STATISTIKEN SPECIAL ISSUE - BANKING STATISTICS YEARBOOK FOR 2007 - OENB

 
OESTERREICHISCHE NATIONALBANK
                                                           EUROSYSTEM

                                        STATISTIKEN
                                                     Special Issue

                    Banking Statistics Yearbook for 2007

Stabilty and Security.                                   July 08
Contents
Preface                                                                                                            4
I. Changes in Reporting for Banking Statistics in 2007                                                             5
    1 The New Risk-Oriented Reporting System ROM                                                                   5
      1.1 Reporting of Intragroup Transactions of Financial Conglomerates                                          7
      1.2 New Reporting Requirements to the ECB on Euro Banknote Recycling                                         8

II. Reporting Obligation to International Organizations                                                            9
    1 Consolidated Banking Data                                                                                    9
    2 ECB Blue Book Data                                                                                           9
    3 Financial Soundness Indicators                                                                              10

III. Structural Developments in Austrian Banking in 2007                                                          11
    1 Banking Office Development                                                                                  11
    2 Development of Employment in Banking                                                                        12

IV. Economic Developments in Austrian Banking                                                                     14
    1 Business Activities of Banks Reporting to the OeNB – Unconsolidated Results                                 14
      1.1 External Business Remains the Driving Force behind Asset Growth                                         15
      1.2 Time Deposits Push Total Deposit Growth                                                                 16
      1.3 Slowdown in Foreign Currency Lending Intensifies                                                        17
    2 Profitability of Banks Operating in Austria – Unconsolidated Results                                        18
      2.1 Operating Profits 2007                                                                                  18
    3 Profitability of Banking Groups that Prepare Consolidated Financial Statements in Accordance
      with Articles 59 and 59a of the Austrian Banking Act                                                        20
    4 Interest Rate Developments                                                                                  22
      4.1 Lending Rates – New Business                                                                            22
      4.2 Lending Rates – Outstanding Amounts                                                                     22
      4.3 Deposit Rates – New Business                                                                            23
      4.4 Deposit Rates – Outstanding Amounts                                                                     23
    5 Developments in the Building and Loan Associations Sector                                                   24
    6 Development of Mutual Funds                                                                                 24
    7 Development of Money Market Funds                                                                           25
    8 Development of Severance Funds                                                                              26
    9 Development of Pension Funds                                                                                26

2                                                                                   STATISTIKEN SPECIAL ISSUE JULY 08
V. Tables and Charts                                                                  28
   1 Changes in the Banking Structure in 2007                                         28
   2 Internationalization Indicators                                                  35
   3 Tables and Charts for Each Survey                                                41

VI. Publications of the OeNB’s Supervisory and Monetary Statistics Division in 2007   62
   1 Information Folders                                                              62
   2 Press Releases                                                                   62
   3 Reports Published in the OeNB’s “Statistiken – Daten & Analysen” Series          63
      3.1 Analyses                                                                    63
      3.2 Brief Papers                                                                64
   4 Other Publications                                                               64
      4.1 Bank Archiv – Zeitschrift für das gesamte Bank- und Börsenwesen             64
      4.2 Magazine „Industrie aktuell“
          (published by the Austrian Institute for Industrial Research – IWI)         64
      4.3 Magazine „Steuer und Wirtschaftskartei“ (SWK) (published by Lindeverlag)    65
      4.4 Brochure of the Landesbank Baden-Württemberg                                65

VII. Overview of the OeNB’s “Statistiken – Daten & Analysen” Series                   66

STATISTIKEN SPECIAL ISSUE JULY 08                                                      3
Preface
    The OeNB’s statistical publications         business developments and profitability
    include the quarterly series “Statistiken   performance as well as retail interest
    – Daten & Analysen” (in German, with        rate developments, but also focuses on
    an English executive summary) and           structural changes, e.g. in the number
    special issues on selected statistical      of banking offices and in sector
    topics.                                     employment. The OeNB has been pub-
        This yearbook provides information      lishing such a comprehensive overview
    about developments in banking statis-       about statistical developments in the
    tics, including changes in prudential       Austrian banking sector yearly in
    reporting, in 2007 and sheds light on       German since 2003 and with this issue
    the current state of the Austrian           for the first time provides a translation
    banking sector. It not only highlights      into English.

4                                                         STATISTIKEN SPECIAL ISSUE JULY 08
I. Changes in Reporting for
   Banking Statistics in 2007

    A new supervisory reporting system featuring extended coverage and greater risk sensitivity           Patrick Thienel1
    went into effect in Austria on January 1, 2007. The introduction of this system – the risk-
    oriented reporting system ROM – represents the most far-reaching overhaul of banks’
    reporting to the Oesterreichische Nationalbank (OeNB). Moreover, starting from June 30,
    2007, limits on risk concentration within a financial conglomerate have had to be reported
    to the OeNB. In compliance with provisions of the European Central Bank (ECB), the OeNB
    introduced a report on cash transaction data: It obligates professional cash handlers involved
    in cash recycling activities to report data on cash handling equipment and transactions using
    such equipment to the OeNB semiannually from mid-2007.

1 The New Risk-Oriented                                     ing groups that prepare financial state-
  Reporting System ROM                                      ments under the International Financial
Austria’s high banking density is a major                   Reporting Standards (IFRS) (Financial
reason why off-site analysis hand in                        Reporting – FINREP). Moreover, the
hand with a relatively comprehensive                        system was to cover the reporting
prudential reporting system play an im-                     requirements for the newly developed
portant role in Austria. This contrasts                     quantitative risk assessment models for
with the supervisory practice in many                       off-site analysis in Austria. Last but not
other countries where a few large bank-                     least, the redesign of the reporting sys-
ing groups are frequently subject to                        tem was to account for the new frame-
permanent on-site inspection. An                            work conditions in the domestic
essential input into banking supervisory                    banking industry. In future there will
activities, prudential reporting is                         thus be a stronger focus on the compi-
required to provide Financial Market                        lation of data from banking groups and
Authority (FMA) and OeNB officials                          foreign subsidiaries as well as of detailed
responsible for banking supervision                         risk information. Following intense
with high-quality data about develop-                       negotiations with industry representa-
ments and changes in the banking                            tives and representatives of Austrian
structure.                                                  banks, agreement on the main features
    When the new international capital                      of the new ROM reporting system was
requirements known as Basel II and                          finally reached at the beginning of 2006.
effective from 2007 were still at                               While the frequency of banks’
the discussion stage, the OeNB cooper-                      reporting unconsolidated financial
ated with the FMA on a project enti-                        statement and participating interest
tled “Risiko-orientiertes Meldewesen                        data was reduced from monthly to
(ROM).” This project, which was                             quarterly reports, the additional report-
launched in mid-2002, was aimed at                          ing requirements increased the data
adapting the supervisory reporting sys-                     volume considerably.
tem for banks. ROM was to meet the                              From 2007 onward, the old monthly
data requirements for Basel II (Com-                        balance sheet reports (monthly reports)
mon Solvency Reporting – COREP),                            and quarterly profit and loss reports
which were at least partly harmonized                       (quarterly reports) were phased out and
throughout the EU, as well as for bank-                     replaced by the asset, income and risk
1
    The author thanks the staff of the Supervisory and Monetary Statistics Division for valuable input.

STATISTIKEN SPECIAL ISSUE JULY 08                                                                                            5
Changes in Reporting for Banking Statistics in 2007

Structure of the New ROM Supervisory Reporting System

Frequency               Unconsolidated                  Consolidated                    Banks’ foreign subsidiaries   Bank’s foreign branches

Ad hoc                  Master data
Monthly                 Central Credit Register     Report on compliance with
                        (GKE), report on compliance regulatory standards (ONA)
                        with regulatory standards   – overview
                        (ONA) – overview
Quarterly               Asset, income and risk state-   Asset, income and risk state-   Asset, income and risk        Asset statement
                        ment (VERA),                    ment (VERA) under Article       statement (VERA)
                        report on compliance with       59 and 59a Banking Act,         under Article 59 and 59a
                        regulatory standards (ONA)      report on compliance with       Banking Act
                        – details                       regulatory standards (ONA)
                                                        – details
Annual                  Annual financial statements,    Loss data according to the
                        external auditors’ prudential   annual financial statements
                        report + report on hidden       (at the highest consolidation
                        reserves                        level)

                           statement (Vermögens-, Erfolgs-, und                            Asset Statement
                           Ririkoausweis – VERA) and the report                            This report details banks’ assets and
                           on compliance with regulatory standards                         liabilities as well as their off-balance
                           (Ordnungsnormenausweis – ONA).                                  sheet activities (broken down by
                               A detailed overview of the new ROM                          domestic/foreign and euro/foreign
                           reporting structure is presented below:                         currency activities and by economic
                                                                                           sectors). It corresponds to a quarterly
                           Master Data Report                                              preliminary balance sheet based on a
                           Master data are the basis of every statis-                      bank’s accounting records. Supervisors
                           tical report. Banks must immediately                            use these data to analyze corporate
                           notify the OeNB of any change in their                          structure and business activity.
                           master data – their address, bodies,
                           approaches to calculating the solvency                          Income Statement
                           ratio and the like.                                             This report provides a detailed prelimi-
                                                                                           nary overview of a bank’s earnings and
                           Asset, Income and Risk Statement                                expenses. It is filed quarterly based on a
                           This report collects data from individual                       bank’s accounting records. Supervisors
                           banks, partly from foreign branches,                            use these data to monitor intrayear
                           and banking groups as well as fully                             profit and loss developments.
                           consolidated foreign subsidiaries. Banks
                           may choose their accounting method                              Participations and Equity Interests
                           and may draw up consolidated financial                          This report collects data on banks’ par-
                           statements either according to inter-                           ticipating interests (assets) and equity
                           national accounting standards (e.g. IFRS)                       interests (liabilities) and thus provides
                           or according to the Banking Act (Bank-                          supervisors with insights into the par-
                           wesengesetz, BWG) and the Austrian                              ticipation and ownership structures of
                           Commercial Code (Unternehmens-                                  Austrian banks.
                           gesetzbuch – UGB).
                               Depending on the scope of consolida-                        Credit Risk
                           tion, this report on banks’ condition and                       This report collects data about the
                           income comprises the following parts:                           quality of banks’ credit portfolios.

6                                                                                                         STATISTIKEN SPECIAL ISSUE JULY 08
Changes in Reporting for Banking Statistics in 2007

Equity Risk                                   ance with specific legal provisions and
This report collects data about banks’        risk assessment methods. It serves to
stock portfolios broken down by markets.      control the factual accuracy of the
                                              statements and valuation methods as
Residual Maturity and Country Risk            well as compliance with the relevant
This report provides a more precise           legal provisions.
assessment of banks’ liquidity risk based
on residual maturities as well as a break-    Report on Hidden Reserves
down of claims on foreign debtors             This report documents the existence of
including a presentation of ultimate risk.    hidden reserves and losses, their struc-
It thus serves to capture international in-   ture and the consequent audit result of
terlinkages and banks’ country risk.          the bank auditors.
Moreover, since 2007, this report has
included information about foreign cur-       Report on Loss Data
rency loans broken down by currencies         This yearly report documents losses
and about repayment vehicles.                 resulting from operational risk.
Interest Risk                                 1.1 Reporting of Intragroup Transac-
This report, which collects data on               tions of Financial Conglomerates
banks’ interest rate risk profile, serves     On April 1, 2007, the FMA’s Regulation
as a basis for supervisory control of         on Reporting and Limiting of Risk
interest rate risk.                           Concentration and Reporting of Intra-
                                              group Transactions of Financial Con-
Report on Compliance with Regulatory          glomerates went into effect. Reporting
Standards                                     under this regulation began on June 30,
This report serves to monitor compli-         2007. The legal basis for reports is the
ance with the regulatory standards            Financial Conglomerates Act (Finanz-
laid down in Articles 22 to 22q, 23           konglomerategesetz – FKG), which
to 25, 27 and 29 Banking Act, provi-          stipulates reporting to the FMA and
sions which are intended to limit risk.       the OeNB at quarterly intervals under
It collects data on solvency (i.e. compli-    Article 14 paragraph 3.
ance with Basel II minimum capital                The reporting regulation covers
requirements), own funds, liquidity,          proof of capital adequacy at the
large exposures and participating             financial conglomerate level, compli-
interests in nonfinancial institutions.       ance with risk concentration limits
Data are collected both at the individual     under Article 9 Financial Conglo-
bank level and at the consolidated level      merates Act (by analogy to the report-
for groups of credit institutions             ing of large exposures by banks) and
according to Article 30 Banking Act.          reporting of intragroup transactions
                                              under Article 10 Financial Conglo-
Annual Financial Statements                   merates Act.
This report corresponds to an Austrian            On December 31, 2007, four financial
bank’s consolidated and unconsolidated        conglomerates were subject to the
annual accounts audited by a bank auditor.    reporting requirement:
                                              • Bausparkasse Wüstenrot AG
External Auditors’ Prudential Report          • Erste Bank der Oesterreichischen
This report contains bank auditors’              Sparkassen AG
comments on audited banks’ compli-            • Grazer Wechselseitige Versicherung AG

STATISTIKEN SPECIAL ISSUE JULY 08                                                                                    7
Changes in Reporting for Banking Statistics in 2007

                           • Raiffeisen Zentralbank Österreich AG2                banknotes in circulation and to take
                           Pursuant to Article 14 paragraph 3                     appropriate action.
                           Financial Conglomerates Act, the                            By collecting data, the ECB and the
                           OeNB must provide the FMA with                         NCBs are able in particular to
                           expert opinions on the reports submit-                 • determine who is involved in bank-
                           ted to the FMA. By analogy to the                         note recycling,
                           monitoring of banks’ compliance with                   • compare the unfit rates of individual
                           the Banking Act, the OeNB provides a                      professional cash handlers in order to
                           table indicating financial conglomerates’                 analyze the functioning of their
                           noncompliance with the Financial                          fitness sorting activities and
                           Conglomerates Act. On December 31,                     • identify issues that may require
                           2007, all financial conglomerates                         clarification by NCBs, e.g. in the
                           fulfilled the capital adequacy provision                  form of on-site visits.
                           under Article 6 Financial Conglomer-                   To this end, the OeNB developed a
                           ates Act.                                              system to collect data from professional
                                                                                  cash handlers, such as banks, cash in
                           1.2 New Reporting Requirements                         transit companies and bureaux de
                               to the ECB on Euro Banknote                        change. Since banks represent the bulk
                               Recycling                                          of the reporting entities, the OeNB’s
                           In January 2006, the ECB introduced                    Supervisory and Monetary Statistics
                           new reporting requirements for national                Division in April 2007 took charge of
                           central banks (NCBs) under the                         capturing and processing the data,
                           Banknote Recycling Framework. The                      given that it fulfills the appropriate
                           NCBs must for instance collect infor-                  organizational and technical require-
                           mation about recycling and cash centers,               ments. The responsibility for the con-
                           statistics on the volume of cash opera-                tent of the related statistics, however,
                           tions and information about the cash                   remains with the OeNB’s Cashier’s
                           handling machinery used for checking                   Division.
                           euro banknotes for authenticity and                         The reporting entities must provide
                           fitness for circulation.                               operational data on banknote recycling
                               The overarching goal of capturing                  semiannually to the OeNB. Also, they
                           such data is to enable the Eurosystem,                 must notify the OeNB of any changes
                           which is responsible for issuing euro                  in reporting entities’ master data within
                           banknotes, to continuously monitor                     three months. Banks and other profes-
                           banks’ and other professional cash                     sional cash handlers may report data
                           handlers’ banknote recycling activities                to the OeNB using an online portal
                           in order to assess the quality of                      (www.myoenb.at).

                           2
                               Raiffeisen Zentralbank Österreich AG was subject only to the capital adequacy reporting requirement on
                               December 2007.

8                                                                                              STATISTIKEN SPECIAL ISSUE JULY 08
II. Reporting Obligation to International
    Organizations

  In 2007, the OeNB provided the ECB with monetary statistics, the Bank for International
  Settlements (BIS) with data about the regional breakdown of claims and liabilities, and the
  OECD with information about the structure of the financial system. In addition, the OeNB
  submitted consolidated data about banks’ profitability, balance sheets and solvency as well
  as supplementary prudential data to the ECB within the consolidated banking data (CBD)
  framework. Also, the OeNB sent comparative economic data, data on payment systems and
  data on securities trading, clearing and settlement systems to the ECB as input for the pub-
  lication “Payment Systems in the European Union” (the “Blue Book”). Finally, the OeNB
  transmitted data on financial soundness indicators (FSI), which serve to present countries’
  financial stability, to the IMF.

1 Consolidated Banking Data                      ment systems (e.g. on volumes and
Consolidated data on banks’ profitabil-          turnover) are published in the Blue
ity, balance sheets and solvency as well         Book. Additionally, the data are broken
as supplementary prudential data are             down by euro area and non-euro area
reported annually by the OeNB for                countries. The data for these statistics
Austria on request of the Working                are compiled in close cooperation with
Group on Macro-Prudential Analysis               EU central banks.
(WGMA) of the European System of
Central Banks (ESCB). The OeNB sub-              ECB Guideline
mitted all consolidated banking data as          The EU-27 central banks used to deliver
at December 31, 2006, in time in the             data for the ECB’s Blue Book to the
summer 2007.                                     ECB by on a voluntary basis. To under-
     The introduction of Basel II and            pin the collection of data from central
the implementation of the new ROM                banks with a legal basis, the ECB
risk-oriented reporting system in Aus-           adopted the recast Guideline on mone-
tria entailed substantial adjustments in         tary, financial institutions and market
data content and of technical aspects to         statistics (ECB/2007/9) on August 1,
meet future consolidated banking data            2007. This guideline is the basis for the
reporting requirements.                          delivery of data to the ECB.
                                                     Article 17 of this guideline details
2 ECB Blue Book Data                             the provisions applicable to the report-
Smooth Handling of Data Trans-                   ing of payment statistics data, stating
mission                                          that data on payment transactions and
Within the framework of the Blue Book            structure and related information on
data project, the OeNB successfully              monetary financial institutions’ balance
transmitted all data for central coun-           sheet items and structural information
terparty clearing statistics and for secu-       on credit institutions must be submit-
rities settlement systems statistics to          ted in accordance with electronic
the ECB in April 2007.                           reporting standards set out by the ECB.
    Basic economic reference data (e.g.          Moreover, the guideline details the
GDP and HICP data), data about pay-              scope of reporting, the reporting
ment systems (e.g. on the value and              frequency and deadline, the revision
volume of transactions), and data about          policy, back data reporting and the require-
securities trading, clearing and settle-         ments for electronic transmission.

STATISTIKEN SPECIAL ISSUE JULY 08                                                                9
Reporting Obligation to International Organizations

                          3 Financial Soundness Indicators              pilation Exercise (CCE) at its head-
                          At the beginning of August 2007, the          quarters in Washington D.C. The
                          OeNB transmitted data on financial            meeting was aimed at drawing conclu-
                          soundness indicators (FSIs), which            sions from the CCE and provided a
                          serve to present countries’ financial         forum to exchange views and discuss
                          stability, to the IMF. These indicators       the way forward among IMF represen-
                          may be retrieved from the Internet by         tatives and coordinators.
                          interested users across the world. The            At this meeting, the OeNB had
                          FSIs contain credit institution data          called for closer cooperation on data
                          about profitability, balance sheets and       transmission between the IMF, the
                          solvency, data of other financial institu-    ECB and the OECD to contain the
                          tions, nonfinancial corporations and          administrative burden. To ensure con-
                          households as well as data on market          tinuity and comparability, the OeNB
                          liquidity and the real estate market.         also suggested leaving the valid frame-
                          These data are compiled in conformity         work unchanged. The IMF is consider-
                          with Basel I, Basel II and IFRS provisions.   ing introducing a quarterly reporting
                              In May 2007, the IMF held a meet-         frequency rather than the current an-
                          ing for coordinators of the countries         nual frequency of transmission of FSI
                          participating in the Coordinated Com-         indicators.

10                                                                               STATISTIKEN SPECIAL ISSUE JULY 08
III. Structural Developments in Austrian
     Banking in 2007

  After personnel figures had been on the rise in recent years at Austrian banks, the number
  of banking offices also rose marginally (by 6) in 2007. At the end of 2007, there were
  870 head offices and 4,286 branch offices in Austria. The number of employees in the
  Austrian banking sector increased by 1,519 to 79,180.

1 Banking Office Development                    outcome of the establishment of 53 new
The figures below are based on the date         banking offices and the closure of 47
of licensing of head offices and of noti-       banking offices.
fication of the establishment in Austria            In a regional breakdown, Vienna
of branch offices of foreign banks. The         had 22 new establishments, Tyrol 8,
actual beginning of operations may well         Lower Austria 6, Styria 5, Upper Aus-
differ from this date.                          tria and Carinthia 4 each, and Salzburg
    In the course of 2007, the degree of        and Vorarlberg 2 new banking offices
concentration of Austrian banking               each. In Vienna 21 banking offices were
offices augmented, as in the preceding          closed, in Upper Austria, Tyrol and
years. The number of head offices               Lower Austria 5 each, in Salzburg 4,
declined by 1 to 870 from the end of            in Styria and Carinthia 3 each and in
2006, a change that resulted from 11            Burgenland 1.
mergers (among Raiffeisen credit coop-
eratives), one license relinquishment           Number of Inhabitants per Banking
(among Volksbank credit cooperatives),          Office Declines Marginally
1 closure (of a main office established         Assuming a constant number of inhab-
under Article 9 Banking Act) and 12             itants, the number of inhabitants per
new establishments (of 3 joint stock            banking office diminished from 1,611
banks, 3 special purpose banks, 3 main          to about 1,610.
offices established under Article 9 Bank-           The comparable values for Germany
ing Act, 1 spinoff among mortgage               (some 2,250) and Switzerland (some
banks, 1 Internet bank and 1 factoring          2,135) are higher.
bank in the Raiffeisen sector). In the
same period, the branch office network          Number of Branch Offices Abroad
expanded by 7 branch offices in Austria.        Rises
                                                The total number of banking offices of
Trend Change in Banking Office                  Austrian banks abroad increased by
Numbers                                         29 to 159. In a breakdown, on Decem-
The number of banking offices expanded          ber 31, 2007, Austrian banks operated
in 2007 for the first time since 1992,          105 branch offices (+27) and 54 repre-
thus marking a trend reversal. From             sentative offices (+2) abroad. The num-
end-December 2006 to end-December               ber of banking offices abroad with
2007, the number of banking offices             Austrian majority ownership augmented
grew by 6 to 5,156. This change is the          by 12 to 92.

STATISTIKEN SPECIAL ISSUE JULY 08                                                              11
Structural Developments in Austrian Banking in 2007

                          2 Development of Employment                                   magnitudes. The decline in the case of
                            in Banking                                                  special purpose banks resulted from
                          Rise in Employee Numbers                                      the shift of Investkredit Bank AG to the
                          The number of employees3 in Austrian                          Volksbank credit cooperative sector
                          banks augmented by 1,519 persons                              and was a key reason that this sector
                          from 77,661 (+1.9%) to 79,180 (of                             posted a 9.4% increase. In absolute
                          which 980 were employees on low                               figures, the Raiffeisen sector recorded
                          earnings) from December 31, 2006, to                          the biggest enlargement (+660 or
                          December 31, 2007. The rise occurred                          +2.8%) of employee figures. Banking
                          in nearly all sectors, joint stock banks,                     offices established under Article 9
                          private banks and special purpose banks                       Banking Act displayed the largest per-
                          being the exception.                                          centage increase in employee figures
                               Broken down by the type of employ-                       (+10.0%). Other sectors with note-
                          ment contract, the total increase of 1,519                    worthy increases were the savings
                          was distributed as follows: full-time                         banks sector (+2.6%), the state mort-
                          employees (+888 or +1.4%), part-time                          gage bank sector (+2.4%) and the
                          employees (+623 or +4.3%) and employ-                         building and loan association sector
                          ees on low earnings (+8 or +0.8%).                            (+4.8%).
                               1.2% of all Austrian banking jobs                            There were no important changes
                          were filled with employees on low                             in the breakdown of employees by prov-
                          earnings at year-end 2007. The total                          inces in 2007. The share of employees
                          number of such jobs came to 980,                              working for branch and representative
                          40.0% of which were at joint stock                            offices of Austrian banks abroad wid-
                          banks and private banks. 746 or more                          ened by 376 (+0.4 percentage points)
                          than three-quarters of the employees                          to 2.2% (1,770). As in previous years,
                          filling these positions were women.                           Vienna accounted for just over a third
                               52.9% of the new full-time posi-                         (33.9%) of all bank employees.
                          tions were filled by men, whereas
                          90.9% of the new part-time jobs were                          See also:
                          held by women; moreover, women                                Table 1 New Head Office Establishments in 2007
                          filled all new low-earnings positions.                        Table 2 Head Office Closures in 2007
                               In full-time equivalents,4 banks em-
                                                                                        Table 3 Head Office Mergers in 2007
                          ployed 68,221 persons at end-2007.
                          This represents a rise by 1,714 persons                       Table 4 Name Changes of Head Offices in 2007
                          (+2.6%) from end-2006.
                                                                                        Table 5 Changes in Foreign Branches of Austrian
                                                                                        Banks in 2007
                          Employee Figures Expand in the
                          Raiffeisen Sector                                             Table 6 Changes in Fully Consolidated Foreign
                                                                                        Subsidiaries in 2007
                          In a sectoral breakdown, joint stock
                          banks and private banks (–0.7%) and                           Table 7 Changes in Foreign Representative Offices
                          special purpose banks (–5.9%) showed                          of Austrian Banks in 2007
                          a decline in employee figures. The                            Table 8 Changes in Austrian Representative
                          other sectors displayed rises of various                      Offices of Foreign Banks in 2007

                          3
                              Austrian banks subject to reporting requirements are requested to file year-end employment statistics (total number
                              of employees – including part-time staff, persons on paid leave and on sabbaticals, persons doing compulsory
                              military service, excluding blue-collar workers). As of 2005, these figures include employees on low earnings.
                          4
                              Banks’ income statements reported to the OeNB include blue-collar workers.

12                                                                                                    STATISTIKEN SPECIAL ISSUE JULY 08
Structural Developments in Austrian Banking in 2007

Table 9 Representative Offices of Austrian Banks   Table 15 Number of Banks in Austria as at
Abroad                                             December 31, 2007

Table 10 Branch Offices of Austrian Banks          Chart 1 Number of Banking Offices Rises Again
Abroad
                                                   Table 16 Share of Men and Women Working Full-
Table 11 100% Foreign-Owned Banks in Austria       Time and Part-Time at Austrian Banks
Table 12 50% to under 100% Foreign-Owned           Chart 2 Trend toward a Rise in Employees (in
Banks in Austria                                   Headcount Figures and in Full-Time Equivalents)
                                                   Continues
Table 13 25% to under 50% Foreign-Owned
Banks in Austria

Table 14 Branch Offices of Foreign Banks in
Austria

STATISTIKEN SPECIAL ISSUE JULY 08                                                                                        13
IV. Economic Developments in Austrian
                          Banking

     Norbert Schuh5       Despite international financial turbulence, total asset growth of banks reporting to the
                          OeNB reached a record high, as did operating profits. Still, a minor impact of the turbulence
                          can be discerned in certain segments.
                               Total asset growth hit a ten-year peak. On the asset side, external business was the
                          main driver of growth as in recent years. On the liabilities side, time deposits posted the
                          highest increase, which may be partly a result of the international financial crisis: It seems
                          that banks have increasingly turned to this source of funding because of unfavorable money
                          market conditions. Consequently, deposit growth reached its highest rate by far over the
                          past ten years. Austrian banks’ domestic issues also continued to gain importance.
                               Foreign currency lending decelerated even more than in the past, so that total lending
                          growth continued to decline even though lending in euro increased markedly in 2007. The
                          OeNB’s new foreign currency loans statistics offers fresh insights into the risk potential faced
                          by households and nonfinancial corporations.
                               Unconsolidated operating profits reached a record high. On the earnings side, this
                          development was ascribable to a strong rise in dividend payments by affiliates and a steady
                          increase in fee-based income. Even though growth in net interest income accelerated, its
                          contribution to operating profits continued to decline. Since 2001, external business has
                          been the only segment to post increases in net interest income, which is partly attributable
                          to the fact that Austrian banks’ net external assets have been rising since end-2004; this
                          means that domestic deposits are used to fund loans to nonresidents. As in recent years,
                          foreign subsidiaries continued to further boost group profitability of large credit institutions
                          operating in Austria.
                               As a consequence of the international financial crisis and the upturn in money market
                          rates, retail interest rates for new and existing loans rose faster than the two increases in
                          key ECB interest rates would have suggested. The high share of variable rate loans implied
                          that Austrian customers’ interest rate advantage narrowed in several loan segments.
                               The financial market turmoil also affected the mutual fund business, which was charac-
                          terized by strong net capital outflows in the second half of 2007. Assets invested in money
                          market funds went up in the full-year 2007, but declined in the second half of the year.
                               While pension funds were also affected by financial market uncertainty, severance
                          funds continued to develop dynamically.

                      1 Business Activities of Banks                              ble-digit rates were recorded only in
                        Reporting to the                                          1998 (10.3%) and 2005 (11.2%).
                        OeNB – Unconsolidated Results                                 As in recent years, external business
                      At end-2007, unconsolidated total                           made the largest contribution to total
                      assets of banks reporting to the OeNB                       asset growth, with external assets rising
                      came to EUR 899.54 billion, thus                            by EUR 57.48 billion (+19.6%), and
                      almost reaching the EUR 900 billion                         claims on nonresidents increasing the
                      mark. At EUR 101.78 billion, total                          most (+28.4%).
                      asset growth exceeded the EUR 100                               On the liabilities side, the fastest-
                      billion mark for the first time; this                       growing instruments were time depos-
                      corresponds to an annual growth rate                        its (+51% or EUR 13.73 billion) and
                      of 12.8% in 2007 – the highest rate                         Austrian banks’ domestic issues to non-
                      observed over the past ten years. Dou-                      banks (+24.2% or EUR 18.61 billion).

                      5
                          The author would like to thank the staff of the OeNB’s Supervisory and Monetary Statistics Division for valuable
                          input.

14                                                                                              STATISTIKEN SPECIAL ISSUE JULY 08
Economic Developments in Austrian Banking

In recent years, securities have steadily     international comparisons) dropped by
gained in importance as a source of           more than 1 percentage point to 43.3%.
funding. Their share in total liabilities         Austria’s ten largest banks ranked
climbed by 2.3 percentage points to           in terms of their total assets as at
10.6% over the past three years. The          December 31, 2007, are listed below:
surge in time deposits seems to be
linked with the financial turmoil. Given      1. Bank Austria Creditanstalt AG
the higher cost of refinancing in the         2. Erste Bank der oesterreichischen
money market, banks chose to raise               Sparkassen AG
(partly significantly) their interest rates   3. Raiffeisen Zentralbank Österreich
on such deposits, and so many market             Aktiengesellschaft
participants decided to invest part of        4. BAWAG P.S.K. Bank für Arbeit
their capital in time deposits as an in-         und Wirtschaft und Österreichische
terim solution in view of the financial          Postsparkasse Aktiengesellschaft
market uncertainty. The sharp acceler-        5. Oesterreichische Kontrollbank Ak-
ation in time deposit growth in the              tiengesellschaft
second half of the year (+EUR 9.0 bil-        6. ÖsterreichischeVolksbanken-Aktien-
lion), which is almost twice as fast as in       gesellschaft
the first half-year (+EUR 4.7 billion),       7. Kommunalkredit Austria AG
confirms this assumption.                     8. Hypo Alpe-Adria-Bank International
    Total assets of all banking sectors          AG
increased in 2007. Raiffeisen credit          9. Raiffeisenlandesbank Oberöster-
cooperatives registered the strongest            reich Aktiengesellschaft
growth in total assets (+12.5% or EUR         10. Raffeisenlandesbank Niederöster-
24.58 billion), followed by joint stock            reich-Wien AG
banks (+16.9% or EUR 20.96 billion).
Total asset growth was lowest for build-      1.1 External Business Remains the
ing and loan associations (+1.8% or               Driving Force behind Asset
EUR 0.37 billion).                                Growth
    At end-2007, joint stock banks held       While the growth rate of external
the largest market share (27.9%) in           assets remained at almost the same level
terms of total assets, followed by Raif-      as in the previous year (19.4% in 2006
feisen credit cooperatives (24.7%) and        against 19.6% in 2007), that of exter-
savings banks (16.7%). State mortgage         nal liabilities halved from 10.5% in
banks registered a market share of            2006 to 5.4% in 2007.
9.8%, special purpose banks 9.7%,                  As a result of this divergent devel-
Volksbank credit cooperatives 7.7%,           opment, Austrian banks’ net external
building and loan associations 2.3% and       assets surged by EUR 43.38 billion
branch offices established under Article      to EUR 77.65 billion. At end-2007,
9 Austrian Banking Act 1.2%.                  external assets came to EUR 351.01
    At end-2007, the market share of          billion and accounted for 39.0% of total
Austria’s ten largest banks came to           assets, while external liabilities stood at
56.4% in terms of total assets and was        EUR 273.35 billion and accounted for
thus only marginally lower (–0.1 per-         30.4% of total liabilities. Some three
centage points) than at end-2006. The         years ago, Austrian banks’ net external
ranking of the top ten banks remained         assets still matched net external liabili-
the same as in 2006. The share of the         ties: At the end of September 2004,
five largest banks (which is used in          external business accounted for some

STATISTIKEN SPECIAL ISSUE JULY 08                                                                              15
Economic Developments in Austrian Banking

                        31% of the totals on both sides of the     from sight deposits to time deposits was
                        balance sheet.                             observed at direct banks. Savings
                            In the second half of 2007, how-       deposits grew at a considerably slower
                        ever, external business growth slowed      pace, rising by 4.5% to EUR 146.12
                        down, so that the share of external        billion. Still, growth was twice as fast
                        transactions declined by 0.6 percentage    as in 2006 or on average in the five-year
                        points on the asset side and by 1.7 per-   period from 2002 to 2006. 2001 has
                        centage points on the liability side.      been the only year since 1996 in which
                            Claims on foreign nonbanks, at         savings deposits grew at a comparable
                        around EUR 104 billion, represented        pace (4.8%) as in 2007. While savings
                        just under 30% of external assets, but     deposits remained the most popular
                        accounted for some 50% of external         deposit category, their share dropped
                        asset growth in 2007. While German         below 60% (56.6%) for the first time.
                        nonbanks accounted for the largest share   Time deposits climbed by 4.1 percent-
                        (17.7%), borrowers from Austria’s six      age points, reaching a share of 15.8%,
                        most important business partners in        whereas sight deposits stagnated at
                        Eastern and Southeastern Europe (Croa-     around 28%.
                        tia, Czech Republic, Romania, Poland,           Time deposit growth was strong in
                        Slovenia, Hungary) taken together          almost all banking sectors, with joint
                        accounted for more than one-third          stock banks posting the highest increase
                        (34.3%) in claims on foreign nonbanks.     (+EUR 6.55 billion), followed by
                                                                   Raiffeisen credit cooperatives (+EUR
                        1.2 Time Deposits Push Total De-           2.79 billion) and savings banks (+EUR
                            posit Growth                           1.40 billion).
                        Total deposits with banks reporting             This spectacular growth may well
                        to the OeNB came to EUR 258.21             be associated with the international
                        billion at end-2007, which is a sharp      financial turmoil. In light of the higher
                        increase by 11.7% or EUR 27.06 billion     cost of refinancing in money markets,
                        against end-2006. This was by far          banks raised their interest rates on time
                        the highest annual growth rate ever        deposits partly significantly, and thus
                        recorded; the second-highest rate          many market participants decided to
                        (7.8%) was observed in 2001. In 2006,      temporarily invest part of their capital
                        total deposits grew by 4.7% or EUR         in such deposits, given the uncertainty
                        10.40 billion. Despite their strong        on financial markets. This assumption
                        growth, deposits continued to lose         is also confirmed by the sharp accelera-
                        significance as refinancing vehicles in    tion of time deposit growth in the
                        2007. Their share in total assets shrank   second half of the year (+EUR 9.0
                        to 28.7%, down by almost 5 percent-        billion), which was almost twice as fast
                        age points over the past five years and    as in the first half of 2007 (+EUR
                        by even more than 10 percentage points     4.7 billion). Nonfinancial corporations
                        since 1995.                                accounted for around one-half of this
                             All deposit categories registered     growth, while households and nonbank
                        positive growth in 2007, particularly      financial intermediaries accounted for
                        time deposits, which posted the highest    one-quarter each.
                        annual growth rate (51.0%) and reached          In view of competition from direct
                        EUR 40.7 billion. Sight deposits also      banks, Austrian banks also launched
                        increased quite markedly (by 10.9% to      new products that allow households
                        EUR 71.41 billion), even though a shift    to manage deposits with agreed matu-

16                                                                           STATISTIKEN SPECIAL ISSUE JULY 08
Economic Developments in Austrian Banking

rity via the Internet. This type of                        euro-denominated loans for the remain-
investment had previously been avail-                      ing EUR 238.5 billion.
able to large customers only. As a result,                      The share of foreign currency lend-
direct banks’ deposit business grew at a                   ing dropped in all Austrian provinces,7
slower pace (+11.1%) than that of all                      with the decline being most pronounced
banks (+11.7%) for the first time in                       in those provinces with the largest
years; their share in the total deposit                    shares: Vorarlberg saw a decrease by
business came to 1.9% at end-2007.                         6.3 percentage points to 34.5%, still
Moreover, a shift from sight deposits to                   the largest share at end-2007, followed
time deposits was observed at direct                       by the Tyrol (–5.5 percentage points to
banks: Their time deposit volume                           23.8%), Carinthia (–3.1 percentage
tripled to around EUR 1 billion in                         points to 18.0%), and Styria (–3.5 per-
2007, partly at the expense of sight                       centage points to 17.3%). Lower Aus-
deposit growth.                                            tria (–2.9 percentage points to 16.8%)
                                                           and Vienna (–1.1 percentage points to
1.3 Slowdown in Foreign Currency                           15.1%) recorded levels around the
    Lending Intensifies                                    Austrian average.
Growth of euro-denominated loans                                Loans denominated in Swiss franc
more than doubled from 3.1% in 2005                        (CHF) declined by EUR 5.9 billion,
to 6.8% in 2007. Still, growth of loans                    and thus by EUR 0.5 billion more
to domestic nonbanks continued to                          than all other foreign currency-denom-
decelerate from 5.0% in 2004 to 4.7%                       inated loans combined (EUR 5.4 bil-
in 2005, to 4.5% in 2006 and to 3.6%                       lion). Still, with a share of 88.5%, the
(EUR 9.9 billion) in 2007. The share of                    CHF remained by far the most impor-
loans in total assets (31.7% at end-2007)                  tant foreign currency. At end-2007,
thus declined by almost 7 percentage                       the outstanding loan volume denomi-
points since end-2004.                                     nated in CHF came to EUR 41.6 bil-
    The moderate development of bank                       lion. The volume of loans denominated
lending was attributable to a sharp decline                in U.S. dollar (USD) – the second-most
in foreign currency lending in 2007.6                      important currency – fell by EUR 0.5
After an increase by 11.1% in 2005, the                    billion to EUR 2.4 billion. By contrast,
volume of these loans decreased by                         the volume of loans denominated in
2.4% (EUR 1.3 billion) in 2006 and by                      Japanese yen (JPY) increased by EUR
10.3% (EUR 5.4 billion) in 2007.                           0.2 billion to EUR 1.7 billion, while
    As a result, the share of foreign                      that of other foreign currencies rose by
currency loans in total loans fell mark-                   EUR 0.8 billion to EUR 1.4 billion.
edly by 2.6 percentage points against                      The development of loans denominated
end-2006, reaching 16.3% at end-2007.                      in Czech koruna (CZK) was especially
Such a low share was last recorded in                      noteworthy: CZK-denominated loans
1999 (15.7%). Of the total loan volume                     expanded from a negligible level to
of EUR 285.1 billion, foreign currency                     EUR 0.9 billion, so that the CZK has
loans accounted for EUR 46.6 billion,                      become the fourth-most important

6
    This figure was not adjusted for exchange rate effects; the decline was around ½ percentage point smaller when
    adjusted for exchange rate effects.
7
    The conclusiveness of comparisons between provinces is limited, because supraregionally operating banks are
    always allocated to the head office location (BA-CA is, for instance, allocated to Vienna).

STATISTIKEN SPECIAL ISSUE JULY 08                                                                                                   17
Economic Developments in Austrian Banking

                        foreign currency for loans in Austria.                      about EUR 1 billion higher than they
                        This rise seems to have come to an end,                     would have been otherwise. Another
                        however, as lending in CZK has stagnated                    factor is the investment risk associated
                        since October 2007.                                         with repayment vehicles. Consequently,
                            In the course of 2007, outstanding                      the effective cost of a loan (principal
                        foreign currency loans to households                        plus interest rate payments) is only
                        came down by EUR 1.7 billion in                             determined at maturity.
                        absolute terms, but their share rose by
                        3.7 percentage points to 68.3%, as the                      See also:
                                                                                    Table 17 Business Activity of Banks in Austria
                        decline in foreign currency loans to the
                        other sectors was even more pro-                            Chart 3 External Business Accounts for Almost
                        nounced: The share of nonfinancial                          35% of Unconsolidated Total Assets
                        corporations decreased by 3.2 percent-                      Chart 4 Share of Savings Deposits in Total Deposits
                        age points to 21.2% and that of other                       Reaches a Historical Low
                        monetary financial institutions (state                      Chart 5 Growth of Loans to Nonbanks: Euro
                        and nonbank financial intermediaries)                       Area Has Outpaced Austria
                        by 0.4 percentage points to 10.0%.
                                                                                    Chart 6 Euro-Denominated Lending Rises amid
                        This means that 28.2% of new house-                         Slumping Demand for Foreign Currency Loans
                        hold loans were denominated in foreign
                        currencies, but only 8% of new corpo-                       Chart 7 The CHF Remains by Far the Dominant
                                                                                    Loan Currency despite Declining Importance
                        rate loans.
                            Almost 70% of foreign currency                          Chart 8 Most Foreign Currency Loans Go to
                        loans to households are housing loans.                      Households
                        This share went up by 1.6 percentage                        Chart 9 Bullet Loans Linked to Repayment
                        points in 2007, and by more than 10 per-                    Vehicles Account for 75% of All Foreign Currency
                        centage points over the past ten years.                     Loans to Households
                            Since 2007, the OeNB’s new for-                         Chart 10 Bullet Loans Linked to Repayment
                        eign currency loans statistics can be                       Vehicles Extended to Households Will Reach
                        used to analyze the risk associated with                    Significant Levels in 5 to 7 Years
                        foreign currency loans for bullet loans                     Chart 11 External Assets by Country Groups
                        and repayment vehicles. While bullet                        (Ultimate Risk)
                        loans linked to repayment vehicles
                        account for almost 75% of all foreign                       2 Profitability of Banks Operating
                        currency loans to households, they                            in Austria – Unconsolidated
                                                                                      Results
                        make up only around 20% of loans to
                        enterprises. This means that households                     2.1 Operating Profits 20078
                        are particularly affected by high                           In 2007, unconsolidated operating
                        exchange rate risk and investment risk,                     profits of banks reporting to the OeNB
                        as for bullet loans, the exchange rate at                   reached a new record high of EUR 6.66
                        maturity determines the amount due in                       billion, thus exceeding the 2006 results
                        euro. The CHF appreciation by 3% in                         by 14.5% or EUR 0.85 billion. Operat-
                        January 2008 alone implies that, at this                    ing profit growth was mainly ascribable
                        exchange rate, repayments would be                          to a rise in operating income by 5.5%

                        8
                            The unconsolidated profits of banks reporting to the OeNB are based on data from the quarterly report of Decem-
                            ber 31, 2007. The following report draws on provisional and, in some cases, expected income data provided by the
                            credit institutions, as final income data (based on audited financial statement data) were not available at the
                            editorial close of this special issue.

18                                                                                                STATISTIKEN SPECIAL ISSUE JULY 08
Economic Developments in Austrian Banking

and a remarkably modest increase             billion). Nevertheless, their share in
in operating expenses by 0.6%. This          operating profits decreased by almost
development is also reflected in an im-      1 percentage point in 2007, compared
provement of the cost-to-income ratio        with a decline by 9.3 percentage points
(CIR) by 3 percentage points to the best     to 42.3% over the last five years.
result recorded so far (62%), after a             The origin of net interest income
somewhat worse result in 2006 (65%)          (EUR 7.40 billion) is especially note-
and the previous best result in 2005         worthy as more than 70% were gener-
(64.1%). In 2006, the trend of a con-        ated abroad in 2007, compared with
tinuously improving CIR had been inter-      less than 50% in 2006. Since 2001,
rupted due to a one-off allocation           external business has been the only
to pension provisions. Owing to the          source of net interest income growth.
release of these provisions, the extent      While in 2000, only 15.9% of net
of the 2007 improvement is overstated.       interest income had been earned
Between 2003 and 2007, the CIR               abroad, its share already amounted to
dropped from 68.2% to 62.0%, by              70.7% in 2007. This development can
around 1 percentage point each year.         be attributed to the fact that interest
This result is, however, in no way           margins abroad are higher than in
exceptional by international standards.      Austria and that Austrian banks’ net
     The rise in operating income by         external assets have surged since 2004.
EUR 0.91 billion to EUR 17.51 billion             In Austria, the interest margin on
was mainly driven by income gains            new business came to 0.77 percentage
from securities-related activities, but      points – down from 1.74 percentage
also by growing interest income and          points in January 2003 – which is about
fee-based income.                            one-half of the euro area average of
     Income from securities and partici-     1.38 percentage points. Interest margins
pating interests surged by 22.3% or          are even higher in the catching-up
EUR 0.64 billion to EUR 3.52 billion in      economies of Eastern and Southeastern
2007, mainly backed by rising income         Europe. This is why in 2004 (when
from shares in affiliated undertakings       Austrian banks’ net external position
(+EUR 0.45 billion). The rise in income      was almost balanced), external business
from shares, other equity as well as vari-   had a share of around 30% in total
able-yield securities by EUR 0.16 billion    assets but generated 40% of net interest
was primarily the result of high divi-       income.
dend and profit participation payments.           The significance of net external
The share of income from securities-         assets for net interest income becomes
related activities in operating profits      evident from the fact that, in 2007, net
climbed by 2.8 percentage points to          external assets climbed by EUR 43.4
20.1 percentage points in 2007, com-         billion to EUR 77.7 billion at year-end.
pared with a rise by 7.2 percentage          This means that domestic deposits
points over the last five years.             finance close to EUR 80 million of
     Even though interest payable and        claims on nonresidents. As a result, net
similar charges jumped to EUR 30.26          interest income generated abroad grew
billion (+36.3% or EUR 8.06 billion          particularly fast by almost 50% in
compared with 2006), net interest in-        2007.
come growth tripled (+3.2%) in 2007,              The net result of financial trans-
as interest receivable and similar income    actions – a component that has in fact
rose even more strongly (+EUR 8.29           little impact on operating profits –

STATISTIKEN SPECIAL ISSUE JULY 08                                                                           19
Economic Developments in Austrian Banking

                        clearly reflects the effects of interna-          3 Profitability of Banking Groups
                        tional financial market turbulence: The             that Prepare Consolidated
                        net surplus on financial transactions               Financial Statements in
                        shrank by 57.9% to EUR 0.29 billion.                Accordance with Articles 59
                             On the positive side, net fee-based            and 59a of the Austrian Banking
                        income rose again markedly in 2007,                 Act
                        reaching EUR 4.71 billion (+9.8%                  In 2007, interest income including risk
                        against 2006). The share of fee-based             provisions of the 21 banking groups
                        income in operating profits thus                  that prepare their consolidated financial
                        increased by 1 percentage point to                statements in line with the Interna-
                        26.8% in 2007, compared with a rise               tional Financial Reporting Standards
                        by 4.9 percentage points over the last            (IFRS; Article 59a of the Austrian
                        five years.                                       Banking Act) or the Austrian Commer-
                             Operating expenses climbed by just           cial Code (Unternehmensgesetzbuch –
                        EUR 0.06 billion to EUR 10.85 billion,            UGB; Article 59 of the Austrian Bank-
                        owing to a sharp decline in other oper-           ing Act) climbed to EUR 15.26 billion,
                        ating expenses and the release of pen-            which is an increase of EUR 3.13 bil-
                        sion provisions.                                  lion or 25.8% against 2006. In the same
                             Administrative expenses grew by              period, interest income including risk
                        2.4% to EUR 9.17 billion in 2007                  provisions collected by the respective
                        against 2006, mainly on the back of a             parent banks rose by EUR 0.50 billion
                        rise in expenditure on goods and                  (+9.1%) to EUR 6.12 billion. This
                        services by 5.4% to EUR 3.70 billion.             implies that the higher net interest in-
                             While staff expenses increased by            come in 2007 could only be achieved
                        just 0.4% to EUR 5.47 billion in 2007             at the group level: In 2007, banking
                        because of the release of pension provi-          groups’ interest income amounted to
                        sions, wages and salaries rose more               EUR 11.72 billion and was thus some
                        markedly, reaching EUR 3.79 billion in            2.5 times higher than that of parent
                        2007 (+5.6% compared with 2006).                  banks (1.9 and 2.2 times higher in 2005
                             In the reporting year, depreciation          and 2006, respectively).
                        of tangible and intangible fixed assets               Operating income including risk
                        dropped by 5.2% to EUR 0.61 billion,              provisions of banking groups reporting
                        continuing the trend of recent years,             to the OeNB was EUR 21.06 billion,
                        and other operating expenses fell by              that is EUR 3.54 billion or 20.2% higher
                        EUR 0.12 billion (–9.9%) to EUR 1.06              than in 2006. Parent banks posted a rise
                        billion.                                          by 4.9% or EUR 0.39 billion to EUR
                                                                          8.44 billion. The increase at group level
                        See also:                                         was primarily sustained by high interest
                        Chart 12 Banks Operating in Austria Post Best     and fee-based income. The decrease in
                        Result Ever for Cost-to-Income Ratio              the “other operating result” UGB item
                        Table 18 Austrian Banks’ Profitability            by 24.7% as at December 31, 2007, was
                                                                          attributable to capital and valuation
                        Chart 13 Two-Thirds of Net Interest Income Gen-   losses on securities. Trading income
                        erated Abroad in 2007
                                                                          declined by 82%, which was the main
                        Chart 14 Declining Importance of Net Interest     reason for the low growth in parent
                        Income                                            banks’ operating income.
                        Chart 15 Income from Participating Interests          In 2007, banking groups’ credit risk
                        Boosts Operating Profits                          provisions grew by 26.3% or EUR 0.57

20                                                                                  STATISTIKEN SPECIAL ISSUE JULY 08
Economic Developments in Austrian Banking

billion to –EUR 2.74 billion, against –       0.07 billion) to EUR 2.76 billion.
EUR 2.17 billion in the previous year.        Depreciation of tangible fixed assets and
This growth can be ascribed to a higher       other expenses came down by 10.8%
allocation to loan loss provisions at joint   to EUR 0.99 billion year on year.
stock banks. Credit risk provisions rose          Operating profits of banking groups
also at parent banks, namely by 10.4%         reporting to the OeNB in compliance
to –EUR 1.25 billion. The lower need          with IFRS or UGB requirements
for allocating credit risk provisions at      augmented by 21.6% or EUR 1.24 bil-
parent banks can be partly explained by       lion to EUR 7.01 billion in 2007 against
the fact that UGB requirements allow          the previous year. Parent banks’ oper-
transferring unused loan loss provisions      ating profits went up by 21.7% to EUR
to the profits and loss account, while        2.68 billion.
this is not permitted in the consolidated         In 2005 and 2006, operating in-
statements prepared in line with IFRS.        come of banking groups reporting to
     Banking groups’ fee-based income         the OeNB surged in relation to operat-
amounted to EUR 7.16 billion (+24.4%),        ing expenses. Over that period, the
that of parent banks to EUR 2.49 billion      CIR improved as well, for the first time
(+12.6% compared with 2006). Fee-             dropping below 60% in 2006. As of
based income thus continued to grow           December 31, 2007, the groups’ consoli-
steadily in 2007.                             dated CIR was 59.1%, thus improving
     By contrast, trading income dropped      by 0.7 percentage points against 2006.
sharply both at the banking group level           After taxes and minority interests,
(–22.5% to EUR 0.80 billion) and,             the groups’ period profit came to EUR
even more so, at the parent bank level        5.88 billion in 2007, down by 12.8%
(–82% to EUR 0.07 billion). This down-        or EUR 0.86 billion on 2006. This
ward trend in trading income can be           decline in consolidated annual profits
explained by the climate of uncertainty       was the result of higher credit risk
and downturns on international capital        provisions and the drop in trading
markets in 2007.                              income on the one hand, and of valua-
     While administrative expenses rose       tion losses on securities and other valua-
by 19.6% or EUR 2.30 billion to EUR           tion results on the other hand. Parent
14.05 billion at group level, they            banks’ period profit amounted to EUR
declined slightly by 1.4% to EUR 5.76         2.87 billion in 2007, up by 11.2% or
billion at parent bank level, so that they    EUR 0.29 billion from 2006.
were around 2.4 times higher at group             Total assets climbed continuously
level than at the parent bank level.          until the end of the fourth quarter of
Higher staff costs and expenditure on         2007. Consolidated total assets stood at
goods and services were the main              EUR 912.56 billion at end-2007, up by
growth drivers at group level. Expendi-       18.2% or EUR 140.20 billion from
ture on goods and services increased by       2006. Parent banks’ total assets rose by
26.1% or EUR 0.99 billion to EUR              13.4% or EUR 68.34 billion, reaching
4.77 billion; in absolute terms, staff        EUR 578.00 billion at end-2007.
costs grew even more strongly by              Consolidated total assets were there-
20.3% or EUR 1.27 billion to EUR              fore some 1.6 times higher than total
7.53 billion.                                 assets of parent banks. The rise in
     Parent banks’ administrative expenses    consolidated total assets points to a
declined somewhat, with staff costs           further expansion of Austrian banking
going down slightly (–2.3% or EUR             groups’ international business.

STATISTIKEN SPECIAL ISSUE JULY 08                                                                              21
Economic Developments in Austrian Banking

                        See also:                                           and December 2007, the aggregated
                        Table 19 Comparison of Austrian Banking Groups
                        and the Respective Individual Banks as at Decem-    retail lending rate for new euro loans
                        ber 31, 2007                                        climbed by 0.84 percentage points
                        Chart 16 Fully Consolidated Foreign Subsidiaries
                                                                            from 4.38% to 5.22%.
                        Account for Some 28% of Banking Groups’ Total           Interest rates for loans to house-
                        Assets                                              holds went up more strongly (0.92 per-
                        Chart 17 Share of Foreign Subsidiaries in Banking   centage points) than for loans to non-
                        Groups’ Operating Profits Rises to Around 51%       financial corporations (0.85 percentage
                                                                            points). This development was attribut-
                        4 Interest Rate Developments                        able to housing loans – the most impor-
                        As a result of financial turmoil, retail            tant category of loans to households –
                        interest rates rose much more markedly              which increased by 0.99 percentage
                        in 2007 than the ECB’s two upward                   points to 5.27%. Consequently, the
                        key rate adjustments (by 0.25 percent-              Austrian interest rates for new housing
                        age points, respectively) to 4.0% would             loans were 9 basis points above the euro
                        have suggested. In light of the unstable            area average in December 2007. In
                        financial market situation, money                   2007, Austria’s average interest rate
                        market rates increased in particular.               advantage was still 14 basis points,
                            Given the higher share of variable              whereas in 2006, Austrian banks’ aver-
                        rate lending in Austria, the country’s              age interest rate for new housing loans
                        interest rate advantage vis-à-vis the               had ranged at the lower end of the euro
                        euro area was offset in some segments.              area spectrum.
                        Interest rates for outstanding amounts
                        of housing loans with a maturity of                 4.2 Lending Rates – Outstanding
                        more than five years – the most impor-                  Amounts
                        tant loan category for Austrian house-              In 2007, interest rates for housing loans
                        holds – were significantly above the euro           with a maturity of more than five years
                        area average. Thus, Austrian customers’             increased in Austria more than they did
                        interest rate advantage of 0.06 percent-            on average in the euro area. At the end
                        age points as at December 31, 2006,                 of December 2007, interest rates in
                        turned into a disadvantage of 0.5 per-              this segment reached 5.5%, which was
                        centage points as at December 31, 2007.             50 basis points above the euro area
                            Deposit rates for new business rose             average and thus at the upper end of the
                        even more markedly, as high-interest                euro area spectrum.
                        time deposits gained strongly in impor-                 A comparison with Germany in this
                        tance, generating 50% of deposit                    category reveals that the fast interest
                        growth in 2007.                                     rate increase in Austria turned the
                            In turn, Austrian banks’ interest               country’s interest rate advantage of
                        margin on new business narrowed                     0.55 percentage points into a disadvan-
                        further to 0.77 percentage points, which            tage of 0.40 percentage points.
                        was the lowest rate in the euro area (euro              Interest rates on loans to non-
                        area average: 1.38 percentage points).              financial corporations with a maturity
                                                                            of more than five years amounted to
                        4.1 Lending Rates – New Business                    5.13% in Austria and were thus still
                        Retail interest rates for new loans to              below the euro area reference value
                        nonfinancial corporations and house-                (5.28%), but the interest rate advantage
                        holds rose more strongly than key                   halved from 0.32 percentage points at
                        interest rates. Between December 2006               end-2006 to 0.15 percentage points at

22                                                                                    STATISTIKEN SPECIAL ISSUE JULY 08
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