Volksbank AG press release:
Österreichische Volksbanken-Aktiengesellschaft (VBAG) Group publishes consolidated results for the first half year of 2013
- Total assets fell to EUR 24.9 billion
- Risk-weighted assets decreased and stood at EUR 14.3 billion
- Capital ratios increased continuously, the tier 1 ratio reached 11.4%
Consolidated results as of 30 June 2013
VBAG Group is currently implementing a profound restructuring process. VBAG has to wind down or sell all business areas and assets which are not related to the bank’s function as central organisation of the Association of Volksbanks. Total assets therefore are to be reduced considerably. The focus of VBAG is on preserving the capital base during the restructuring phase. A number of restructuring and downsizing measures could already be implemented, these measures, however, have an impact on results. As of 30 June 2013 a pre-tax consolidated result of EUR -54 million and a consolidated result after taxes and non-controlling interests of EUR -87 million were reported, the results are in line with VBAG’s expectations.
Due to the efficient and effective downsizing process capital ratios increased continuously in the first half year 2013. The tier 1 ratio in relation to total risk was 11.4% at the end of the first half year of 2013 (10.9% as of 31 December 2012) and the equity ratio in relation to total risk stood at 16.3% as of 30 June 2013 compared to 15.7% at year-end 2012. As a result of the downsizing process capital buffer improved slightly in the first half year 2013.
Risk-weighted assets (RWA) could be reduced by EUR 1.5 billion and stood at EUR 14.3 billion (RWA total risk) at the end of the first half year of 2013. The reduction of risk-weighted assets is attributable primarily to downsizing measures implemented successfully in the Non-core Real Estate and Non-core Corporates segments and to the winding down of investment book positions. With regard to the downsizing process, VBAG exceeds the asset reduction targets set by the European Commission.
Eligible own funds of VBAG Group stood at EUR 2.3 billion as of 30 June 2013 and exceeded the regulatory requirement by just under euro 1.2 billion.
Total assets stood at euro 24.9 billion as at 30 June 2013, down by euro 2.8 billion compared with the end of 2012.
First half year 2013 results in detail
Net interest income stood at EUR 73 million as of 30 June 2013, down EUR 42 million year-on-year. This decrease is primarily due to effects from at equity valuations of EUR -60 million due to a planned capital measure at Volksbank Romania. At the same time, net interest income of VBAG Group’s core business areas increased slightly.
Risk provisions dropped by EUR 46 million compared to the first six months of the previous year to EUR -27 million. The decline was driven by a reduction of specific provisions in the Non-core Real Estate segment and by a release of EUR 35 million from portfolio-based allowances due to expected lower impairment levels. In the Non-core Corporates segment, however, an increase in specific provisions was reported in the period under review.
Net fee and commission income declined by EUR 19 million on the comparable period and stood at EUR 19 million at the end of the first half year. This decline is primarily the result of a change in the way income from cost allocations in the Other Operations segment is recognised, which has been recorded under other operating income since the fourth quarter of 2012. Furthermore, a guarantee commission expense of EUR 5 million for the Federal Government’s asset guarantee has been included in net fee and commission income.
A decline on the comparable period was also posted in net trading income, which is mainly attributable to valuation losses resulting from ineffective hedge relations. Net trading income stood at EUR -27 million at the end of the first half year of 2013.
As a result of VBAG’s cost reduction program, general administrative expenses dropped by EUR 7 million to EUR -126 million. The head-count has been decreasing continuously, as of 30 June 2013 VBAG Group had 1,878 employees, of which 755 were employed abroad.
The other operating result was EUR 66 million in the period under review. The Republic of Austria provided VBAG with an asset guarantee up to a maximum amount of EUR 100 million. The asset guarantee includes an earn-out clause which represents a liability that also has to be discounted. In sum, those two items amounted to EUR 65 million and were reported in the other operating result position. The year-on-year change in the other operating result is also due to a provision of euro 19 million regarding an impending liability for investment income taxes which was recognized in the last year’s comparable period.
Income from financial investments declined to EUR -47 million as of 30 June 2013. Main drivers were a valuation loss of EUR -22 million resulting from an overhang of effective fair value hedges, and a loss of EUR -22 million resulting from the valuation of guarantees for capital-guaranteed funds.
Outlook
In the second half of the year, the focus will be on the conclusion of planned or already contractually agreed sales of assets as well as on the implementation of a sales process for VBLI Group and Volksbank Malta. The massive deleveraging process will continue to affect results, it is therefore to be expected that VBAG Group´s results for the full year 2013 will be negative.
