Financial Statements 2013 - Bank Austria · tionately strong gains recorded on Wall Street (S&P...

Financial Statements 2013

1Bank Austria · 2013 Annual Report

Consolidated Financial Statements – Contents

Management Report of Bank Austria for 2013 2The banking environment in 2013 2Bank Austria in 2013 – Overview 8Quarterly trends in 2013 10Details of the income statement for 2013 12Financial position and capital resources 19Financial and non-financial performance indicators 21Development of business segments 33Outlook 52

Consolidated Financial Statementsin accordance with IFRSs 59

Consolidated Income Statement for the year ended 31 December 2013 60Consolidated Statement of Comprehensive Income 61 Statement of Financial Position at 31 December 2013 62Statement of Changes in Equity 63Statement of Cash Flows 64

Notes to the Consolidated Financial Statements 67A – Accounting policies 69B – Notes to the income statement 121C – Notes to the statement of financial position 133D – Segment reporting 151E – Risk report 163F – Additional disclosures 211Concluding Remarks of the Management Board of UniCredit Bank Austria AG 227Report of the Auditors 228Report of the Supervisory Board for 2013 230

Corporate Governance 235Corporate Governance Report for the 2013financial year of UniCredit Bank Austria AG 236Statement by Management 243Supervisory Board and Management Boardof UniCredit Bank Austria AG 244

Additional Information 249Office Network 250CEE Network 254Investor Relations 256

*)

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

2 2013 Annual Report · Bank Austria

Management Report

Overview 2013 was a year of stabilisation and transition to the expected moderate scenario – six years after the financial market crisis of 2007/2008, and following state intervention and the great recession in 2009/10 and repercussions in the form of the government debt crisis seen in peripheral European countries in 2011/12. While previous years were characterised by economic crisis management, 2013 saw individual structural adjustments in the business sector. This led to divergent trends – in real economic and financial terms, among companies and private individuals – in global regions and also within the European Union, which did not yet permit any signifi-cant growth in 2013. However, the factors required for such growth improved appreciably. Towards the year-end, leading indicators signalled that the period of weak growth was coming to an end and a stronger, though still moderate, upward trend across most regions was emerging. The progress that has been made so far provides better support for such confidence than a year earlier.

2013 was also a year of adjustment for banks. They had to cope with a mixed environment: companies’ demand for investment finance and working capital stagnated, turnover in the areas of foreign trade and investment business hardly revived, and excess liquidity was mainly used to reduce debt. As a result, and in combi-nation with low interest rates, margins and income from maturity transformation continued to decline. Eventually, banks experienced a further decrease in their profitability and in their ability to generate capital from their operations. They were thus faced with an urgent need to revise their business models, especially in the high-cost retail banking segment.

Banks also had to adjust to tighter regulatory and fiscal conditions while coping with a persistently restrictive market situation in their funding and capital raising activities. All this involved a sharper focus on core business, leaner balance sheets and risk-weighted assets, and continued adjustments in the valuation of business and equity interest portfolios to reflect the moderate medium-term prospects. These efforts were intensified in the period before the ECB assumes its role as the bank supervisory authority for systemically important banks, which will be linked to an asset quality review and subsequent stress tests by the EBA: the increase in equity capital ratios which will soon become effective has affected considerations regarding equity interests. In addition, loan loss provisions were increased regardless of the underlying risk profile. This means that the annual financial statements of banks – including Bank Austria – should be viewed against the background of their efforts to meet the various requirements despite a structural erosion of revenues and increasing national burdens imposed on banks. On the positive side, significant progress was made in 2013 on the road to a European banking union. These efforts aim at creating a level playing field for the pre-vention of crises. Being an internationally active and systemically important bank, we greatly welcome this development.

World economyGlobal production and global trade picked up in the summer after a disappointing first half-year, though with pronounced divergent trends among the individual regions. Economic growth slowed markedly in emerging markets but remained disproportionately strong. For the first time in over four years, it was the impetus from the industrial countries which was responsible for the stronger economic momen-tum. Overall, the developments confirmed the experience that recov-ery from a recession caused by a financial crisis can be exceptionally protracted and very moderate.

The US was the first of the global regions to emerge from the reper-cussions of the crisis. The housing market and the financial position of private individuals improved to an extent that boosted consumer spending, the construction industry, investment and also employ-ment. This development, and an expansive monetary policy, veiled the braking effect of the country’s public finances (abolition of tax benefits, automatic budget cuts). Expansion also accelerated in the UK, especially as greater progress had been made in reducing private debt. Japan had established ambitious economic support programmes in 2013 and doubled monetary expansion with a view to overcoming deflation, a measure that was supported by a dramatic depreciation of the yen (see “2013 timeline”). Emerging markets, on the other hand, lost much of their economic momentum. Evidently the rapid upward trend of recent years cannot simply be assumed to continue. The import pull from China also weakened, not least because the country’s politicians paid more attention to the sustaina-ble growth of the domestic economy. Further developments in the summer were the announced change in US monetary policy, a temporary withdrawal of capital, currency depreciation and a rise in interest rates on bonds, which in particular impacted exposed countries with current account deficits. Global trade expanded by only 2.7% in 2013 (IMF), compared with 7% as a long-term average (20 years before 2009).

After contracting for one and a half years, the economy of the euro area emerged from recession in the middle of 2013. While there are still highly divergent trends between the core countries, primarily Germany, and the peripheral countries, the decline in production in the southern EU countries of Spain and Italy came to an end in the third and fourth quarters. A key factor responsible for this improve-ment was less economic uncertainty after the ECB announced its OMT programme in August 2012 and thereby its intention to safe-guard the interests of the euro area. Ample liquidity, an easing of fis-cal restrictions, and an improvement in price-related competitiveness through internal depreciation (unit labour costs) in the peripheral countries also had a positive impact. The moderate 0.4% decline in GDP in 2013 is attributable to the low base level. However, a com-parison of the final quarters of the respective years reveals positive growth (an estimated +0.5%).

The banking environment in 2013

Management Report (CONTINUED)


Financial marketsIn 2013, financial markets were characterised by ample liquidity and interest rates which were at record lows worldwide. Looking for returns, investors were again prepared to assume higher risk. The euro crisis continued to ease, with CDS spreads on bonds of the five highly exposed peripheral countries declining from over 500bp in mid-2012 to 238bp at year-end 2012 and 145bp at the end of 2013; the most recent figure was 121bp (weighted average). Credit risk spreads on bonds of European companies were also fall-ing sharply. Pressure to invest, anticipating the forecast upswing, and stronger corporate balance sheets made 2013 a year of equities: the MSCI world index rose by 22.6% year-on-year, with dispropor-tionately strong gains recorded on Wall Street (S&P 500: +29.6%), leading to high valuation levels measured on an earnings basis. The EuroStoxx advanced strongly (+20.5%) while emerging markets indices were moving around the previous year’s levels (BRIC: –0.2%, Emerging Europe: –1.0% in local currency terms), reflecting a slow-down of growth and higher interest-rate and currency risks.

Developments in 2013 mirrored the vacillations of US monetary policy: in May 2013, prompted by improved economic data, the Federal Reserve started to discuss tapering its bond purchases of US$85 billion per month. Although the Fed provided forward guid-ance, expressing its commitment to keep key interest rates at a low level for the foreseeable future, markets anticipated a global turnaround in interest rates. The yield on 10-year US government bonds rose from 1.62% at the beginning of May to 3.00% at the beginning of September, with euro benchmarks following suit (rising from 1.17%, the level recorded on the day when the ECB first reduced its key interest rate, to 2.04%). When labour market data proved disappointing and new uncertainties emerged (US budget dispute), the Fed postponed its plans and capital markets eased. As the US budget /debt problem was temporarily resolved in October, US yields declined by about one half of a percentage point before rising steadily to 3% in the last four months of the year. Ultimately, the definitive announcement on 18 December 2013 of the first step of the exit from unorthodox measures (QE3), with effect from January 2014, had only little impact. The ECB withstood external pressure to raise interest rates, reducing its key rate on two occasions (2 May and 7 November 2013) to a level of 0.25% and affirming its policy of keeping interest rates low and providing liquidity via the full allocation of tenders. Euro benchmark yields thus rose by only 63bp (despite strong correlation) compared with an increase of 125bp on US Treasuries. Although the yield differential widened to over 1 percent-age point in favour of the US dollar, it depreciated by 4.3% in the course of the year, to €1.3791 per US dollar.

In global capital markets, the debate on tapering led investors to realise significant gains and rearrange their portfolios, primarily in the summer months. Portfolio shifts were mainly seen in high-yielding bonds. In particular, emerging markets investments made in the final

phase of the bull market in bonds were sold again, an exit which primarily affected countries experiencing a disequilibrium in the balance of payments. These developments resulted in currency depreciation and rises in local interest rates.

In a comparison of performance (year-end 2013/2012) US bonds (–7.6% in US dollar terms/–11.6% in euro terms) and euro govern-ment bonds (–2.5%) showed a negative performance (price + coupon) for the first time in many years. Even the performance of euro corpo-rate bonds was low (non-financial /BBB: +3.5%), after an excellent result in 2012 (+13.5%), as was the performance of higher-yielding emerging markets bonds (+3.7%). The divergent trends seen in the US stock market (MSCI in euro terms: +26.9%) and in euro area stock markets (+24.4%) as compared with the BRIC index (–7.4%) reflect the renewed growth momentum of the industrial countries; CEE mar-kets were partly impacted by the slowdown (–2.9%, all data in euro terms). As fears of inflation and crises abated, the Swiss franc remained well below the intervention threshold of 1.20 (at its most recent level of 1.2276 CHF/EUR, it was down by 1.7% ytd). The price of gold also mirrored US monetary policy, reaching a low of 1,180.7 US$/oz at the end of June after the announcement of mone-tary policy tightening in the US; a recovery in the autumn was followed by a renewed decline to a low level by the end of 2013 (closing price: 1,204.94 US$/oz, down by 28.0% year-on-year).

AustriaAfter a very weak second half of 2012, the Austrian economy did not achieve any significant growth in the first two quarters of 2013, either. The summer months then saw the start of a hesitant recovery in the industrial sector, which turned more lively towards the end of the year. In August, the Bank Austria Purchasing Managers’ Index (PMI) for manufacturing exceeded the growth threshold of 50 points, reaching 54 in December 2013 and January 2014, a level last seen in mid-2011. Quarterly trends in production were probably similar to those in real GDP. Given the low base at the beginning of the year, and as the upswing started late in the year, we believe that growth for 2013 as a whole was only 0.3%, after 0.9% in the previous year, despite the fact that quarter-on-quarter growth reached 0.3% in the fourth quar-ter of 2013.1) The renewed momentum will be reflected in a higher growth rate (+2.0%) in 2014 – see the “Outlook” section.

Economic performance in 2013 was weighed down primarily by stag-nant domestic demand and a negative impact of inventory manage-ment. The growth stimulus provided by exports (over +2%) was mod-erate, as in 2012, one of the reasons being the significant reduction of current account deficits in peripheral countries of the European Union, with demand from CEE countries also remaining at a low level. For this reason manufacturing capacity was underutilised. Despite a strong internal financing capacity and excellent terms and conditions

1) All GDP data for 2013 are estimates made before the editorial close of this report. The first data on Austria’s national accounts will be published in the middle of March.


Management Report


available for financing, investment in equipment declined considera-bly (–2.5%), both for the expansion and replacement of manufactur-ing plant, although 2013 saw an upward trend as the year pro-gressed. The construction industry also experienced a marked slowdown in 2013: after growth of 2.5% in both 2011 and 2012, construction output probably grew by only 0.5% (in real terms) in 2013, with housing construction recording a better trend than other investment in construction. Private consumption decreased slightly, by 0.4%, in 2013 as real incomes declined. While employment rose by 0.7% in 2013, private households’ disposable income was down by about 1%, reflecting lower investment income, higher social transfers and increases in prices. As private households tried to maintain their consumption levels, the savings ratio continued to decline by about 1 percentage point, to 6.5%. The increase in employment in 2013 was due to various factors, including immigra-tion; but unemployment also rose, reaching a rate of 4.9% based on the Eurostat method, after 4.3% in the previous year. In the first few months of 2013, the inflation rate was 2.5% and more; in the sum-mer it started to fall (to a recent level of only 1.4%) as fuel prices declined. The figure for 2013 as a whole averaged 1.9%.

In view of the weak propensity to consume and invest, liquidity in the non-bank sector remained high and credit demand low. At the end of 2013, lending volume – which usually follows economic develop-ments with a time lag of a few quarters – was somewhat lower than at year-end 2012. Within total loans to private households (–0.1%) consumer loans again declined and real estate finance picked up towards the year-end, growing by a low 2%. Outstanding corporate loans hardly changed (with maturities of less than one year declin-ing). Loans to the public sector decreased more significantly. In the area of deposits, a strong increase in 2012 was followed by a weak trend in the middle of 2013, with growth returning as the year pro-gressed (year-end 2013: +2% over the previous year). Corporate deposits grew comparatively strongly, with a disproportionately strong increase seen in short-term deposits, but this trend is beginning to reverse as recovery gathers momentum. Among deposits held by private households, short-term deposits showed the strongest growth while fixed deposits with terms of up to one year decreased signifi-cantly. The current environment of low interest rates has led to a deleveraging process, with private households reducing loans and investments. Although market opportunities have improved steadily, private investors are still reluctant to consider more attractive types of investment such as mutual funds or life insurance policies. Net additions to financial assets were significantly lower in 2013 than in previous years, due to lower investment income and a marked decline in the savings ratio as well as stronger interest in real estate. The volume of mutual funds also recorded negligible growth (+0.6%) in 2013. After a decline (net sales and performance) in May, June and August, which reflected the downward market trend in response to the debate on tapering and weaker economic data, net inflows no longer recovered on a sustainable basis in the remaining part of the year although stock markets rallied.

Q1 Q22012 2013

Q3 Q4 Q1 Q2 Q3 Q4

Currencies of CEE countriesagainst the euro

(Bank Austria-weighted)

Turkish lira

PMI euro area

Purchasing Managers’ IndexPMI manufacturing PMI global

CEE countries(Bank Austria perimeter without Ukraine)

Core euro countries

Economic recovery starting in summer 2013

0.00

0.50

1.00

1.50

2.00

2.50

3.00

0

100

200

300

400

500

4445464748495051525354

90

100

110

120

130

140

78

82

86

90

94

98

102

106

110

End of 2011=100

Current yield, % p.a.

End of 2011 = 100

Czech crown

Multi-year bull market coming to an end

Sovereign debt crisis stabilised

Currency depreciation in CEE from May 2013

Monetary policy turnaround anticipated

Share prices

Bond performance(euro benchmark, total return)

Euro benchmark bond(10-year)

Spread

Country risk premiums(CDS spread, 5-year)

50 = growththreshold

Russianrouble

10-year US Treasuries

Bonds of highly exposed countries(Portugal, Spain, Ireland and Italy, weighted)

bp


Central and Eastern Europe (CEE) 2) Economic performance of CEE countries (within our perimeter, GDP-weighted) continued to expand in real terms in the past two years, by 1.7% in 2013 after 2.1% in the previous year; this compares with declines of 0.4% and 0.6%, respectively, in the euro area. The region thus maintained its long-term growth lead, and the out-look remains good. Moreover, in the past two years economic policy achieved significant progress in stability with regard to public finances, inflation and external equilibrium. This generally reduced vulnerability to external shocks, even if this came at the expense of domestic demand and economic growth. Anchors of stability which helped to implement economic policies in the various countries included the avoidance of the EU deficit procedure, EU convergence, exchange rate regimes (Bulgaria) and IMF conditionality. This policy mix also significantly improved the basic balance (current account plus long-term capital transactions) in most countries. External bur-dens eased and inflation rates declined sharply, giving central banks room for interest rate reductions. This is true for most CEE countries, especially EU members among them, and to a lesser extent also for major producers of commodities, including Russia and Ukraine. It applies less to countries like Croatia, Bosnia and Serbia, which are lagging somewhat behind with regard to integration, quite apart from the special case of Turkey, which enjoys a high degree of eco-nomic autonomy.

As was to be expected, economic trends in countries which are closely integrated in European manufacturing networks were in 2013 characterised by moderate growth in the first half-year, exports giving an impetus to production in the third quarter, and a significant improvement in sentiment in the fourth quarter, most recently with double-digit growth of industrial output. Direct invest-ment and production capacity in key industries continued to increase, mainly in the automotive sector, and partly also in services (IT, Romania). In advanced CEE economies, industrial output accounts for between 22% and 28% of GDP (average for the euro area: 17%).

The Fed’s tapering announcement in May 2013 led to expectations of an increase in interest rates which prompted investors to sell, within a few months, almost all of the portfolio investments which they had made in emerging markets in the wake of quantitative easing in the US in autumn 2012 ; this exit also affected CEE. In countries with large external financing requirements, primarily Turkey, currency market intervention, renewed interest rate increases and, ultimately, substantial currency depreciation were inevitable. The Turkish lira depreciated by 20.4% against the euro (based on year-end 2013/2012 figures), a movement which also reflected political uncertainty in the final months of 2013.

The Russian rouble depreciated by 11.0% (one of the reasons being continued capital outflows), and the Ukrainian hryvnia (slightly stronger than the reference currency US dollar) lost 6.5% against the euro. The Czech government, finding itself in a completely differ-ent position, moved to drive the value of the Czech crown lower (–8.3% from year-end 2012 to year-end 2013) with a view to stimulating the economy. Overall, CEE currencies (Bank Austria-weighted) depreciated by 9.5% in 2013 (based on year-end levels), or by 4.1% based on annual averages. Country risk premiums (5-year CDS) fell to 170bp on a weighted CEE average in the first half of 2013, a level seen before the onset of the sovereign debt crisis in 2011. After the debate on tapering, CDS spreads rose by about 50bp. At the end of 2013, the CEE average was 220bp, compared with 270bp a year earlier and 340bp at year-end 2011. The renewed slight increase in 2013 was mainly driven by Croatia (structural changes), Slovenia (banking crisis), Turkey (external sec-tor, domestic policy) and Ukraine (geopolitical aspects).

In line with economic trends, credit expansion was unusually weak by CEE standards. Deposits rose more strongly than loans in most countries. Exceptions were Russia and Turkey, where credit expan-sion was still strong (+17% and +27%, respectively), driven by the boom in retail lending. Without these two countries, lending volume in CEE was up by 1.6% on the previous year, while bank deposits were 6.4% higher. The improvement in portfolio quality in CEE, which started in 2011, stalled in 2013 due to the weak trend in incomes and stagnant credit volume in most countries as well as the slowdown in domestic business activity. Nevertheless, on a CEE average, impaired loans were 12.2% of lending volume in 2013, significantly lower than the peak of 13.4% in 2010.

� Economic performance in the four Central European countries (CE) again declined in 2013 (–0.4% after –0.7%). This was due to developments in the Czech Republic and Slovenia, although these countries also recorded a significant increase in industrial output in the course of the year, primarily in the dominant automotive sector. While the economy in the Czech Republic shrank by 1.3% on an annual average for 2013, six quarters of recession (reflected in declining consumption and a sharp fall in investment) came to an end in the summer. Recent PMI levels, at 55 points, exceeded the growth threshold of 50, indicating a robust turnaround supported by a policy of currency devaluation. In Slovakia, production picked up earlier. The country’s economy was impacted by weak domestic demand, also in the area of investment, and this led to a large surplus on the basic balance (close to 5% of GDP in 2013). Both countries seek to keep the budget deficit down, to levels below 3%; external financing needs are relatively low. Hungary’s policy mix of export orientation in industry and state intervention in the domestic economy has so far been successful. GDP grew by a surprisingly strong 1.0% after shrinking a year earlier (–1.7%). On the supply side, a contribution to this growth came from new production capac-ity (car factories). The basic balance is highly positive (+5% of

2) Data on national accounts (GDP) for 2013 are forecasts available at the editorial close of this report (actual figures are published after this report), other key indicators are estimates or most recent figures.


Management Report


GDP), reflecting strong exports and weak imports. The government is keeping the national deficit at a level just below the Maastricht limit through various levies imposed on specific sectors including banks and foreign investors while taking measures to help private house-holds. Disinflation (CPI at year-end 2013: below +1%) was used for continuous reductions of key interest rates. The Funding for Growth Scheme (FGS) introduced in mid-2013 led to rescheduling of foreign currency loans and extended maturities of SME loans at subsidised and capped interest rates, at the expense of currency reserves. The Hungarian forint held up well (HUF/EUR down by 1.6% from Decem-ber 2012 to December 2013), despite the discriminatory fiscal policy. However, the cost was wide CDS spreads (234bp) and interest rate spreads (380bp/5-year). At the end of 2013, these country risk spreads were even higher than in Slovenia (CDS: 208bp/ interest rate: 313bp), where the restructuring of the banking sector over-shadowed all other developments in 2013. The severe adjustment recession (about –2.5% p. a. in the past two years) affected primarily private consumption and investment (both down by 4%). Reserves from earlier bond issues and the bad-bank solution (and the closure of two smaller banks in the middle of 2013) helped the country to avoid an EU assistance programme. The stress test results for the banking sector published at the end of 2013 indicated a recapitalisa-tion requirement of €4 billion, of which €3 billion is accounted for by the three large state-owned banks. Recapitalisation is planned to be carried out with funds from government bond issues, further reducing bail-out risk.

� The country group of South-East Europe (SEE) achieved sound economic growth of 1.4% in 2013 after stagnation in the previous year (–0.1%). The situation in the various countries within the SEE region differs widely. Romania achieved the strongest growth, expanding by 2.6% (after +0.7%) and benefiting from its advantage in terms of unit labour costs. Exports (+13.5%), including those in the automotive sector (Ford), and services were important factors once more. The basic balance is in equilibrium, the budget deficit is just below the 3% mark. Romania is regarded as a success story for the conditionality of IMF standby agreements. On the other hand, interest rate spreads are high and domestic demand very weak, with the domestic economy characterised by structural weakness; this is reflected in declining lending volume (–2.7%) and consequently an impaired loans ratio of 32.9%, the highest in CEE but now falling. Romania is dependent on portfolio inflows also for repayments to the IMF. Interest rate spreads are therefore high (5-year: 380bp), even though country risk premiums (CDS/5-year) are below average (171bp). Inflation, previously at +5%, declined substantially in the course of the year, to recently +1.7%; the Romanian leu remained stable (–0.6%). Bulgaria’s economy continued to perform well in 2013 thanks to the currency board – exports rose (+9%), the basic balance was positive (5% of GDP), government debt is low (18% of GDP) in an interest rate environment similar to that in the euro area, and risk premiums are also low (CDS: 109bp). But domestic busi-ness activity, where the state accounts for a large proportion, is

weak. Adverse impacts come primarily from legal and governance problems and from a structural productivity lag. Negative rates of inflation (–2.2% in August) have given rise to fears of deflation. Lending volume stagnated. Croatia has experienced recession for five years now (real GDP in 2013: –0.8%); this is due to structural factors and will continue in 2014. The country joined the European Union in the middle of 2013; having left the Central European Free Trade Agreement (CEFTA), Croatia reoriented its foreign trade. EU membership is now resulting in an excessive deficit procedure (EDP). The high budget deficit (expected to reach 5.7%), foreign debt in excess of 100% of GDP and the strong use of foreign currencies were among the reasons why Croatia lost its investment grade rating in 2013. Croatia is trying to avoid an IMF programme by launching new bond issues. However, the country risk premium rose in 2013 (recent CDS spread: 350bp). While asset quality deteriorated, the ratio of impaired loans to lending volume is in the mid-range of CEE countries (16.5%). After Croatia’s accession to the European Union, Bosnia and Herzegovina now shares the longest border with the EU. It cannot apply for EU candidate status due to problems with the country’s constitution (rights of ethnic minorities). Production (mainly energy) developed favourably in 2013, at a very low level. However, the current account and the basic balance show large deficits (–7.7% and –4.1% of GDP, respectively), suggesting a need to renew the standby arrangement with the IMF. The same is true for Serbia, with its twin deficits of budget (–6.6% of GDP in 2013) and current account (–4.9%). The inflation rate recently declined to 5% despite strong monetary expansion. Exports rose strongly (+13%) thanks to output in the automotive sector (Fiat 500L). The CDS spread is 400bp, the interest rate spread exceeds 10%. In view of the funding gap, various credit arrangements, including those with the United Arab Emirates (UAE), Russia and the EU/EBRD, and also with the IMF/World Bank, are inevitable. The dinar depreciated by only 1.9% against the euro in 2013.

� Russia and Turkey, two large countries outside the EU’s direct sphere of influence which enjoy a relatively high degree of economic autonomy, again achieved the strongest rates of real and monetary growth in 2013, though the growth momentum slowed considerably as the year progressed. In Russia, the slowdown in GDP growth, to recently +1.5% (after +3.4% and +4.3% in the two preceding years) reflects a longer-term trend. This development was due to three factors: first, losses in the terms of trade because of a concen-tration on energy resources, leading to stagnant export revenues; second, capacity bottlenecks explained by obsolete manufacturing plant and a shortfall in investment (2013: –0.5%); third, strains in the labour market. This compared with booming private consumption and imports (both up by 4% in real terms). The inflation rate is over 6%. The banking sector is expanding strongly (loans: +17%, depos-its: +16%), with loans to private individuals increasing by about 30%, double the rate of growth recorded in corporate lending. Consumption bought on credit has already led the government to take restrictive measures. Following the introduction of a debt brake,


public finances are under control and the public welfare fund is increasingly being used for infrastructure projects. The current account surplus to which Russia has become accustomed is dwin-dling and is further reduced through permanent capital outflows. In 2013, the central bank continued to ease its exchange rate regime (intervention thresholds in connection with the dollar /euro basket). The objective is free floating from 2015. Ukraine’s growth model focuses on two sectors, steel production and agriculture. Demand and price developments for steel in 2013 led to a double-digit decline in exports in real terms, a fall in investment and a GDP decrease in both real (–1.4%) and nominal (–0.5%) terms. Given the country’s twin deficit (budget: −5.7%, current account: −8.2% of GDP), defending the exchange rate target (US dollar) was only possible by keeping interest rates at a high level of between 11% and 15%, and this increased deflationary pressure (inflation rate: +0.2%). Credit expansion (7.4%) lagged behind deposit growth (+14.8); the impaired loans ratio was 30%. During the whole year, Ukraine was facing a fundamental choice between signing an EU association agreement or joining the Eurasian customs union. With-out signing up for the customs union, the government signed an agreement with Russia at the end of December (bond purchases of €15 billion by the Russian welfare fund, and gas price reductions of one-third). While this temporarily eased the external financing gap, the controversial decision brought Ukraine to the brink of civil war.

With GDP growth of 3.9% in 2013, Turkey was still the fastest-growing CEE economy. Domestic business activity was booming for much of the year (private consumption: +4%), supported by strong credit expansion (at a rate expected to reach 27.4% in 2013, with even stronger growth in retail lending) and relatively high inflation (December 2013: +7.3% year-on-year). Large imports (up by 8%) aggravated the country’s main problem, i. e. the current account deficit (8% of GDP) and the negative basic balance (7% of GDP). No problems were experienced in financing the external gap with strong inflows of short-term portfolio capital in the first few months of 2013 (after Turkey was assigned an investment grade rating) and with borrowing by the banking sector. However, given its vulnerable external position, Turkey was hit hardest by the repatriation of capital following the debate on Fed tapering. The country’s central bank responded with a variable policy mix of intervention, liquidity meas-ures and interest rate increases, but allowed the currency to depreci-ate in the latter part of the year (end-of-year 2013/2012 compari-son: –19.0% against the USDxEUR basket and –20.4% against the euro). Political unrest in a neighbouring country (Syria) and within Turkey itself (democracy reform) had an additional impact (CDS spread up from 105bp at the beginning of 2013 to 225bp at the end of December). Dampening economic-policy measures (including restrictions on the booming credit card sector and on public con-sumption) recently initiated a longer-term adjustment process, which will reduce economic growth in 2014 to about 2%. Despite the strain in retail lending, impaired loans accounted for 2.8% of lending volume, the lowest ratio in any CEE country.

2013 timeline

11 Jan. Japan launches the largest post-Lehman economic stimulus programme (€175 billion).

24 Feb. Parliamentary elections in Italy; stalemate in the Senate.1 March Fiscal cliff: spending cuts (“sequester”) take effect.16 March Banks in Cyprus shut; rescue package initially rejected.25 March Rescue package modified after ECB ultimatum: €19 billion from EU

and IMF, restructuring and recapitalisation of two major banks; bail-in of bonds and of bank deposits exceeding €100,000.

19 March European Parliament, Commission and national governments agree on European banking supervision to be set up under the umbrella of the ECB.

19 March Japan adopts radical monetary policy to overcome deflation: doubling the monetary base, extending the term of government bonds, inflation target of 2% within two years. The yen depreciates dramatically.

14 April European Parliament adopts CRD IV, putting Basel 3 into effect as of 1 Jan. 2014.

1 May Slovenia’s rating falls below investment grade. 2 May ECB responds to slowdown in growth: key interest rate reduced

by 25 basis points to 0.50%, rate on lending facility by 50 basis points to 1.00%; 0% on deposits and excess reserves. Tenders to be fully allocated until mid-2014.

3 May European Commission lowers its forecast of economic growth after the IMF, OECD and others have already done so.

9 May Austerity and reform programme in Slovenia. The country seeks to restructure banks on its own. Debt brake to be applied from 2015.

14 May Greece’s credit rating raised for the first time (Fitch: B–). 22 May Neutral statement by Federal Reserve fails to dispel interest rate

fears. 11 June Hearing before Germany’s Constitutional Court on ECB monetary

policy (OMT).19 June Fed leaves key interest rates at 0% to 0.25% subject to

conditions; “tapering” may start in 2013 g exit fears lead to strong rise in interest rates.

27 June Banking union: European Council draws up directive on single resolution mechanism (SRM) comprising resolution plans, bail-in of creditors, and resolution fund.

1 July Hypo Alpe Adria needs €2 billion in financial assistance to prepare its half-yearly financial statements.

1 July Croatia joins the European Union, becoming its 28th member. 4 July ECB affirms that interest rates will be low for a long time (forward

guidance). 11/12 July Italy’s credit rating lowered to BBB+, that of France to AA+. 21 August Syria crisis escalates internationally with renewed use of

chemical weapons before chemical weapons facilities are destroyed in early September.

12 Sept. European Parliament gives ECB the role of banking supervisor from autumn 2014.

18 Sept. Fed surprises financial markets by continuing intervention. 1 Oct. US government shutdown (for 16 days). 7 Nov. ECB lowers key interest rate to 0.25% and lending facility rate to

0.75%, deposit rate remains at 0.00%. Tenders fully allocated until at least July 2015.

29 Nov. Credit rating of the Netherlands downgraded. Germany, Finland and Luxembourg are now the only EU countries to retain AAA ratings.

13 Dec. Ireland leaves bail-out after 3 years, Spain follows suit on 31 December.

18 Dec. Fed decides to reduce its monthly bond purchases (of US$85 billion) by US$10 billion from January 2014.

18 Dec. EU Finance Ministers give concrete shape to the SRM with gradual build-up of resolution fund, bail-in rules and minimum guarantee of 8%.

20 Dec. S&P lowers the European Union’s rating from AAA to AA–.


Management Report


The commentary in this management report refers to the condensed income statement shown in this section on page 11. The same format is used for segment reporting. This makes it possible to consistently explain the contributions made by the various business segments to the items in the income statement and to Bank Austria’s overall develop-ment. A reconciliation of the condensed income statement to the man-datory reporting schedule – presented in a different format – of the consolidated financial statements is given in section D.1, Segment Reporting, of the notes to the consolidated financial statements on pages 152 to 153.

To ensure comparability with the previous year’s figures, the items in the income statement for 2012 were adjusted to reflect the structure of 2013. Net profit / loss (attributable to the owners of the parent company) is not affected thereby. To obtain consistent time series, the compara-tive figures for 2012 have additionally been recast to reflect the cur-rently applicable financial reporting standards and definitions, and minor changes in the consolidation perimeter have been taken into account. The recasting differences to the totals for the various items of the income statement are shown in the segment reporting tables D.3 in the notes to the consolidated financial statements on pages 156 and 157.

� For Bank Austria, 2013 was another year characterised by weak demand for credit and for transaction-based banking services. This was due to persistently weak economic growth, ample liquidity in the busi-ness sector and the decision of our customers to further reduce their debt. The low interest rate environment also impacted revenue from commercial banking activities in 2013 – the longer this persists, the greater the impact. Both Austria and the closely integrated EU countries in Central and Eastern Europe (CEE), were obliged to scale down their plans. In the latter part of 2013 Turkey and Russia, until then the major contributors to revenue growth, were also affected by the generally more critical view of emerging markets. Overall, in 2013, expectations that pre-2008 growth rates would no longer be seen in the medium to longer term were confirmed, despite the recent brighter economic out-look. Like other major banks, Bank Austria was under strong pressure to respond to the stricter regulatory and fiscal requirements in addition to the commercial banking environment. In 2013, triggered by the forth-coming asset quality review and stress tests, markets already required banks to adjust their business models, balance sheet and funding structure, and capital held by them – ahead of the actual implementa-tion of regulatory requirements, most notably Basel 3, which is to take place in several stages over a number of years.

➔ In this environment, Bank Austria again generated a sound oper ating profit in 2013. Operating income rose by 4% (or by 6% if one-off income resulting from the buyback of hybrid instruments in the previous year is excluded) to €6,960 million, with growth mainly driven by the Central Eastern Europe (CEE) business segment. As operating costs were more or less stable (+2%), operating profit reached €3,104 million, an increase of €208 million or 7%; adjusted for the one-off effect, the figure was up by €335 million or 12%.

Profit performance in 2013 compared with 2012 € million (2012 recast)

2013 2012+/– €

million +/– %

operating profit 3,104 2,895 +208 +7%Net write-downs of loans and provisions for guarantees and commitments –1,441 – 969 –472 +49%net operating profit 1,663 1,926 –263 –14%

Non-operating items 1) –531 –656 +125 –19%

Profit before tax 1,131 1,269 –138 –11%Non-operating items 2) –2,734 –850 –1,884 >100%

net profit / loss 2) –1,603 419 –2,022 >100%

1) Provisions for risks and charges, integration/ restructuring costs, net income/ loss from investments. / 2) Income tax, total profit or loss after tax from discontinued operations, non-controlling interests, Purchase Price Allocation effect, goodwill impairment charge. 3) Net profit / loss attributable to the owners of the parent company.

� Based on these operational strengths, we made far-reaching adjust-ment measures in the consolidated financial statements for 2013 in response to a reassessment of the medium-term economic outlook and the foreseeable operating environment in the banking industry.

First, among the operating items, we made significant additions to loan loss provisions. As a result, the coverage ratio of impaired loans rose by over 7 percentage points to 55%; the coverage ratio of non-performing loans (NPL), in particular, was increased by 2 percentage points to 66%. Net write-downs of loans and provisions for guarantees and commitments therefore rose by almost one-half to €1,441 million in 2013. This was the reason why net operating profit (operating profit less net write-downs of loans and provisions for guarantees and commitments) was down by €263 million or 14% to €1,663 million (see table). Almost one-half (48%) of the decrease was due to the one-off effect in the previous year (gains of €126 million on the buy-back of hybrid instruments).

Second, the following measures relating to the consolidated financial statements are reflected in the charge for non-operating items: the focus of the multi-year plan is the concentration on core markets and the bank’s commercial core business as well as risk reduction. In line with this policy, and following our withdrawal from Kazakhstan in 2012, the banks in Ukraine, which were recently integrated, are classified as a disposal group held for sale. With the realignment of leasing business throughout UniCredit Group, we classified the shareholding interest in UniCredit Leasing, which is accounted for under the equity method, as held for sale; in this context it is planned to repurchase leasing subsidi-aries in Austria and CEE in 2014. Our subsidiary in the Cayman Islands, which serves as a vehicle for international capital market transactions, was placed on a non-active basis. The impact of these transactions on the income statement is reflected in the item “Net income/ loss from investments”.

The goodwill impairment test had the strongest impact on results. While a cyclical recovery is underway, economic trends and industry developments in 2013, especially vulnerability of several CEE countries to external shocks, required a reassessment of medium-term and long-term economic and revenue growth prospects in our markets, reducing

Bank Austria in 2013 – Overview


them to levels below the scenarios prevailing in the market in the years before 2008, when major acquisitions were made. In the past years the carrying amounts of equity interests in various banking subsidiaries were adjusted on several occasions. As part of a reassessment of remaining goodwill, in line with UniCredit policy, Bank Austria recog-nised substantial impairment losses on goodwill in all CEE countries and in Austria, reducing it to nil; this had an impact of €1,957 million on the income statement. The other non-operating items include integration/ restructuring costs, of which €104 million related to the strategic Bank Austria 2020 project. A reduction of deferred tax assets led to a significant increase in the income tax charge.

➔ Overall, the structural adjustments and current expenses resulted in a net charge of €3,265 million for non-operating items, up from a net charge of €1,506 million in the previous year. The deduction of this amount from the net operating profit of €1,663 million resulted in a net loss of €1,603 million.

� The result for 2013, including substantial impairment losses on goodwill, had an impact on IFRS equity, which declined by €3.1 billion to €15.1 billion. However, regulatory capital was maintained at more or less the previous year’s level as goodwill was already deducted under the provisions of the Austrian Banking Act. (The impact on the income statement and the change in the difference between equity and the carrying amount of subsidiaries offset each other.)

Our efforts to achieve a leaner structure of total assets, not least through deconsolidation of ATF Bank, Kazakhstan, have also reduced risk-weighted assets. The total capital ratio based on all risks thus rose from 12.5% at the end of 2012 to 13.5% at the end of 2013. This means that even on the basis of these difficult financial statements, Bank Austria significantly improved its capital resources. In the coming years, as the focus will continue to be on core business while

Long-term review: build-up, growth, consolidation1)

Average for the period …

2002 2003 2004 2005 2006 2) 2007 2008 2009 2010 2011 2012 3) 20132002–

2005 2006–

20082009–

2012

income statement, € millionOperating profit 1,109 1,069 1,342 1,610 2,428 3,069 3,296 3,630 3,442 3,083 2,895 3,104 1,283 2,931 3,263Net write-downs of loans –537 –467 –398 –491 –715 –483 –1,012 –2,267 –1,839 –1,352 – 969 –1,441 –473 –737 –1,607Net operating profit 572 602 944 1,119 1,713 2,586 2,284 1,363 1,603 1,731 1,926 1,663 809 2,194 1,656Charge for non-operating items –263 –160 –335 –155 –325 –298 –1,140 –261 –856 –1,522 –1,507 –3,265 –228 –588 –1,037

Net profit / loss4) 309 442 609 964 1,388 2,288 1,144 1,102 747 209 419 –1,603 581 1,607 619

Statement of financial position, € billion Cumulative changes based on

end-of-period figures

Total assets 148.0 137.1 146.6 158.9 191.2 209.2 222.3 194.4 199.0 199.2 207.6 196.2 +11 +63 –15Goodwill 0.9 1.0 0.9 1.1 2.4 3.9 3.6 3.4 3.2 2.4 2.1 0.0 +0 +3 –1IFRS equity, € billion 4.6 5.8 6.9 7.5 14.1 15.3 14.2 14.4 17.5 17.7 18.2 15.1 +3 +7 +4

Total capital ratio5) 11.2% 13.1% 12.4% 12.2% 6) 10.8% 11.4% 9.2% 10.9% 12.1% 12.7% 12.5% 13.5% 1.0%P –3.0%P 3.3%P

1) Several changes in the consolidation perimeter and in Bank Austria’s membership of banking groups. / 2) The income statement for 2006 did not provide meaningful information in operating terms because of the realignment of regions (sales and purchases within UniCredit Group); for this reason the figures shown are pro-forma data reflecting the structure at the beginning of 2007. The figures for the 2006 statement of financial position are initial figures for 2007. / 3) Recast. /4) Net profit / loss attributable to the owners of the parent company. / 5) Total capital ratio based on all risks pursuant to the Austrian Banking Act. / 6) Figure for September 2006 because large capital gains were recorded in the fourth quarter of 2006.

minimising risk, and as future profits will be retained, the bank aims to further strengthen the capital base for future organic growth.

➔ The multi-year time series (see table below) puts results for 2013 and the related measures into perspective: in the build-up years of the new Group, Bank Austria’s operating profit showed a steady upward trend, declining only slightly after the financial market crisis of 2007/2008 and the recession of 2009. The average figure for the period from 2009 to 2012 was even significantly higher than for the 2006–2008 period. The crisis years in the banking sector were mainly reflected in net write-downs of loans and provisions for guarantees and commitments. But the provi-sioning charge declined after the crisis years, from a peak of €2.3 billion to about one-half of that figure. In average terms, Bank Austria’s net oper-ating profit in the past five years was slightly lower than in previous years but still exceeded €1.5 billion. The new scenario following the financial market crisis, which marked a turning point, required the original plans to be adjusted to medium-term expectations. On several occasions, this involved the recognition of impairment losses on goodwill, which had to be carried as an asset in previous years, and the goodwill impairment charge absorbed a part of net operating profit. The far-reaching measures reflected in the 2013 consolidated financial statements included a good-will impairment charge to reduce remaining goodwill to nil, thereby taking into account the new, more modest outlook for future developments. This means that operating income, even if it grows only moderately, can feed through to bottom-line results to a greater extent once the intended disposals of equity interests are completed. With the implementation of the strategic plan, Bank Austria has focused its business portfolio in regional and operational terms. Over the past few years, total assets have declined slightly while the proportion of customer business has risen. An essential factor for Bank Austria’s future development is its sound capital base, which provides the bank with strong foundations for future growth. The total capital ratio has increased by 3.3 percentage points in the past five years, reaching a multi-year high of 13.5%.


Management Report


Quarterly trends in 2013

2011 2012 2013

*) Net operating profit = operating profit less net write-downs of loans and provisions for guarantees and commitments.

Quarterly trends in operating performance € billion

Average volume of loans to customers

128

130

126

132

134

136

€ million

0

100

200

300

400

500

600

700

800

900

adjusted for exchange rate movements

Provisioning charge

Net operating profit *)

Operating profit

Bank Austria’s performance in operating terms has shown a more or less stable development over the past two years, with the usual quar-terly fluctuations and a moderate upward trend. In the fourth quarter of 2013, currency depreciation in several countries where the bank has large operations – Turkey and Russia from the middle of 2013, and the Czech Republic from September 2013 – had an impact on performance. But even the figures as reported show strong revenue growth over the preceding quarter and the fourth quarter of the previ-ous year, and a significant improvement in operating profit, which was only offset by the increase in net write-downs of loans and provisions for guarantees and commitments.

operating income in the fourth quarter of 2013 was €1,850 million, up by 11% on the preceding quarter and 7% higher than in the fourth quarter of the previous year. Within the total figure, net interest declined (by 2% from Q3 2013 and 5% from Q4 2012), mainly as a result of the low interest rate environment. In CEE (down by 2% from Q3 2013 and by 7% from Q4 2012), currency depreciation was an important factor: adjusted for exchange rate movements, net interest was unchanged compared with the preceding quarter and with the same quarter of the previous year. The unusual stagnation in CEE was due to a significant narrowing of interest margins as interest rate con-vergence to EMU levels accelerated in many countries; adjusted for exchange rate movements, volume continued to rise (+2%/+11%). Net fees and commissions, on the other hand, rose strongly in both Austrian customer business and CEE; in the bank as a whole, they increased by 13% to €456 million from the third to the fourth quarter, exceeding the Q4 2012 figure by 7%. Revenue growth in the fourth quarter of 2013 was mainly driven by net trading, hedging and fair

value income, which rose by €173 million to €366 million and exceeded the Q4 2012 figure by about the same amount. CEE gener-ated a large proportion of net trading income (and of its growth), with an increase of €179 million to €304 million. Besides higher turnover in customer business in an environment characterised by strong volatility of exchange rates and interest rates in the final months of the year, sales of government bonds and financial investments also made a strong contribution to the favourable development.

operating costs remained stable in 2013: despite a seasonal increase of 9% in the fourth quarter, they were €1,001 million, more or less matching the figure for the fourth quarter of the previous year (+1%). Costs in Austrian customer business and in the Corporate Center were lower than in the same period of the previous year, by 2% and 13%, respectively, with payroll costs declining particularly strongly. In CEE, operating costs grew by 5%, the same rate as revenue growth; the cost increase in CEE was mainly driven by other administrative expenses (including higher charges for bank levies and the financial transaction tax) and amortisation and depreciation while payroll costs were reduced in CEE, too.

On this basis, operating profit rose by 13% from the third to the fourth quarter of 2013, to €849 million, an increase of 16% over the Q4 2012 figure. Although net additions to impaired loans showed a down-ward trend, net write-downs of loans and provisions for guarantees and commitments rose slightly from quarter to quarter in the past two years up to and including the third quarter of 2013. In the fourth quarter of 2013, the provisioning charge increased sharply, to €565 million. This explains why net operating profit for the fourth quarter, at €285 million, was lower than in the preceding quarter and in the same quarter of the previous year (see chart).

non-operating items in the fourth quarter of 2013 reflected the impact of the measures described above. The substantial expenses in this context were mainly recognised in the Corporate Center. Net operating profit of the customer business segments (bank as a whole minus the Corporate Center) was €396 million; it was lower than in the preceding quarter (down by €128 million) and in the fourth quarter of 2012 (down by €224 million) as a result of the charge for additional loan loss provisions mentioned above. Non-operating items were a net charge of €204 million. Customer business thus generated a net profit of €192 million in the fourth quarter of 2013. The large net profit of €585 million recorded in the third quarter of 2013 included capital gains of €195 million on the sale of insurance operations in Turkey (Yapı Kredi Sigorta, YKS, and Yapı Kredi Emeklilik, YKE). Compared with the fourth quarter of the previous year, net profit generated in customer business was down by 45%. Together with the results recorded in the Corporate Center – which include a large proportion of integration/restructuring costs (of which €104 million related to the Bank Austria 2020 project), special expenses in connection with operations held for sale, and the substantial impairment losses on goodwill – Bank Austria recorded a net loss of €2,689 million for the fourth quarter of 2013.


Condensed income statement of Bank Austria1) (€ million)

RECAST 2) QUARTERlY FiGURES RECAST CHAnGE

Q1 2013 + Q2 2013 + Q3 2013 + Q4 2013 = 2013 2012 +/– € +/– %

Net interest 1,060 1,048 1,020 1,003 4,132 4,143 –11 –0%

Dividend income and other income from equity investments 35 28 14 6 83 86 –3 –4%

Net fees and commissions 403 434 404 456 1,698 1,543 +155 +10%

Net trading, hedging and fair value income 144 232 193 366 934 768 +167 +22%

Net other expenses/ income 38 14 41 20 113 141 –28 –20%

Operating income 1,680 1,757 1,673 1,850 6,960 6,681 +279 +4%

Payroll costs –482 –491 –454 –460 –1,886 –1,916 +30 –2%

Other administrative expenses –430 –409 –407 –445 –1,690 –1,625 –65 +4%

Recovery of expenses 0 1 0 0 1 1 +0 +5%

Amortisation, depreciation and impairment losses on intangible and tangible assets –62 –63 –60 – 96 –281 –246 –35 +14%

Operating costs – 973 – 963 – 920 –1,001 –3,856 –3,786 –70 +2%

Operating profit 708 794 753 849 3,104 2,895 +208 +7%

Net write-downs of loans and provisions for guarantees and commitments –286 –301 –289 –565 –1,441 – 969 –472 +49%

net operating profit 421 493 464 285 1,663 1,926 –263 –14%

Provisions for risks and charges –74 –46 –22 –35 –177 –305 +129 –42%

Integration/ restructuring costs –2 –4 –10 –116 –132 –33 – 98 >100%

Net income/ loss from investments –1 1 194 –417 –223 –318 +95 –30%

Profit before tax 344 443 627 –284 1,131 1,269 –138 –11%

Income tax for the period –64 –111 –100 –259 –534 –327 –207 +63%

Total profit or loss after tax from discontinued operations 18 –45 7 –250 –270 –438 +168 –38%

Profit or loss for the period 299 287 534 –793 327 505 –177 –35%

Non-controlling interests –11 –4 –12 53 27 –38 +65 n.m.

Net profit or loss before PPA 3) 288 284 522 –740 354 467 –113 –24%

Purchase Price Allocation effect 4) 0 0 0 0 0 –13 +13 –100%

Goodwill impairment –3 –3 –3 –1,949 –1,957 –34 –1,923 >100%

net profit or loss 3) 285 281 520 –2,689 –1,603 419 –2,022 n.m.

n.m. = not meaningful. / 1) Bank Austria’s income statement as presented in this table is a reclassified format corresponding to the format used for segment reporting. / 2) Recast to reflect the consolidation perimeter and business structure in 2013. / 3) Attributable to the owners of the parent company. / 4) PPA effects Russia.


Management Report


� In 2013, Bank Austria’s operating income was €6,960 million, an increase of €279 million or 4% over the previous year. Adjusted for exchange rate movements (i. e. CEE calculated at constant exchange rates at overall bank level), operating income increased by 7%. A longer-term comparison shows that after a weaker figure for 2012, operating income in 2013 returned to the average level of about €7 billion maintained since 2008 and was only 1.7% lower than the average of €7,081 million for the period from 2008 to 2012.

Multi-year comparison of operating income (€ billion)

FivE-YEAR AvERAGE

2006pf 2007 2008 2009 2010 2011 2012r 20132008–

2012

Austrian segments 2.9 2.9 2.3 2.8 2.3 2.4 2.2 2.2 2.4CEE 2.8 3.4 4.7 4.6 4.6 4.7 4.6 4.9 4.7Corporate Center 0.1 0.1 0.2 –0.2 0.2 –0.2 –0.2 –0.1 0.0Bank Austria 5.8 6.4 7.2 7.2 7.2 7.0 6.7 7.0 7.1

pf = 2006 pro forma figure reflecting the consolidation perimeter in 2007. / r = 2012 recast to reflect the structure in 2013.

Growth of operating income was driven by the CEE business segment, which achieved an increase of €299 million or 6% to €4,929 million in 2013, the highest level ever. Currency depreciation lopped about 4 percentage points off the growth rate (adjusted for exchange rate movements, operating income in CEE grew by 11%). While all country groups made positive contributions to this performance (see table below), developments in the various countries differed according to local economic trends. Net interest generated in Central Europe (CE) was impacted by slackness in economic activity in Western Europe and by the low interest rate environment, but this was offset by growth in other income components; overall, operating income in CE rose by 11% (despite a 7% decrease in Slovenia). In South-East Europe (+4%), Romania had a very good year (+16%) while Croatia recorded a slight decline (–3%). Among the high-growth countries, the strongest increase in operating income was generated by our Russian banking subsidiary (+€172 million /+19%), where all income components rose significantly.

The Turkish bank in which we hold an equity interest (consolidated proportionately at 41%) continued to generate the largest operating income of CEE banks within our perimeter: at €1,221 million for 2013, operating income in Turkey stagnated (–1%) when compared with the previous year, due to currency depreciation (adjusted for exchange rate movements: +8%); the unfamiliar slowdown is also to be seen in the context of economic challenges experienced in the second half of 2013, especially a more difficult environment in terms of interest rates and funding conditions.

Austrian customer business continued to be affected by a gradual erosion of income which resulted from persistent weakness of demand and the long period of low interest rates. This development was partly offset by more lively fee-based business in the latter part of the year. Overall, operating income was €2,156 million, slightly lower than in the previous year (– €48 million or –2%).

In the Corporate Center, where a number of factors – including the sub-holding company function for CEE (liquidity and funding costs of overall bank management, hedging of expected CEE profit contribu-tions) – regularly lead to a negative figure, the deficit was lower than in the previous year (– €125 million compared with – €152 million). If the gains of €126 million on the buyback of Tier 2 hybrid capital instruments in 2012 are deducted from operating income for that year, the 2013 figure represents an improvement of €154 million; revenue growth for the bank as a whole would have been higher by the same amount (+€405 million or +6%).

Operating income by component € million (2012 recast)

2013 2012+/– €

million +/– % CONST

Net interest 4,132 4,143 –11 –0% +3%Dividend income and other income from equity investments 83 86 –3 –4% –3%Net fees and commissions 1,698 1,543 +155 +10% +13%Net trading, hedging and fair value income 934 768 +167 +22% +25%Net other expenses/ income 113 141 –28 –20% –18%operating income 6,960 6,681 +279 +4% +7%

Movements in the various income components show that weak demand and the interest rate environment in 2013 still had an impact on the net interest performance and (indirectly) on income from equity investments while the other items already indicate the increase in transactions seen as the year progressed.

net interest, the main component of income (59%), was €4,132 mil-lion in 2013, more or less unchanged compared with the previous year (–0%; adjusted for exchange rate movements, +3%). Based on the various items of interest-bearing assets and liabilities, net interest gener-ated by customer business (loans, deposits, debt securities in issue) rose by 7% but net interest from financial market investments and trading and hedging positions declined. The volume of the latter was reduced (mainly hedging derivatives, see commentary on the financial position)

Details of the income statement for 2013

Operating income by region € million (2012 recast)

2013 2012+/– €

million +/– % CONST 1)

Austrian customer business 2) 2,156 2,203 –48 –2%Central Eastern Europe (CEE) 4,929 4,630 +299 +6% +11%… Turkey 1,221 1,237 –16 –1% +8%… Russia 1,074 901 +173 +19% +26%… Central Europe (CE) 955 862 +94 +11% +13%… South-East Europe (SEE) 1,486 1,432 +54 +4% +4%… Other incl. PCV 3) 193 198 –5 –3%Corporate Center –125 –152 +28 +18%Total operating income 6,960 6,681 +279 +4% +7%

1) CONST = adjusted for exchange rate movements = translated at exchange rates prevailing at the end of 2011. / 2) Austrian customer business = Retail & Corporates, Private Banking and Corporate & Investment Banking (CIB). / 3) Baltic countries and CEE/Profit Centre Vienna (PCV).


and also reflected losses in value resulting from the turnaround in bond market trends which started in late summer 2013. Overall, the interest margin (net interest/ interest-bearing items, bank as a whole) recently was 2.36%, a slight improvement over the previous year (2.29%).

A regional analysis shows that net interest generated by the threeAustrian business segments continued to decline, by €130 million or 9%. It should be noted, however, that the decline resulted mainly from Treasury and funding operations and from net interest on financial market investments, which are managed in the CIB Division; the fur-ther decline in the yield curve, which remained flat over much of the year (narrow gap between medium-term/ long-term and short-term interest rates), did not permit gains on maturity transformation as in previous years. Net interest generated by commercial banking busi-ness with customers (including large corporate customers served by the CIB Division) almost matched the previous year’s level. On the lending side, the slight decline in average volume in the reporting year (–2%) in line with economic trends was offset by slightly widening spreads. On the liabilities side average volume of deposits and debt securities in issue remained more or less unchanged (–1%, with direct deposits rising by 3%), but margins deteriorated significantly. One of the reasons for this is that deposits from previous years, on which higher spreads were granted, are reaching maturity to an increasing extent and can only be replaced at lower spreads in the current low interest rate environment. Overall, net interest (commercial margin and the remaining components) measured against average lending volume declined by 17 basis points (bp), from 257bp to 240bp; based on average volumes of loans and primary funds (i. e. customer deposits and debt securities in issue), net interest fell by 19bp, from 253bp to 235bp.

In Central and Eastern Europe, net interest amounted to €3,091 mil-lion, up by €59 million; the growth rate of 2% (adjusted for exchange rate movements, +6%) was significantly lower than in previous years. In the Central European group of countries, net interest declined slightly (–6%/adjusted for exchange rate movements, –3%). Given the high degree of integration and convergence of these countries, volume stag-nation and narrowing interest margins spread throughout this region in 2013 (a development which may also move in the opposite direction again). Net interest in SEE rose slightly, by 2%, with good growth achieved in Romania (+10%) and Serbia (+8%). The overall net inter-est performance also reflects the restructuring of banking business in the Baltic countries to focus on leasing activities, but this had no mate-rial impact. The largest contribution of any CEE country in our perimeter to overall net interest came from the bank in Turkey, with €732 million (although Bank Austria only has a 41% shareholding in the bank). Currency depreciation in average terms for the year led to a decrease in euro terms (–6%); expressed in local currency, net interest rose at a comparatively low 3%. While average volume growth in 2013 was still strong (+20% in local currency terms), the interest margin was down by over 80 basis points from the previous year, due to a rise in interest rates in the second half of the year and various restrictive measures which impacted funding costs. Net interest generated in Russia in 2013

rose substantially, by 13% (adjusted for exchange rate movements, +20%), as strong volume growth combined with margin improve-ments. Overall, it should be noted that the interest margin (net interest /average lending volume) in the CEE business segment declined in 2013, as in 2012, from 457bp to 440bp. At this level, it is still signifi-cantly higher than for the bank as a whole (312bp), even after the provisioning charge (279bp compared with 203bp).

Dividend income and other income from equity investments remained more or less unchanged at €83 million, with contributions to this item coming primarily from Austrian regional and specialised banks, real estate project companies and financial service providers. In this context, following the realignment of leasing business, our 31.01% shareholding interest in UniCredit Leasing was classified as a disposal group held for sale and is therefore reflected in this item only with current profit or loss, without including valuation adjustments (the comparative figures for the previous year were recast).

In 2013, operating income was substantially supported by net fees and commissions (€1,698 million), which increased by €155 million or 10% (adjusted for exchange rate movements: +13%). It was partic-ularly gratifying to see that the increase took place in all areas of the bank’s operations: in Austrian customer business (€676 million) net fees and commissions were up by about €23 million or 4%, although in 2013 they again declined sharply in the areas of payment transac-tions and account services and banking services. This compared with a favourable trend in securities business: in the retail segment (+4%) mutual fund business experienced a recovery and in Private Banking (+10%) assets under management won further market shares thanks to a sustainable good performance. In the CIB Division (+15%) the increase in net fees and commissions was driven by securities busi-ness and especially by renewed stronger demand for capital market and financial services (guarantees, credit derivatives, placements, commit-ment fees). In CEE net fees and commissions rose by €83 million or 9% (adjusted for exchange rate movements: +13%) to €1,040 million, with improvements seen in all countries. Contrary to the trend in Austria, contributions to growth also came from account and payment services, and from lending business in Turkey and Bulgaria. Securities business also experienced an upturn, although this was largely limited to business with corporate customers where it was driven by under-writing operations, credit insurance and guarantees. In the retail seg-ment, contributions to growth also came from the sale of insurance policies in some countries. Central Europe made the strongest contribu-tion to the increase in net fees and commissions (+€63 million/ +32%); in Hungary the strong rise (+€47 million) partly reflected higher charges (for accounts, payments, transactions, credit cards) in response to the financial transaction tax introduced in 2013, which amounted to €65 million and is included in other administrative expenses. Russia also recorded strong growth rates (+9%, adjusted for exchange rate movements: +16%), generated largely by under-writing business. Turkey’s performance was less favourable (–1%, adjusted for exchange rate movements: +9%), partly on account of economic-policy measures dampening growth in credit card business.


Management Report


net trading, hedging and fair value income in 2013 rose by €167 million or 22% to €934 million. Without the gains of €126 million on the buyback of hybrid instruments included in the comparative figure for 2012 (a non-operating one-off effect), the increase was €293 million or 46%. The net trading result achieved in Austrian customer business rose by €65 million to €90 million, and was generated mainly by the CIB Division which (in contrast to net interest) achieved strong growth in this area through Markets /Counterparts. In 2013, the CEE business segment contributed €705 million to the net trading result, accounting for about three-quarters of the overall figure and €173 million up on the previous year (+33%). Realised gains on available-for-sale securities (espe-cially government bonds) were an important factor in this context. In addition, banks in CEE countries with flexible exchange rates and strong international capital movements conduct significant transactions for local customers in interest-rate /exchange-rate management. Strong increases in net trading income were recorded in Turkey, Romania, in the Czech Republic and in Hun-gary. In Russia, gains on the sale of shares in MICEX, the Russian trading platform, were substantial as in 2012, but these were now generated for the last time (€145 million after €76 million). In the Corporate Center, which also covers activities relating to liquidity management and equity capital management of the bank as a whole and Bank Austria’s function as subholding company, including exchange rate hedging activities in respect of the anticipated contributions to results by the CEE units, net trading performance improved from €85 million in 2012 (without gains on the buyback of hybrid instruments) to €140 million in 2013, although Bank Austria’s participation in profit before tax of UniCredit’s Markets product line (to which Bank Austria is entitled until the end of 2014 following the sale of UniCredit CAIB) was in 2013 slightly lower than in 2012.

net other expenses/ income, which cover many minor items not included in core commercial business, in 2013 was €113 million, down by €28 million on the previous year. A contribution to the result came from an indirect non-bank equity interest (Istraturist, Croatia). This compared with an equalisation payment within UniCredit Group by Bank Austria in 2013 for services provided to large international customers. � Our efforts to improve cost efficiency in 2013 were successful, a significant achievement in view of a weaker revenue trend in the banking sector and growing additional burdens of a fiscal and reg-ulatory nature. operating costs (€3,856 million) rose only slightly (+2%); without the bank levies and financial transaction tax included in other administrative expenses, operating costs would have been slightly lower (–0.2%). Within the total figure, payroll costs declined by €30 million or 2% to €1,886 million, thanks to strategic concentration on core business and cost reductions in the administrative sector. The average number of employees in 2013 was down by 869 FTEs or 2% from 2012 (without the operations

in Ukraine, which are classified as held for sale and are not included in costs, and without Kazakhstan). Other administrative expenses were €1,690 million, €65 million or 4% up on the previous year; within the total figure, bank levies (including the financial transaction tax) rose by €78 million to €209 million, accounting for 12% of other administrative expenses. The cost /income ratio (without the bank levies but including the financial transaction tax, which is a transitory item) improved by 1.3 per-centage points to 53.4%.

Operating costs € million (2012 recast)

2013 2012+/– €


Austrian customer business 1,478 1,461 +17 +1%Central Eastern Europe (CEE) 2,162 2,075 +87 +4% +8%Corporate Center 216 250 –34 –14%Bank Austria as a whole 3,856 3,786 +70 +2% +4%… without bank levies and FTT 3,647 3,654 –7 –0%

Types of costsPayroll costs 1,886 1,916 –30 –2%Other administrative expenses 1,690 1,625 +65 +4%… of which: bank levies and FTT 209 131 +78 +59%

Cost / income ratio (without bank levies)Austrian customer business 65.3% 63.1% +2.2 percentage points Central Eastern Europe (CEE) 42.9% 44.0% –1.1 percentage pointsBank Austria as a whole 53.4% 54.7% –1.3 percentage points

In Austrian customer business, costs rose by only 1% to €1,478 million. Payroll costs declined slightly (–1.5%), despite the wage drift. The total number of employees in the three Divisions was down by 104 FTEs or 2% (average for the period). Other administrative expenses also remained under control, rising by 2%, despite the IT costs associated with the follow-up work at the beginning of the year in connection with the software changeover to EuroSIG, and the start of the SmartBanking project in the fourth quarter. In CEE (€2,162 million) cost growth was 4%, or 8% at constant exchange rates, in both cases lower than revenue growth. Without the bank levies and the financial transaction tax (FTT), costs would have declined by 1%. The cost / income ratio (without bank levies, but including the FTT) therefore improved by more than 1 percentage point to 42.9%, a figure that is over 10 percentage points lower than that for the bank as a whole. Payroll costs in CEE in euro terms remained constant (–0.3%); adjusted for exchange rate movements, payroll costs rose by a low 4%. The average number of employees in 2013 (40,843 FTEs; pro-rata figures for banks in which equity interests are held, without Kazakhstan and Ukraine) was down by 689 FTEs (–2%). Programmes for optimising the branch network and enhancing efficiency were underway in most countries. The above-average growth of costs in Romania (+10%) was due to the acquisition in August 2013 of the retail portfolio (+128 FTEs) of the Royal Bank of Scotland. The sale of


insurance operations in Turkey (Yapı Kredi Sigorta, YKS), on the other hand, resulted in a decline of about 1,800 FTEs. Almost all of the increase in other administrative expenses (+8%/+11%) in CEE was due to the spontaneous rise in Hungarian levies. Operating costs in the Corporate Center were down by €34 million or 14% on the previous year, the reduction also reflects lower payroll costs.

➔ operating profit rose by €208 million or 7% to €3,104 million as moderate revenue growth combined with a low increase in costs. Without the non-operating one-off effect recorded in the previous year (gains on the buyback of hybrid instruments), operating profit would have increased by €335 million or 12%. Adjusted for exchange rate movements (CEE calculated at overall bank level), the increase would have been about 4 percentage points higher.

Operating profit € million (2012 recast)

2013 2012+/– €


Austrian customer business 678 742 –65 – 9%Central Eastern Europe 2,767 2,555 +212 +8% +13%… Turkey 716 719 –3 –0% +9%… Russia 783 619 +164 +26% +34%… Central Europe 429 397 +32 +8% +11%… South-East Europe 813 775 +39 +5% +5%… Other countries and PCV 26 45 –19 –42%Corporate Center –341 –402 +62Bank Austria as a whole 3,104 2,895 +208 +7% +11%

� net write-downs of loans and provisions for guarantees and commitments – comprising direct write-offs and additions to / releases from loan loss provisions and provisions for guarantees and commit-ments (as well as results from purchases and disposals of loans and receivables) – rose by €472 million to €1,441 million in 2013.

When assessing the risk situation, it is important to note that the increase in net write-downs of loans and provisions for guarantees and commitments was not due to a renewed deterioration in general asset quality. The risk profile in several countries – including Romania, Slovenia, Hungary and, at a very low level, Russia – deteriorated dur-ing the reporting period (mainly in retail banking). The increase in the total provisioning charge led to an improvement in coverage ratios.

An analysis of trends in net write-downs of loans and provisions for guarantees and commitments over the past years shows that they were falling steadily from their peak in the recession year 2009 (€2,267 million) to the previous year, declining by about one-half, to €969 million (without Ukraine) or €1,106 million (including Ukraine) in 2012. The renewed increase in 2013 reflects a slowdown in deteriora-tion, though the situation has not yet improved. Net additions to impaired loans have fallen significantly since 2011, reaching a low of +€228 million in 2013 (comparative figures for 2012 recast /Ukraine not included).

Net write-downs of loans and provisions for guarantees and commitments € million (2012 recast)

2013 2012 +/– € CoST oF RiSKACTUAl 2013 2012

Austria*) 219 208 +11 35bp 33bpCEE 1,222 761 +461 174bp 115bp… Turkey 156 147 +9 105bp 109bp… Russia 78 67 +11 62bp 57bp… Central Europe 247 140 +107 157bp 87bp… SEE 534 367 +167 260bp 163bp… Other + PCV 207 40 +167Bank Austria as a whole 1,441 +969 +472 109bp 75bp

*) Including the Corporate Center.

Net write-downs of loans and provisions for guarantees and commit-ments in Austria (customer business segments plus Corporate Center) rose only slightly, by €11 million to €219 million, in 2013. At 35 basis points (bp) the cost of risk remained at the very low level seen in the past years. Net write-downs of loans and provisions for guarantees and commitments in the Retail & Corporates business segment declined significantly, by 15% to €136 million, reflecting developments in retail banking business. Employment and incomes in Austria still presented a favourable picture compared with other countries. Private individuals and businesses tended to reduce their debt rather than adding to it. Moreover, the exchange rate of the

2008 2009 2010 2011 20121) 20132)

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Management Report


Swiss franc remained stable, well below the intervention limit, while the Japanese yen depreciated strongly (–22%). For this reason net write-downs of loans and provisions for guarantees and commit-ments in the Retail & Corporates business segment continued to decline slightly although we enhanced the portfolio-based provision-ing method in 2013, which in itself led to an increase in the provi-sioning charge. In the CIB Division, net write-downs of loans and provisions for guarantees and commitments rose slightly, by 11% to €53 million. The cost of risk in CIB was 37bp, more or less matching the level in the three preceding years (32bp, 36bp, 35bp).

As additions to loan loss provisions were made, net write-downs of loans and provisions for guarantees and commitments in the CEE busi-ness segment increased by €461 million or 61% to €1,222 million. The coverage ratio thus improved in most countries, with the improve-ment varying from country to country. In percentage terms, the Central European countries recorded the strongest combined increase in net write-downs of loans and provisions for guarantees and commitments (+€107 million, +77%). However, at 157bp, the cost of risk in these countries remained below the average figure of 174bp for CEE as a whole. In Hungary and Slovenia, the relatively low provisioning charges doubled in 2013. A stronger increase of €167 million or 45% was seen in the region of South-East Europe (SEE). Within SEE, net write-downs of loans and provisions for guarantees and commitments in Romania rose strongly once more, by €83 million to €174 million, although the country’s economic performance in 2013 was relatively good. The cost of risk in Romania reached 461bp, the highest level in CEE. In Croatia, loan loss provisions were increased already in mid-2013, with further additions at the end of 2013 bringing the total charge to €186 million (up by €34 million on the previous year, cost of risk: 196bp), which reflects the bank’s size and high market share. At our banks in Turkey and Russia, net write-downs of loans and provisions for guarantees and commitments in euro terms increased at comparatively low rates of 6% and 16%, respectively, although some segments of retail banking (credit card business, consumer credit) were under strain; adjusted for exchange rate movements, the increases were 16% and 23%, respectively. The cost of risk was 105bp in Turkey and 62bp in Russia, well below the CEE average as the local banks benefited from a well-balanced business structure with a high proportion of large customers. The Profit Centre Vienna of the CEE business segment includes the charge for loan loss provisions for cross-regional portfolios such as international project finance, and the provisioning charge for a portion of the exposures of Ukrsotsbank which was transferred to UniCredit Bank Austria by means of a sub-participation agreement at the beginning of 2013 to replace an expired guarantee.

The following table presents the volume and quality of the loan portfolio. It shows that, at the end of 2013, impaired loans accounted for 8.4% of gross loans to customers, after 9.2% at the end of 2012. Net of loan loss provisions, impaired loans were 4.0%

of total loans, down from 5.1%. The decrease is also explained by the change in accounting for Ukrsotsbank, which is classified as held for sale in the statement of financial position at year-end 2013 and is therefore no longer included in lending volume (and in net write-downs of loans). However, a comparison with the adjusted figure for the previous year (without Ukraine, see the middle col-umn in the table) does not change the picture to any significant extent. A comparison of unadjusted year-end figures shows that the coverage ratio of impaired loans (without taking collateral into account) improved by over 7 percentage points, from 47.6% to 54.9%, reflecting the increase in specific loan loss provisions while lending volume was reduced. The CEE business segment accounted for 54% of lending volume and 69% of impaired loans.

Lending volume and asset qualityDEC. 2013 DEC. 2012 DEC. 2012

(€ million) ACTUAlWiTHoUT

UKRAinE 1) ACTUAl 2)

Bank Austria as a wholeGross loans to customers 136,099 136,297 139,255Total write-downs –6,979 –6,288 –6,831Net loans to customers 129,121 130,009 132,424Gross impaired loans 11,409 11,182 12,802… % of loans to customers 8.4% 8.2% 9.2%Specific write-downs –6,262 –5,559 –6,092Coverage ratio 54.9% 49.7% 47.6%Net impaired loans 5,148 5,622 6,710… % of loans to customers 4.0% 4.3% 5.1%

Central Eastern Europe (CEE)Gross loans to customers 73,559 71,435 74,393Total write-downs –4,390 –3,666 –4,208Net loans to customers 69,170 67,769 70,185Gross impaired loans 7,837 7,433 9,053… % of loans to customers 10.7% 10.4% 12.2%Specific write-downs –4,014 –3,258 –3,791Coverage ratio 51.2% 43.8% 41.9%Net impaired loans 3,824 4,175 5,262… % of loans to customers 5.5% 6.2% 7.5%

Austria (incl. Corporate Center)Gross loans to customers 62,540 64,862Total write-downs –2,589 –2,622Net loans to customers 59,951 62,240Gross impaired loans 3,572 3,749… % of loans to customers 5.7% 5.8%Specific write-downs –2,248 –2,301Coverage ratio 62.9% 61.4%Net impaired loans 1,324 1,447… % of loans to customers 2.2% 2.3%

1) Ukraine classified as held for sale in the 2013 consolidated financial statements (no longer included in the various items of the statement of financial position and the income statement, 2012 adjusted). / 2) As reported (not adjusted).


Impaired loans expressed as a proportion of total loans, in gross terms, improved from 12.2% at the end of 2012 to 10.7% most recently; in net terms, they improved from 7.5% to 5.5%. In Austria (customer business segments and Corporate Center = bank as a whole minus CEE), the ratios were more or less unchanged (gross impaired loans amounted to 5.7% at the end of 2013, in net terms, 2.2%). The coverage ratio of impaired loans in Austria improved by 1.5 percentage points to 62.9%. ➔ Bank Austria’s net operating profit (operating profit less net write-downs of loans and provisions for guarantees and commit-ments) in 2013 amounted to €1,663 million. The decline of €263 million or 14% compared with the previous year is explained by the additions to loan loss provisions. Adjusted for exchange rate movements (CEE at overall bank level), net operating profit was down by 9%. Another factor to be taken into account is the non-operating one-off effect in the previous year (gains of €126 million on the buyback of hybrid instruments). As the additional loan loss provisions were made mainly in CEE, net operating profit in CEE fell by 14% (adjusted for exchange rate movements, by 9%). Never-theless, net operating profit generated by the CEE business seg-ment was €1,545 million, still representing more than three-quar-ters (76%) of the total figure for customer business. This means that Bank Austria’s underlying operating performance is stable and supported by sustainable income components.

Net operating profit € million (2012 recast)

2013 2012+/– €


Austrian customer business 488 535 –47 – 9%Central Eastern Europe (CEE) 1,545 1,794 –249 –14% – 9%… Russia 705 553 +153 +28% +36%… Turkey 560 572 –12 –2% +7%… Central Europe 182 257 –76 –29% –27%… South-East Europe 279 407 –128 –31% –32%… Other countries + PCV –181 5 –186Corporate Center –370 –403 +33 –8%Bank Austria as a whole 1,663 1,926 –263 –14% – 9%

� The balance of non-operating income/expenses between net operating profit and profit before tax was – €531 million in 2013, an improvement of €125 million or 19% over the previous year.

Within this negative balance, net additions to provisions for risks and charges in 2013 were €177 million after €305 million in 2012. This figure also reflects legal risks, including a €65 million charge recognised in March and April 2013 for the legal dispute in Switzerland which has in the meantime been completed (BvS ver-sus predecessor banks and UniCredit Bank Austria as legal succes-sor; for details of legal risks see pages 201 to 203 in the notes to the consolidated financial statements). Some of the additions to

provisions for risks and charges related to current retail banking business in Turkey, including the credit card bonus point pro-gramme. Larger items included additional expenses relating to the sale of ATF Bank, Kazakhstan, in 2013.

integration/restructuring costs in 2013 were €132 million (2012: €33 million). This item included primarily restructuring pro-visions of €104 million for the Bank Austria 2020 strategic project, which involves staff-related measures in connection with rearrange-ments in branch-based sales activities, with branch closures and a fundamental reorientation of the IT infrastructure, and the introduc-tion of multi-channel banking (for details see the section on “non-financial performance indicators /strategic projects” and pages 148 to 149 in the notes to the consolidated financial statements). The provisioning charges for the restructuring of operations in the Baltic countries (€6 million for concentrating customer service activities in Riga and focusing on leasing business) and for the restructuring of the Hungarian branch network (€8 million) were comparatively low; the item also includes expenses relating to the new deposit guaran-tee scheme in Slovakia. Integration costs also included €18 million for the integration of the banking subsidiaries in Slovakia and the Czech Republic.

The negative amount shown in the item net income/ loss from investments for 2013 was – €223 million, an improvement of €95 million over the previous year. The decrease resulted from one-off income of €195 million from the sale of equity interests in Turkish insurance companies, which was accompanied by the con-clusion of a long-term distribution cooperation agreement with the objective of focusing on core business and enhancing capital efficiency (see comments on consolidated companies and changes in consolidated companies on pages 110 to 118 of the notes to the consolidated financial statements). This was offset by various expenses for equity interest restructuring. The most significant factor in this context is the step-by-step restructuring of leasing business in the entire UniCredit Group, which involves the sale of Bank Austria’s shareholding interest in UniCredit Leasing S. p. A. and in the Russian leasing subsidiary. This shareholding interest, now classified as held for sale, impacted net income/ loss from investments with – €131 million. (In 2012, write-downs were reflected in the item “Dividend income and other income from equity investments”; the comparative figures for 2012 shown in the condensed income statement were adjusted to reflect the structure prevailing in 2013.) A negative impact of €134 million on net income/ loss from investments relates to the planned liquida-tion of a company in which we hold an equity interest. In addition to valuation adjustments to minor equity interests in the domestic real estate sector and in CEE countries as well as current results from financial market investments, the carrying amounts of equity interests in Austria were also reduced, with the related charge being reflected in net income/ loss from investments.


Management Report


Profit before tax

€ million (2012 recast)

2013 2012+/– €


Austrian customer business 450 455 –5 –1%Central Eastern Europe (CEE) 1,641 1,722 –80 –5% +1%… Russia 707 553 +154 +28% +36%… Turkey 758 512 +246 +48% +62%… Central Europe 123 235 –112 –48% –45%… South-East Europe 271 417 –146 –35% –35%… Other countries and PCV –218 5 –223 Corporate Center – 960 – 907 –53 +6%Bank Austria as a whole 1,131 1,269 –138 –11% –3%

After deduction of the balance of non-operating items from net operating profit, profit before tax was €1,131 million in 2013, after €1,269 million in the previous year. Profit before tax gener-ated by Austrian customer business almost matched the previous year’s figure (–1%). In CEE, profit before tax was down by 5% in euro terms and up by 1% when adjusted for exchange rate move-ments. Large increases in the contributions from Turkey and Russia offset declines in the other regions of CEE (see table). The special expenses mentioned above in connection with equity interest man-agement are reflected in the Corporate Center.

� Further non-operating charges and taxes of €2,734 million (2012: €850 million) had to be deducted from profit before tax to arrive at net profit / loss for 2013; the total amount includes effects from deferred taxation and discontinued operations as well as impairment losses on goodwill, which was reduced to nil.

Although profit before tax was slightly lower than in the previous year, the income tax charge for 2013 was €534 million, substan-tially higher than in the previous year (€327 million) because deferred tax assets were written down in 2013.

In line with the strategy of concentrating on core markets in the business portfolio and reducing risks, and following our withdrawal from Kazakhstan in 2012, the banks in Ukraine (which were recently integrated) are classified as a disposal group held for sale. As in the case of ATF Bank, Kazakhstan, in the 2012 consolidated financial statements, the income statement items of the new Ukrsotsbank were combined and presented in the item “Total profit or loss after tax from discontinued operations”, together with the effects from the reclassification. The comparative figure for the previous year

includes expenses relating to the sale of ATF Bank, Kazakhstan, which has been completed in the meantime. In 2013, total profit or loss after tax from discontinued operations was a substantial loss of – €270 million but lower than in the previous year (– €438 million).

With the merger of the two banks in Ukraine – Ukrsotsbank and UniCredit Bank, Kiev – Bank Austria’s shareholding interest in Ukrsotsbank declined from 98% to 72%. A portion of the foresee-able result from the sale (and of the provisions which have been made) of Ukrsotsbank will therefore be attributable to UniCredit’s non-controlling interest in Ukrsotsbank. From the Bank Austria consolidation perspective, this had a favourable effect on the item “non-controlling interests”, giving a positive amount of €27 million (including the other non-controlling interests) for 2013 after – €38 million in the previous year.

Recent goodwill impairment tests have led to the decision to write off all goodwill (of cash-generating units). This is the result of sig-nificantly lower medium-term forecasts (economic growth in real and nominal terms, growth of banking sector), changes in the inter-est rate scenario, and additional risks which recently materialised again (such as currency depreciation and capital transfer controls) and, last but not least, regulatory restrictions and fiscal charges imposed on the banking sector in most countries including Austria. Impairment losses on goodwill added up to a charge of €1,957 million (2012: €34 million), of which €1,891 million (97%) related to CEE banking subsidiaries.

The recognition of a goodwill impairment charge which reduces goodwill to nil, and of provisions for the intended disposals and restructuring of equity interests, led to a net loss of €1,603 million in the 2013 consolidated financial statements.

Profit performance € million (2012 recast)

2013 2012+/– €

million +/– %

net operating profit 1,663 1,926 –263 –14% Non-operating items 1) –531 –656 +125 –19%Profit before tax 1,131 1,269 –138 –11% Non-operating items 2) –2,734 –850 –1,884net profit / loss 3) –1,603 419 –2,022

1) Provisions for risks and charges, integration/ restructuring costs, net income/loss from investments. / 2) Income tax, total profit or loss after tax from discontinued operations, non-controlling interests, Purchase Price Allocation effect, and impairment losses on goodwill. / 3) Net profit / loss attributable to the owners of the parent company.


Major items in the statement of financial positionAS PUBliSHED: FoR AnAlYSiS PURPoSES:

31 DEC. 2013 31 DEC. 2012 CHAnGE2013/2012 PUB

31 DEC. 2012ADJUSTED

CHAnGE2013/2012 ADJUSTED

ASSETSOther financial assets*) 23,430 23,384 +46 +0.2% 23,384 +46 +0.2%Loans and receivables with banks 24,967 28,112 –3,145 –11.2% 27,759 –2,792 –10.1%Loans and receivables with customers 129,121 132,424 –3,304 –2.5% 130,021 – 900 –0.7%Intangible assets 219 2,459 –2,240 – 91.1% 2,406 –2,187 – 90.9%Non-current assets and disposal groups classified as held for sale 3,714 3,788 –73 n.m. 7,488 –3,773 –50.4%Other asset items 14,759 17,429 –2,670 –15.3% 16,538 –1,779 –10.8%Total assets 196,210 207,596 –11,386 –5.5% 207,596 –11,386 –5.5%liABiliTiES AnD EQUiTYDeposits from banks 27,020 31,061 –4,041 –13.0% 30,833 –3,813 –12.4%Deposits from customers 108,935 110,563 –1,628 –1.5% 108,839 +96 +0.1%Debt securities in issue 29,049 28,063 +987 +3.5% 28,062 +987 +3.5%Liabilities included in disposal groups classified as held for sale 2,242 3,506 –1,264 n.m. 5,494 –3,252 –59.2%Provisions for risks and charges 5,155 5,389 –234 –4.3% 5,388 –234 –4.3%Equity 15,052 18,192 –3,140 –17.3% 18,192 –3,140 –17.3%Other liability items 8,757 10,822 –2,066 –19.1% 10,788 –2,031 –18.8%Total liabilities and equity 196,210 207,596 –11,386 –5.5% 207,596 –11,386 –5.5%

*) Financial assets at fair value through profit or loss + available-for-sale financial assets + held-to-maturity investments.

Financial position and capital resources

Financial position Ukrsotsbank, Ukraine, which was classified as held for sale on the basis of a strategic decision to reduce risk, is no longer included in the state-ment of financial position as at 31 December 2013 with its contribu-tions to the various items but is shown in the assets item “Non-current assets and disposal groups classifed as held for sale” and in the liabilities item “Liabilities included in disposal groups classified as held for sale”. Ukrsotsbank was a significant factor in 2012, with about €2.4 billion in loans and receivables with customers and €1.3 billion in primary funds (customer deposits and debt securities in issue). To ensure comparability with the previous year’s figures for the individual items, the 2012 statement of financial position is shown as published and in an adjusted form for analysis purposes.

� As at 31 December 2013, Bank Austria’s total assets were €196.2 billion, down by €11.4 billion or 5.5% on year-end 2012. A large part of the decrease is due to a deconsolidation effect: ATF Bank, Kazakhstan, which was included in the item “Non-current assets and disposal groups classified as held for sale” of the 2012 statement of financial position and has in the meantime been deconsol-idated, accounted for €3.8 billion of the total decline of €11.4 billion on the assets side; on the liabilities side, ATF Bank, Kazakhstan, was included in the item “Liabilities included in disposal groups classified as held for sale” in 2012 and accounted for €3.5 billion of the decrease in total liabilities and equity. The comparison of (unadjusted) year-end amounts shown in these items of the statement of financial position includes Ukrsotsbank, Ukraine, in 2013 and ATF Bank, Kazakhstan, in 2012, which were about the same size. In addition to deconsolidation, exchange rate movements also influenced the various items of the statement of financial position and capital consolidation. From the

middle of 2013, the currencies of countries where Bank Austria has large operations came under pressure against the euro: in a compari-son of year-end figures 2013/2012, the Turkish lira depreciated by 20.4%, the Russian rouble by 8.3% and the Czech crown by 3.2%. In operational terms, the slowdown of growth was reflected on the lending side and on the deposit side. Moreover, efforts made by the bank to optimise the structure of assets and liabilities proved effec-tive: the proportion of items which are directly related to customer busi-ness continued to rise, at the expense of interbank business, financial market investments, trading assets/ liabilities and hedging derivatives.

� A presentation of the items of the statement of financial position for analytical purposes (2012 figures adjusted to 2013 by reclassifying Ukraine), on which the following commentary is based, shows that on the assets side – in addition to the above-mentioned deconsolidation effect – loans and receivables with banks declined significantly, by €2.8 billion or 10.1% (see the three columns shown in the table under “for analysis purposes”). Financial market investments were more or less equal to the year-end figure of the previous year (+0.2%) while hedging derivatives were substantially reduced (–29.4%). loans and receivables with customers totalled €129.1 billion at the end of 2013, more or less matching the previous year’s level (– €0.9 billion/ –0.7%). This reflects stagnant lending volume in Austrian customer business (–2.7%) and credit expansion in the Central Eastern Europe (CEE) business segment which was much weaker than in previous years (+1.6%). The main reason for the weaker development was currency depreciation: at constant exchange rates, loans and receivables with cus-tomers in CEE rose by 10.6%. At the Turkish bank in which we hold an equity interest, lending volume grew by 26.6% in local currency terms (reflecting a slowdown) but by only 1.6% in euro terms. For Russia, the rates of change are +8.7% in rouble terms and –3.3% in euro.


Management Report


Capital ratios31 DEC. 2013 31 DEC. 2012

based on all risks 1) Tier 1 capital ratio 11.6% 10.8%… without hybrid capital (Core Tier 1 capital ratio) 11.3% 10.6%Total capital ratio 13.5% 12.5%based on credit risk 2) Tier 1 capital ratio 13.2% 12.3%… without hybrid capital (Core Tier 1 capital ratio) 13.0% 12.0%Total capital ratio 14.3% 13.0%

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

Nevertheless, the proportion of loans and receivables with customers shown in the statement of financial position rose from 62.6% at the end of 2012 to 65.8% at the end of 2013. Within the financial market investments (unchanged at €23.4 billion), claims against sovereign borrowers (carrying amount: €18.4 billion/9.4% of total assets), which are included in various valuation categories, increased by 3.1%. Austrian government securities (€6.9 billion) accounted for the largest proportion of the total portfolio (37.4%) and rose strongly (+30.4%), followed by Turkish (18.4%), Czech (11.6%) and Hungarian (8.9%) government securities. The proportion of Italian government securities (carrying amount: €563 million) was 3.6%, more or less the same as Slovak or Bulgarian bonds. Holdings of government bonds fulfil an important function in liquidity management of the local banks and of the bank as a whole.

� On the liabilities side, deposits from banks amounted to €27.0 billion, a decrease of €3.8 billion or 12.4%. Trading liabilities (–26.0%), hedging derivatives (–24.0%) and financial liabilities at fair value through profit or loss (–31.6%) were lower at the end of 2013 than a year earlier. The item “Liabilities included in disposal groups classified as held for sale” declined by €3.3 billion (deconsolidation effect from the sale of ATF Bank, Kazakhstan). Primary funds (€138.0 billion) slightly exceeded the previous year’s figure (+0.8%), they accounted for 70.3% of total liabilities and equity in 2013, up from 65.9% at the end of 2012. This means that Bank Austria’s lending volume is funded with primary funds (customer deposits and debt securities in issue) to the extent of 107%. Customer deposits (€108.9 billion) were slightly higher than in the previous year (+0.1%). Deposits in the Austrian business segments (including the Corporate Center) totalled €50.2 billion, more or less matching the figure for the previous year (–0.5%). In CEE the picture is distorted by exchange rate movements: at current exchange rates, deposits rose slightly, by 0.7%; translated at constant exchange rates, deposits increased by a substantial 10.1%. In this context it should be noted that deposits grew strongly already in 2012. In Russia (–6.5% ytd in euro /+5.1% in local currency) expansion slowed down. The rate of change at constant exchange rates in Turkey was +22.6%, while in euro terms it was –1.5%, reflecting currency depreciation.

The bank’s own issues rose by €987 million or 3.5% to €29.0 billion in 2013, despite large redemptions. In the area of funding (without short-term instruments and funds raised from the ECB) we issued Senior Bonds totalling about €3.3 billion in 2013 (including bonds in Austria with a total volume of €1,250 million) and €1.8 billion in mort-gage bonds and other covered bonds.

� Equity declined by €3.1 billion to €15.1 billion (–17.3%) from year-end 2012 to year-end 2013. One of the reasons for the decrease was the net loss of €1.6 billion, which resulted from the goodwill impairment charge of €1,957 million. Items within other comprehensive income also had an impact: the foreign currency translation reserve, which shows exchange differences from capital consolidation, declined by €1,033 million. Reserves in accordance with IAS 39, which directly

reflect market price fluctuations of financial market instruments (for cash flow hedges and available-for-sale financial assets), had an impact of – €662 million. As at 31 December 2013, equity amounted to €15.1 bil-lion, accounting for 7.7% of total liabilities and equity compared with 8.8% at the end of 2012. The leverage ratio – based on the cash con-cept, without intangible assets – was 13.2 after 13.0 in the previous year.

Capital resources� As at 31 December 2013, risk-weighted assets (RWAs) were €118.5 billion, down by €11.6 billion or 8.9% from the year-end 2012 figure. RWAs from credit risk declined by €11.3 billion. The decline in credit-risk RWAs resulted mainly from exchange rate movements in TRY, RUB and CZK, from deconsolidation of ATF Bank including its subsidiar-ies, from the improvement in risk weightings as Croatia joined the EU, from the fact that banking business in the Baltic countries was discon-tinued, and from UniCredit Bank Austria AG. While RWAs from opera-tional risk rose by €0.1 billion compared with year-end 2012, market-risk RWAs declined by €0.4 billion in the same period.

� Capital requirements for credit risk were €8.3 billion, down by 9.8% from year-end 2012, and capital requirements for all types of risk declined by 8.9% to €9.5 billion.

� net capital resources amounted to €16.0 billion and were thus lower than at the end of 2012. An increase resulting primarily from retained profits at CEE banking subsidiaries was largely offset by the release of capital reserves at UniCredit Bank Austria AG and by exchange rate movements reflected in net capital resources. Net Tier 2 capital was only slightly up on year-end 2012 as the new issue of €0.5 billion launched in the first quarter of 2013 was largely offset by the maturing of previous issues and by deconsolidation of ATF Bank.

➔ The reduction of RWAs has led to an improvement in capital ratios since the end of 2012. The Core Tier 1 capital ratio (Tier 1 capital ratio without hybrid capital) based on all risks rose from 10.6% at the end of 2012 to 11.3% at the end of 2013. In the same period the Core Tier 1 capital ratio based on credit risk increased from 12.0% to 13.0%. At the end of December 2013, the total capital ratio (based on all risks) was 13.5%, up by one percentage point on year-end 2012.


Financial and non-financial performance indicators

Resources and profitability (2012 RECAST)

BAnK AUSTRiA

AUSTRiAnCUSTomER

BUSinESS 1) CEE

Relative sizeAverage loans to customers (€ billion) 132.3 55.5 70.3

Change over previous year 2) +2.3% –2.5% +5.8%Average risk-weighted assets (RWAs, € billion) 125.5 27.3 78.7*)

Change over previous year 2) –2.8% –2.5% –2.3%Primary funds (€ billion) 135.4 58.2 61.1

Change over previous year 2) +2.8% –0.6% +5.8%

Results, profitability and value creationOperating income (€ million) 6,960 2,156 4,929

Change over previous year 2) +4.2% –2.2% +6.5%Profit before tax (€ million) 1,131 450 1,641

Change over previous year 2) –10.9% –1.0% –4.7%ROE before tax 3) 6.7% 15.2% 11.6%Marginal EVA (€ million) …4) 94 125Marginal RARORAC … 4) 3.93% 1.63%

EquityAverage equity (€ billion) 4) 16.9 3.0 14.2

Change over previous year 2) –5.5% –2.7% +8.8%

*) without Ukraine / 1) Retail & Corporates, Private Banking and Corporate & Investment Banking (CIB) Divisions; the difference to the total amount is allocated to the Corporate Center – see “Description of segment reporting” on pages 154 to 155 of this report. / 2) Recast to reflect the consolidation perimeter and accounting principles in 2013. / ROE = profit before tax divided by average equity of the business segments. / 4) Not meaningful at overall bank level because of the various special effects in the Corporate Center; see commentary. 5) Subsidiaries are included at actual IFRS capital.

Volume, profitability and resources� Bank Austria expanded moderately in 2013, despite a slowdown from quarter to quarter which reflected economic stagnation in most countries and depreciation of major CEE currencies. Average loans and receivables with customers increased by 2.3% to €132.3 billion in 2013. In CEE they rose by 5.6% (adjusted for exchange rate movements, by 9.3%), reflecting expansion in Turkey and Russia (combined growth: +8.1%; adjusted for exchange rate movements: +16.2%). In the three Austrian customer business segments, average volume declined (in retail banking and in CIB) by 2.7%. A stronger increase of 2.8% was seen in primary funds (customer deposits and debt securities in issue), supported by high market liquidity in combination with acquisition efforts in the CIB segment comprising large customers and also in CEE, as well as the bank’s increased new issue activities.

� In the segment reporting tables, average risk-weighted assets (RWAs) still include Ukrsotsbank (within the CEE Division), which is held for sale but has not yet been disposed of (lending volume and

deposits shown in the statement of financial position no longer include Ukrsotsbank because all items of Ukrsotsbank have been combined and are shown 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”. Average risk-weighted assets (all types of risk) including Ukraine in 2013 were down by 2.9% from the previous year. In absolute terms, RWAs in CEE amounted to €82.4 billion. If the RWA figure for Ukrsots-bank is deducted to make a consistent comparison with lending volume, average risk-weighted assets for CEE are €78.7 billion (compared with the recast figure for the previous year, the change is as low as –1.7%).

Average equity in the CEE business segment rose by 8.8% in line with strategy. Equity allocated to Austrian customer business declined slightly, by 2.7%, in parallel with risk-weighted assets. Return on equity (ROE before tax) was 11.6% for CEE and 15.2% for Austrian customer business, which absorbs significantly less equity.

marginal Economic value Added (EVA), the long-term indicator used by UniCredit Group for value creation, by definition does not include impairment losses on goodwill as non-cash items (“mar-ginal” refers to the exclusion of goodwill); positive and negative one-off effects are also not included in NOPAT. In 2013 the CEE business segment generated an EvA of €125 million, and the combined EVA for the three Austrian customer business segments was €94 million. Risk-adjusted return on risk-adjusted capital (RARORAC) in CEE was 1.63%, reflecting the relatively large amount of equity (target Tier 1 capital ratio multiplied by RWAs) allocated to the segment and the high cost of capital to be earned on it (averaging 13.3%). RARORAC in Austrian customer business was 3.93%, based on an average cost of capital of 10.7% for the Austrian customer business segments. (For Bank Austria as a whole – including the Corporate Center – EVA is no longer shown until further notice as this key figure is not meaningful at overall bank level in view of the high risk premiums and structurally weak profitability in the banking sector, and also because of the higher capital requirements imposed on banks.)

� As a result of the sale of ATF Bank, Kazakhstan, which was completed in the reporting year, the most recent numbers of branches and employees declined (just before deconsolidation) by 139 branches and 3,350 FTEs; the movements are reflected in the Corporate Center, where ATF Bank’s branches and employees had been recorded since the decision was made to sell the bank, and comparative figures were adjusted. Ukrsotsbank, Ukraine, which is classified as a disposal group held for sale, is still included in the total numbers of employees and branches – with 402 branches and 6,143 FTEs most recently.


Management Report


At the end of 2013, Bank Austria had 2,789 branches, down from 2,970. At the end of 2012, Kazakhstan was included with 139 branches. Without Kazakhstan, the number of branches declined by 42. The decrease resulted from Romania (–21), Hungary (–20) and Bosnia and Herzegovina (–6), while less significant movements in the other countries offset each other. At the end of 2013, the num-ber of branches in the Austrian business segments declined by 20. A foreign brokerage firm, which was allocated to the CIB Division, was closed. In the commercial banking branch network we closed 19 branches – under the “SmartBanking” and “Bank Austria 2020 projects”; twelve closures took place in Vienna and seven in other Austrian regions.

At the end of 2013 the number of employees totalled 53,598 full-time equivalents (FTEs), down by 4,585 or 7.9% compared with a year earlier. Of this change, ATF Bank, Kazakhstan, which has been deconsolidated in the meantime, accounted for a decline of 3,314. In the CEE business segment (without Kazakhstan, but with Ukraine) staff numbers at the end of 2013 were 46,936 FTEs, down by 1,091 FTEs or 2.3%. The number of employees in Turkey (counted at 100%) fell by 835 FTEs to 16,423 FTEs. All of this decline is explained by the deconsolidation of the insurance operations, without which staff numbers would have grown by about 1,000. Significant increases in the number of employees were seen in Russia (+176 FTEs), Romania (+130 FTEs, mainly as a result of the acqui-sition of the retail business of the Royal Bank of Scotland) and Serbia (+29 FTEs). This compares with reductions in Bulgaria (–173 FTEs), Croatia (–87 FTEs), Hungary (–87 FTEs), Bosnia and Herzegovina (–46 FTEs) and Slovenia (–28 FTEs).

Staff employed in Austrian customer business recently totalled 5,255 FTEs, a decrease of 172 FTEs or 3.2% compared with the year-end 2012 figure. A significant reduction was made in Retail & Corporates (–134 FTEs/–3.1% to 4,146 FTEs). The Bank Austria 2020 initiative envisages a reduction of 686 workplaces (FTEs), mainly in areas which do not provide direct customer services; 54% of this reduction is planned to be implemented in 2014 and 46% in 2015.

CEE PCV and other 6%

South-East Europe (SEE) 17%

Central Europe (CE) 13%

Corporate Center 13%

Austrian customer business 22%

Turkey and Russia 30%

Austrian customer business 10%

Turkey and Russia 38%

Corporate Center 4%

Ukraine, Baltics 11%

CEE other 1%

South-East Europe (SEE) 26%

Central Europe (CE) 10%

Risk-weighted assets by region Employees by region

Number of employees (FTEs), end of 2013

€125 billion 53,598 FTEs

Average risk-weighted assets in 2013

BAnK AUSTRiA

3 AUSTRiAn SEGmEnTS 1) CEE KAZAKHSTAn 2)

CoRPoRATECEnTER 3)

BranchesYear-end 2013 2,789 269 2,520 0 …Year-end 2012 2,970 289 2,542 139

Employees (FTEs)Year-end 2013 53,598 5,255 46,396 0 1,947Year-end 2012 58,182 5,427 47,488 3,314 1,954

1) Retail & Corporates, Private Banking and Corporate & Investment Banking (CIB) Divi-sions. / 2) Kazakhstan until the end of the first quarter of 2013. / 3) Corporate Center = Global Banking Services plus Competence Lines.


Strategic projectsThe focal areas of Bank Austria’s strategy are the concentration of its business portfolio on business with customers in the core countries and the realignment of the business model, the structure of sales operations and the range of products and services to meet customers’ specific needs. Based on optimum allocation of capital and supported by professional risk management, this is designed to assure the bank’s development on a sustainable basis.

Banks have been subjected to growing pressure to adapt to the new conditions in the years following the financial crisis: several years after the crisis management and adjustment recession in 2009, the current market environment is still characterised by weak economic activity, surplus liquidity and interest rates at histori-cally low levels, weakening the revenue base. In addition, current expenses are increased by bureaucratic rules imposed on banks with regard to the customer /bank relationship, excessive reporting requirements and rising costs for security measures. Banks are moreover faced with much more rigid regulatory requirements through the implementation of Basel 3 /CRD 4 and in connection with the banking union. Allocations to a resolution fund and to the deposit guarantee scheme will burden Austrian banks with about €250 million each year. Added to this comes the fiscal burden of bank levies in the amount of €550 million (of which €97 million is payable by Bank Austria in Austria), which is very high in an interna-tional comparison; bank levies are likely to rise to €650 million in 2014. The rollout of risk management techniques in accordance with Basel 2 (transition to the IRB approach) and stricter regulatory requirements have generally also been implemented in the CEE countries. In some countries (especially Hungary), these were sup-plemented by national regulatory measures and fiscal ad-hoc levies. Overall, the burdens on both the earnings and cost sides make it more difficult for banks to meet the stricter capital requirements from their own resources.

Commercial banking is also undergoing a process of change: on the demand side, technical progress reflected in the digitalisation of our daily lives, the availability of social networks and greater per-formance transparency and mobility, is radically changing the pref-erences and demand patterns of customers, especially those of the “Digital Natives” generation. On the supply side, FinTech boutiques are breaking into the market in addition to major Internet providers. Demographic developments within society moreover call for new solutions, such as are required to address the needs occurring in the different phases of a customer’s life, and the working environ-ment within banks is also changing significantly.

➔ In 2013, Bank Austria responded to these challenges with a number of strategic initiatives geared to adjusting its business model, so as to emerge as a winner from this process of change.

� In Austria, at the beginning of 2013, we paved the way for the process of change (as part of the UniCredit-wide GOLD initiative) by realigning existing customer business segments within the bank’s organisational structure on a needs-oriented basis. We bundled the entire spectrum of retail and commercial customer groups within the responsibility of one Management Board member while making a clearer distinction between retail sales and corporate sales. The Private Banking Division continues to serve the top segment of private individuals. In addition, we transferred internationally-oriented large corporate customers to the responsibility of another Manage-ment Board member to give them easier access to cross-regional capital market products of UniCredit Group. (For details see Section D, Segment Reporting, of the notes to the consolidated financial statements on page 152 to 161).

� With our new SmartBanking customer service model we have adopted a forward-looking strategy for revenue growth on a sustain-able basis while taking advantage of current trends in consumer behaviour (digitalisation). SmartBanking offers all customers wishing to use this service the possibility to settle routine banking transac-tions and for personal advisory services via video telephony, tele-phone, SMS and OnlineBanking and within the branch network. The significant added value compared to online banking alone is the personal advisory service component, via either this channel or the bank’s branches.

After an eight-month trial period – with very good feedback from customers – we successfully launched SmartBanking in September 2013. In the course of the accompanying market campaign, new SmartBanking customers who opted for a comprehensive account package which includes a credit card (such as ErfolgsKonto Plus, Premium or Gold) were presented with a Samsung GALAXY Tablet 3. Bank Austria apps for iPhone and Android were very well received and are continuously being enhanced. They now permit customers to generate QR codes and scan them on invoices and payment slips, and they offer a complete ATM locator for all ATMs in Austria. We have extended daily service hours from 8 a.m. to 8 p.m. Largely for these reasons, and because customer contact with the relationship manager is not limited to a specific location, we have obtained high customer satisfaction scores (including 91% consent in the cus-tomer platform). Since September 2013 we have won an additional 6,600 new customers on the market; we are currently serving 57,000 SmartBanking customers. About 800 qualified advisory talks take place every month via video telephony. This is complemented by customer contact via telephone, e-mail, information, OnlineBank-ing and SMS. We want to win 20,000 new customers on the market each year by the end of 2017 and serve a total 350,000 customers via SmartBanking.

� Through a number of multi-year projects we continue to focus on the business model of a universal bank, but with a much more pronounced two-pronged approach: one approach is that of a basic



Management Report

services bank, whereby we will offer basic services such as depos-its and the provision of consumer loans as well as cash deposits, withdrawals and transfers with substantial technical support. These basic services will be provided in an efficient and dependable man-ner at very competitive prices. The SmartBanking project involves substantial investments in equipping branches with the requisite technology such as multi-media terminals and cash recyclers for deposits, withdrawals and transfers, as well as tablets and SignPads in contact with customers. The other approach is that of an advisory bank, which offers customers added value through expert advice. Besides the settlement of payment orders, the SmartBanking con-cept, unlike online banking alone, provides advisory services through personal contact with customers; these are available to customers as and when they need them. We are thus strengthening our focus on making experts and advisory teams available in our branches so as to more effectively meet the needs of customers.

The branch network will be fully integrated in this customer service model, resulting in new branch formats. Bank Austria’s branch initiative is being launched in the first quarter of 2014, with over €100 million being invested in existing office locations in the course of the next four years. The forthcoming months will see the estab-lishment of the first prototypes. There will be three types of branches of a new calibre: the advisory service centres – at least one in each federal province and 12 to 15 in Vienna – will serve as flagship branches with up to 50 employees, providing an extensive range of services for all customer groups. These branches will have highly-qualified experts to advise customers on construction and housing, investment and leasing; they will provide these services for SMEs and independent professionals, corporate customers and Private Banking customers. The classic branch will also be relaunched with the objective of making advisory services a core component of its activities. Advisory services will in these cases be upgraded by state-of-the-art technology. This will include cash managers, also known as cash recyclers, which perform all functions from deposits and withdrawals to transfers. They will be complemented by state-of-the-art multi-media terminals and interactive screens which offer a broad range of information including product details. Tablets and SignPads are used for advisory services. The blending of traditional and virtual branches will be accompanied by longer service hours, which are still under discussion (it is planned to serve customers Monday to Friday from 8 a.m. to 10 p.m., and Saturday from 10 a.m. to 6 p.m.). Self- service branches will be converted into highly effi-cient bank office locations through investment in the latest technol-ogy to cover all basic financial needs and routine transactions.

Together with enhanced efficiency and new media capabilities, this will increase customer service intensity, enabling the bank to streamline its regional sales network. According to a detailed mar-ket analysis, three-quarters of the 270 retail branches are in a good location, meaning that they are in the right place and have potential. These branches today serve 90% of Bank Austria’s customers. 25%

of the branches need to be adapted; one half will be integrated in larger offices, while the other half will be converted into self-service branches. While some branches will be closed or integrated with other offices, other branches will be newly established or relocated. We closed 19 branches in 2013, twelve in Vienna and seven in the other federal provinces. At the end of 2013 we maintained 324 offices at these 269 branch locations, of which 264 were retail branch offices and 60 were Corporate Centers.

� The new business model will enable us to make much better use of opportunities to generate revenue. At the same time, in November 2013, we launched the Bank Austria 2020 efficiency programme. This aims to reduce costs in Austria by €130 million within the next two years, with payroll costs accounting for €70 million of this amount. Over the past two years we have permanently cut our other administrative expenses by €44 million, and we will reduce them by a further €20 million in the next three years. By not filling vacant positions, and with the support of Movement Management, we have reduced staffing levels at Bank Austria by 2.2% per annum since 2010. In the same period, payroll costs have remained unchanged following increases through collective bargaining agreements and advancements.

In order to close the widening gap between stagnating or even declining revenue and rising payroll costs we are planning to reduce payroll costs by €70 million in the next two years. The measures will involve a reduction of about 850 FTEs at UniCredit Bank Austria AG and subsidiaries in Austria over the next two years. This is some 400 FTEs more than we had originally planned based on natural staff turnover. Staff cuts will be made in all business segments along the entire value creation chain, but primarily in back-office units. They are to take place in a socially compatible form, based on the principle of free will. The objective is to achieve the reduction in staffing levels without operational layoffs. To this end we offered employees four different models at the end of December 2013: three models relate to part-time work for different age-groups, and one offers initial assistance to employees who either want to pursue a different career or already meet the criteria for early retirement. We are paying greater attention to the transfer of knowledge to maintain service quality for our customers. movement manage-ment will therefore remain a key component, as will personnel development and other measures for modern flexibility in the work-ing world (see the section on Human Resources).

� In Central and Eastern Europe (CEE) our strategic plan covers a focus on specific countries such as the Czech Republic, Russia and Turkey. Under the plan, we are aligning our geographical footprint closer to the market outlook while taking advantage of local market niches with strong customer demand. In this process we are guided by the optimisation of risk-conscious investment and efficient alloca-tion of capital.


This is reflected in the sale of our bank in Kazakhstan. We are in the process of scaling back our range of services in the Baltic countries, limiting it to the provision of leasing services by the middle of 2014. We sold our insurance operations in Turkey and entered into a strategic cooperation agreement with the buyer. On the other hand, we acquired RBS’s retail business in Romania to reinforce our strengths in this area. 2013 moreover saw a further streamlining of our organisational structure. In Ukraine we merged the two UniCredit entities at the end of 2013. We have integrated our bank in Slovakia with the banking subsidiary in the Czech Republic.

The modernisation of our sales operations now embraces our subsidiaries in CEE, though to varying degree. Innovative products offered via online banking and credit card business make it easier to step up product penetration without building large branch net-works such as those in western Europe. In Bulgaria, our banking subsidiary opened widely acclaimed pilot branches and tested a new branch model. The latter takes advantage of all opportunities offered by the new media within the newly designed branch and also involves a new service approach by our relationship managers and experts. Our banking subsidiaries in other countries are taking this experience on board.

Our primary objective: customer satisfaction Bank Austria’s slogan – “Life is full of ups and downs – we’re there for both!” – shows that we are putting customers first. We aim to live up to this commitment to customers’ needs in our entire business and service model using an integrated system of control elements. These efforts are based on a comprehensive approach comprising objective measurements for which we apply various techniques and by which we want to better understand our – external and internal – customers in order to make steady improvements. The degree of customer satisfaction is regularly ascertained and is used as an element of scorecards at all levels of the bank’s hierarchy, not least for determining variable salary components.

In an exclusive cooperation with @Honestly, we made preparations in 2013 for the possibility of giving direct electronic feedback to Bank Austria branches via tablet, smartphone and online. In 2014, we will be the first financial services provider in Austria to offer its customers the opportunity to use this easy and modern way of giving feedback. Direct involvement of customers is becoming increasingly important to ascertain customer preferences. As part of the Bank Austria customer dialogues conducted in October 2013, for example, we talked with 120 customers to find out what they expect of SmartBanking and the “Bank of the Future”. The findings from these discussions were immediately used as inputs in ongoing projects and communication activities.

In 2013 we again interviewed about 43,000 customers to obtaininformation on general customer satisfaction; this was done byexternal market research institutions. The feedback was evaluatedat all levels (branches, regions, customer groups, divisions, the bankas a whole), which included a comparison with the banking sectorand within UniCredit Group. Bank Austria’s aggregated TRi*m cus-tomer satisfaction index showed a significant decline in customer satisfaction in the first two quarters of 2013, following the difficult IT system implementation at the end of 2012. Subsequently, the index developed favourably again, reaching a level of 70 as the year progressed. The Private Banking Division improved its score to a TRI*M of 77, up by 2 points on 2012, thereby impressively under-lining its market leader and quality leader positions as perceived by customers.

In addition to the telephone survey, Bank Austria increasingly uses new methods for measuring customer satisfaction also online. Our “@Feedback Kundenerlebnis” (customer experience feedback) tool has met with very strong acceptance by customers: immediately after an advisory talk with a customer, such as an annual review, we send the customer a short electronic questionnaire for the purpose of evaluating the talk. Since the tool was launched in 2010 we have sent out 210,000 e-mails inviting feedback, yielding a favourable response rate of close to 40%. The results generally indicate a high level of satisfaction (95%) with the quality of advisory talks.

“Best service provider”: In 2013, for the third time in succession, Service Rating GmbH, Germany, and the University of St. Gallen elected Bank Austria as the “Most customer-oriented financial services provider in Austria” in a comparison covering all sectors. Since 2011 we have defined, together with all sales units, service standards for excellent customer experiences and provided training in this respect. Bank Austria’s promise to customers – “Wir möchten die Besten für Sie sein!” (we want to be the best for you) – defines these various standards in a form that is simple and easy to understand. The promise to our customers encompasses four dimensions: “Focused on your future” (complete range of services, simple, easy and forward-looking); “Round the clock” (availability via modern communication channels); “Your needs” (satisfaction and relationship management); “All-round advice” (listening, lucidity, active information). We have made the promise to customers an integral component of our corporate communication and the guiding principle of our activities for customers.

Complaint management is a core process of customer relationship management. “BeschwerdeExzellenz” is a project launched by Bank Austria in 2013 to take a critical look at all internal and exter-nal complaint management processes with a view to further optimis-ing them for our customers at all points of contact (branch, @mail, CallCenter etc.) and setting a benchmark in the financial sector in this context. Despite the difficult EuroSIG IT implementation, we were able to significantly improve customer satisfaction with our response



Management Report

to complaints, with our solutions to specific problems, and with processing periods. We continued to bundle specific competences in the ombudsperson’s office for persons experiencing social hardship, where customers who are in financial difficulty receive assistance in reducing their debt, or are granted additional time for payment.

People Survey: In 2013 we again conducted a survey among our employees to find out what they think about various issues including leadership, the clarity of strategy and objectives, commitment to the company, customer orientation and the contribution to the commu-nity. The importance of this survey, which takes place every year, and the related action plans are reflected in the high participation rate of recently 71%.

Communication using digital channels� Tablets and smartphones have become indispensable sources of information also in business and finance. Wirtschaft online is a new Internet portal which we offer to customers who are interested in economic affairs. The platform encompasses economic news, analyses and background information. Factual content is provided by Bank Austria experts, primarily those from Economic Research and Private Banking Research. Short texts give readers a quick summary while full-length versions contain comprehensive details. Recommendations for reading and a list of subjects lead readers to the requested topic. Wirtschaft Online is accessible via smartphones and tablets at http://wirtschaft-online.bankaustria.at. In addition to PC and mobile versions, Wirtschaft Online also comes as an app for iOS, Android, Windows and BlackBerry.

Bank Austria e-magazines have also been optimised for all mobile devices. They combine texts, images, photo galleries and videos into a modern information medium for our customers. The e-Magazines can be viewed at http://e-magazin.bankaustria.at. The e-Magazin app is available for iOS and Android.

In our social media presence, we focus on diversity to cover the interests of a wide range of customer groups. While services and edutainment are bundled on the company’s Facebook site, Twitter offers hard facts on banking business and all press releases. Pinter-est and YouTube show the whole world of Bank Austria via images and videos. Information on jobs and advanced training is available on XING, LinkedIn and Whatchado. Additionally, we established the BusinessForum on XING in 2013, where Bank Austria with its recruit-ing team presents itself as an attractive employer. “ThemenTab”, a feature newly added on Facebook, offers news at a glance.

� “mitdenken und mitlenken” is the motto used by Bank Austria at www.kundenforum.at to invite its customers to join in shaping the future. Recent surveys and discussion rounds ask for feedback, thereby contributing to new ideas and products. This helps us to adjust services and products even more effectively to our customers’

wishes and needs. Bank Austria mitarbeiterForum is an internal platform available to Bank Austria employees, enabling them to con-tribute the experience gained in their customer advisory service activities and to comment on proposals for products. Since they were launched in February 2013, Bank Austria KundenForum and Bank Austria MitarbeiterForum have attracted about 6,700 users, with more than 14,000 responses providing feedback.

Bank Austria is also breaking new ground in leadership communi-cation. In 2013, the interactive platform www.bankville.at received the Austrian State Award for Internal PR; it supports the current change process within Bank Austria, by linking managers in a network and supporting the joint development of future-oriented projects for Bank Austria. “Bankville”, an innovative feature in the Austrian banking sector, will be extended to cover all employees via the UniCredit Academy.

Human ResourcesHuman Resources Management is a strategic partner for business and HR activities support the ongoing change processes in the company. These create an environment enabling all employees to fully use their potential in meeting customer needs in the best possi-ble manner. The range of training programmes was expanded in 2013 to support the bank’s employees in their development while also positioning ourselves as an attractive employer.

The CEE Human Resources team in Vienna plays an important role for human resources management with regard to UniCredit banks in Central and Eastern Europe (CEE.) Leveraging on geographical and cultural diversity, human resources teams in CEE Vienna and CEE countries are driven by the same values and principles. Capitalising on country experiences, sharing best practice as well as driving and implementing Group processes are the main traits of HR Manage-ment in CEE. In 2013, all areas of HR focused on providing the oper-ating units with the support required to achieve their objectives. Therefore we concentrated on centrally managed programmes to enhance commitment and motivation, and on training and personnel development.

� The strategic projects which we launched in 2013 – primarily SmartBanking and the Bank Austria 2020 initiative, which are our dynamic response to rapid changes in customer behaviour, demo-graphic changes, technological progress and new communication media, in banking and in the working environment quite generally – focus on the qualifications and flexibility of our employees, i. e. on intensive HR support.

The new job-related challenges presented by these changes require new approaches to staff development. The newly founded UniCredit Academy supports all employees on their way into the future.


Numerous initiatives dispel any fears of facing new situations – these initiatives include team coaching; seminars for managers focusing on learning partnerships for mutual support; internships and job rotation for young employees. Thinking over the current pattern of opening hours requires more flexible work arrangements within the framework of variable working hours – appropriate internal service agreements are under negotiation or being tested in a pilot operation. Specific multimedia training programmes are making our employees fit for serving customers online, via video or personally at a branch. Training for new products is pro-vided on “power days” to enable employees to offer advisory ser-vices to customers at all stages of their lives. Professional wel-come management improves processes at branches in order to faster attend to customers’ wishes.

The reorientation of the business model, which started in 2013, is accompanied by continued efforts to make processes leaner and reduce costs, both payroll costs and other administrative expenses. There are plans for lowering staff costs by €70 million in the next two years, which translates into reducing the number of full-time jobs by about 850 in the period to the end of 2015 (FTEs in Austria within Bank Austria including subsidiaries and UniCredit entities). Some 20% of this reduction may be achieved through natural staff turnover and retirement. In carrying out reductions required beyond this proportion, it is our declared objective to achieve them without operational layoffs and to reduce costs in a manner that will not result in any social hardship, based on the principle of free will. We have developed a number of HR instruments to implement our objective. These range from offering more opportunity for part-time work to providing appro-priate support to those who decide to pursue a different direction in their careers. Special attention is being given to retaining and passing on knowledge in a structured form so as to ensure that service quality for our customers is maintained and steadily enhanced. Movement Management, including the various support measures available to employees and managers, will continue to be a key element in these efforts.

Two years of movement management – we keep moving! More than 350 colleagues have found new jobs internally: this is the good result of two years of Movement Management in Bank Austria. Thanks to close cooperation of managers, HR Business Partners and the Employees’ Council, we can improve the services offered to our movers on an ongoing basis; feedback provides us with important suggestions in this context. Movement Management comprises extensive information, coaching opportunities including the Profile XT analysis of strengths, and online services on myHR, the Human Resources website which encompasses the portal for job applicants. Job-Infofairs give employees opportunities for personal exchange and getting to know each other; more than 450 visitors – including movers, employees on unpaid maternity /

paternity leave and colleagues who wish to pursue a new career – have been welcomed at the three events of this type organised so far. A new series of workshops has given our managers valua-ble support in their tasks within the framework of Movement Man-agement. A new initiative, “2 Become 1”, was launched especially for part-time employees: two part-timers as a duo can benefit from help in transferring to a full-time job.

� Our human resources activities are based on and guided by the Global Job model, the Group-wide personnel management system used for describing and categorising all roles and activi-ties within UniCredit, and the UniCredit Competency model, which defines standards for employee conduct in key situations. In 2013, strategic workforce planning was extended to cover the entire network. This makes it possible to plan personnel requirements at job level for the Divisions and regions for a period of 3 to 5 years. These plans are adjusted in the event that the strategic orientation of a business segment changes.

� Bank Austria highly appreciates diversity and sees it as a value in itself. Diversity management is in line with our ethical principles while also serving to enhance productivity, creativity and innovation. UniCredit employs persons who differ from one another in their gender, the colour of their skin, in their language, ethical, cultural and religious values, marital status, age, disabili-ties, social status and sexual orientation. Positive recognition and respect for people in all their diversity enables us to benefit strongly from the manifold qualities, talents and personality facets of our employees. Implementing these objectives is facilitated by an innovative design of the working environment. With the “Job and Family” audit we use assessments by external audi-tors to make further improvements. Key topics in this context include enhancing working time flexibility to make family life and job requirements compatible with each other, giving attention to equal career opportunities for part-time employees, intensifying teleworking, and creating an awareness among managers of the need for a work-life balance.

Bank Austria has for a long time pursued numerous initiatives to ensure equal opportunities for women and men. Controlling is essential to the success of these efforts. Qualitative and quantita-tive targets are defined and measured for (almost) any activity, with a separate dashboard indicating, for example, the proportion of women holding managerial and successor positions and partic-ipating in career support initiatives. Women are seen as a key resource in UniCredit Group. In 2013 we took a number of meas-ures to provide optimum support to women in their careers. Seminars such as “shaping my future” and “inclusion@work” focus on realising one’s own strengths and weaknesses, on self-marketing and networking.



Management Report

� The pleasure of learning – UniCredit Academy Austria. Sharing knowledge and experience – in an entertaining, informal and timely manner – is an essential feature of “The Bank of the Future”. Against this background we created the UniCredit Academy Austria in autumn 2013, which bundles all Learning & Development activities of UniCredit in Austria. The UniCredit Academy Austria offers our employees a wide range of pro-grammes to acquire and develop know-how required for an employee’s sphere of activities by using the appropriate learning method. Seminars, eLearning, podcasts (audio files), coaching, mentoring, shadowing and internships are among the methods used for promoting and supporting a person’s individual learning style. This gives the learner a more active role in his /her learning process. We have created a new way of learning – new in terms of architecture and advanced learning environment, such as UniCredit Center Am Kaiserwasser; and new with regard to knowledge trans-fer. The changes are also noticeable in the virtual Academy, a dif-ferent type of learning space. Virtual learning space helps the bank to respond at short notice to market requirements with a suitable learning programme, thereby enhancing the return on learning for everyone – in line with the motto: higher earnings through effec-tive learning. www.unicredit-academy.at

Our Executive Development Plan (EDP) and Talent Management programme form the basis of our forward-looking and sustainable personnel planning for executives and talented employees, which is geared to the bank’s strategy. Bank Austria continues to focus on the ongoing development of management potential from within the bank while gradually raising the percentage of female manag-ers. Uniform Group-wide quality criteria serve as a standard for verification. Talent management activities featured initial meas-ures to define the careers of senior employees or executives on the basis of potential interviews. Under the national mentoring pro-gramme, in 2013 young employees again took advantage of the opportunity for career and personal development through network-ing and the sharing of knowledge and experiences.

� With the global UniCredit Performance management, Bank Austria has a modern, fair and transparent performance eval-uation system and procedure for planning employees’ future development. Building on experience, the efficiency of the uniform Group-wide process adopted in 2012 was enhanced in the past year. All employees can easily view their evaluation and the feedback documentation in their personal electronic archives. Performance Management thus makes a substantial contribution to the bank’s corporate culture based on respect, and to employees’ personal development in line with their specific abilities. The goals agreed in a discussion between the employee and the manager are captured in the Performance Management tool. The manager eval-uates the employee’s performance after a maximum period of 12 months before discussing the next steps for his /her develop-

ment. The information obtained from the employee’s feedback and evaluation serves as a basis for personal development measures, further career opportunities and individual remuneration measures.

The proper mix: our remuneration system. Our Group-wide remu-neration system provides for a balanced mix of fixed and variable monetary and non-monetary components. Regular communication to our employees and information available on “myHR”, the HR Intranet site, provide an overview of all components of compensation while linking this to the related compensation processes including the merit review and the bonus. Remuneration of top management is determined within UniCredit by way of a Group Compensation Sys-tem, which has been implemented at Bank Austria. The variable components of the remuneration mix are linked to sustainable, long-term performance criteria; they also include non-financial criteria and do not encourage persons to take unreasonable risks. Deferred payment is possible for parts of variable remuneration, this may also be in the form of UniCredit shares. Bank Austria applies the remu-neration policies and practices for banks which are currently defined by national and international regulatory authorities.

� 18 months ago, within UniCredit Group, we entered into a strate-gic partnership with hp and founded the Enterprise Services Shared Service Center (ES SSC). This is a joint venture whose task is to settle HR services such as payroll for Bank Austria employees. A further objective of the joint venture is to migrate our HR tools to a modern state-of-the-art IT system landscape by the end of 2014 while further optimising our processes. We successfully implemented the initial steps in 2013: in the fourth quarter of 2013 we transferred the first processes of Human Resources management to an interna-tional Shared Service Center of hp in Poland.

� Award-winning HR services. In April 2013 Bank Austria was the first company to be presented with the coveted European Top Employer award for the third year in succession, this time covering the bank’s operations throughout Europe. The award is presented on the basis of a three-tier, certified evaluation process of the CRF Insti-tute: extensive, fact-based research activities, qualitative interviews with representatives of the company, comparison of performance within a group of companies. In 2013, this renowned prize was awarded to only 20 top companies for their outstanding work in the area of human resources.

At the end of 2013, in Austria’s largest recruiting study “Career’s Best Recruiters”, which analysed the recruiting quality of over 500 companies, Bank Austria was ranked among the top 3 companies among banks/ financial service providers. The main criteria analysed were the online recruiting presence, recruiting activities, a compa-ny’s response to applicants and their feedback. Bank Austria thereby once more underlined its position as one of Austria’s most innovative top employers.


Sustainability managementThe balance between economic, ecological and social objectives is a highly significant factor at Bank Austria. Sustainability and responsi-bility are important values for us. Stakeholder management plays a key role in Bank Austria’s sustainability activities. It is a question of identifying, within and outside the bank, the needs of important stakeholders and to include them in the measures aimed at improv-ing corporate sustainability. This also requires a meaningful and open communication of topics on corporate social responsibility. In the area of sustainability reporting our e-magazine, which in the “Sustainability” section can be viewed (in German) at www.bankaustria.at, provides a vivid picture of Bank Austria’s com-mitment to sustainability. It combines texts, images, photo galleries and videos, supported by statements by Management Board mem-bers and renowned experts.

Social commitment is an important component of our sustainability policy. We pursue a clear strategy by primarily supporting aid pro-jects and initiatives which help children and young people in need, and which also focus on integration /migration. Every year, we pre-sent the Bank Austria Social Prize, where customers and employ-ees vote for social projects which are then supported by the bank financially and through communication measures and the personal commitment of Bank Austria employees. In 2013, for the first time, in light of the large number of outstanding initiatives submitted from throughout Austria, one winning project was chosen from each of Austria’s federal provinces instead of just one winning project over-all. Each of the nine winners received prize money of €10,000. The €30,000 Bank Austria Social innovation Award was pre-sented for the first time in 2013, for innovations in the social sector. This was made possible by the generous support provided by UniCredit Foundation.

Besides pursuing a comprehensive donation policy, Bank Austria cooperates with social care organisations over the longer term such as Caritas or SOS Children’s Villages, where we act as house sponsor for one Children’s Village family in each of Austria’s federal provinces. It is not only the financial support but the active involve-ment of employees which we feel is very important also in this area. The Bank Austria Volunteer Day, which is organised with Caritas Österreich, was a resounding success in 2013. This is one day when employees from Bank Austria and its subsidiaries lend a helping hand to initiatives and projects throughout Austria. Bank Austria also supports the private social commitment of employees. Bank Austria’s “Gift matching Programme”, probably unique in Austria, is an annual initiative which promotes the social commit-ment of the bank’s employees. The idea is simple: private donations are increased by funds held by UniCredit Foundation if the initiating employees succeed in inspiring at least 15 colleagues to donate to the same charity and exceed a threshold. There are no limits to

creativity. The Gift Matching Programme 2013 raised over €296,000 for 65 projects, an amount which will now be increased by the Foundation.

In line with the “Financial Education” initiative, our website http://meingeld.bankaustria.at has been created for people who have difficulty understanding the financial world which can sometimes be quite complex. With a renowned partner, the Austrian Museum for Social and Economic Affairs, we offer interested schools free work-shops. The topics discussed range from money, the role of banks and banking products to distributive justice. The objective is to give young people an overview of the various types of financial transac-tions, to draw their attention to the opportunities and risks, and to inform them of their rights and duties as consumers of financial products. In addition to passing on knowledge, the workshops are aimed at encouraging young people to critically examine how they themselves handle money and the significance of money in their social environment. Over 16,000 schoolchildren had attended these workshops by year-end 2013. Since the end of 2013 this facility is complemented by the new portal www.finanz-bildung.at, which offers interesting information – without an advertising component – on money for teachers, young people and students.

For such an international and diverse company as Bank Austria, diversity management is not simply an integral component of its corporate culture but something which also promotes productivity, creativity and innovation. We derive substantial benefits from the diversity of our employees, who differ from one another in their gen-der, the colour of their skin, in their language, ethical, cultural and religious values, marital status, age, disabilities, social status and sexual orientation. Numerous initiatives are being implemented to promote a work-life balance and equal opportunities for men and women. Controls of the success of the initiatives via controlling instruments and the “Job and Family” audit provide objective infor-mation (see also the section on Human Resources). Consideration for disabled persons is a key factor for us, both within and outside the bank. Two disability managers are responsible for planning and implementing numerous disability-related measures. They are sup-ported by a network of about 60 disability employees, and awareness of this issue is raised by employee training programmes. In pilot pro-jects we are testing various possibilities for helping disabled persons to settle their banking business. Measures that have already been implemented include a special bank card for visually impaired per-sons, sections of Bank Austria’s website which enable customers to listen to spoken information and watch videos in sign language or read texts in simple language, and a shuttle service introduced in 2010 for customers with limited mobility, which is steadily being expanded to cover the whole of Austria. The bank plans to complete the adaption of its buildings and branches to make them barrier-free by 2016. We are also creating a pool of employees who are skilled in disability-related communication techniques such as sign language.


Management Report


Environmental managementIn May 2011, Bank Austria’s environmental management system (EMS) was certified in accordance with iSo 14001, an interna-tionally recognised standard. By complying with ISO 14001, a company can prove that it operates in harmony with the environ-ment. Environmental management benefits the community while also involving advantages for the company in the form of cost sav-ings resulting from more efficient use of resources. Environmental and climate protection covers the head office buildings and all branches, and involves all employees. The great importance given to ecological sustainability and a sparing use of resources is also reflected in the organisation: the steering committee is headed by the Chief Executive Officer and the EMS team coordinates the measures and ensures that environmental and climate protection issues are implemented in all operations.

In CEE we enhance environmental awareness through the UniCredit sustainability network of central and local contacts. Specific CEE initiatives are described in the UniCredit Sustainability Report, which corresponds to the highest Global Reporting Initiative (GRI) standard.

UniCredit Group is committed to reducing Co2 emissions by at least 30% in the period to 2020. Bank Austria is reducing its ecological footprint by drawing up an annual environmental pro-gramme. In regard to operational climate protection considera-tions, Bank Austria, as one of the six founding members, has since November 2011 been a partner of klima:aktiv pakt2020, which was created by the Austrian Ministry of Life. The participating companies undertake, through a voluntary agreement on objec-tives, to meet the Austrian climate-related targets for 2020 (mini-mum targets are a 16% reduction of greenhouse gases, a 20% increase in energy efficiency and a renewable energy share of 34%). Moreover, Bank Austria has committed itself to reducing CO2 emissions by 30% and achieving a 51% share of renewable energies. In its fleet management Bank Austria has switched to low-consumption cars and reduced the number of pool cars. The maximum Co2 emission level for cars in the Bank Austria fleet has been set at 100 grams per kilometre. The CO2 emission level of the current standard model is significantly lower than the maxi-mum level set by the bank. Bank Austria further reduced busi-ness travel through the use of video conferencing facilities and the trend towards digitalisation in the working world. A positive secondary effect of the gradual expansion of teleworking is that it reduces environmental pollution, especially the pollution caused by commuters who use cars.

Measures aimed at improving energy efficiency focus on reduc-ing consumption of electricity (which accounts for about 60% of overall energy consumption); these include the areas of refrigera-

tion and IT. All electricity supplied to Bank Austria comes from renewable sources of energy, which is guaranteed by a certificate issued by the bank’s energy supplier confirming that 100% of the electricity supplied is hydroelectric power. As a contribution to increasing the proportion of renewable energy in Austria, the bank has installed photovoltaic systems in suitable locations. Installa-tions at branches in Innsbruck and Hirschstetten /Vienna are already in use. Special mention should be made of our solar power installation in Vienna’s second district, on the roof of the Lassallestrasse 5 office building, which enables Bank Austria to save a CO2 equivalent of about 35 tonnes annually. The aforemen-tioned projects aimed at bundling and modernising the central administrative buildings and at adapting the branches offer the bank the opportunity to implement its ecological targets as well as its operational and social objectives. The Austria Campus, in partic-ular, is expected to result in a significant improvement in energy efficiency.

Key environmental indicators 1)

2013 2012

CO2 emissions in t 2) 21,896 20,382Electricity consumption in MWh 68,900 3) 71,954Heating in MWh 52,000 3) 46,800Business travel in thsd km 12,935 16,332

of which: air travel 8,334 11,133 by car 4) 2,702 3,423 by train 4) 1,899 1,776

Water consumption in m3 215,358 216,305Waste in kg 1,427,095 1,385,630Paper consumption in kg 591,958 889,649

of which copying paper 390,343 437,149

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

Operations, ICT, infrastructureOne of UniCredit’s strategic objectives focuses on the development of a cross-regional infrastructure for settlement, IT and internal services which will provide optimum support to the bank’s cus-tomer service units with a view to creating value, bundling techni-cal expertise, strengthening the bank’s innovative power and improving cost efficiency. The need for such measures is partly underlined by the growing relevance of IT and back office activities (taxation of securities, reporting requirements, regulatory require-ments etc.). A general cross-regional service model is moreover consistent with the logic of an international banking group. This function of a global service company is performed by UniCredit Business Integrated Solutions S. C. p. A. (UBIS S. C. p. A.), a wholly-owned company of UniCredit.


UBIS and UBIS AustriaThe main goal of UBIS is to provide UniCredit with various services in the best quality from a single source. At the beginning of 2012 the global company UniCredit Business integrated Solutions S. C. p. A. (UBIS S. C. p. A.) started operations, and on 1 February 2012 the 100% subsidiary UniCredit Business integrated Solutions Austria GmbH (UBIS Austria) followed. When UBIS Austria commenced oper-ations, the goals of the All4Quality project – service efficiency, cost reduction, increased quality – were achieved. It was the first precise result of the UniCredit strategic concept.

The last step to become a full service provider – and at the same time also the end of the All4Quality project in Austria – was the inte-gration of DOMUS Facility Management GmbH. With the completion of the purchase in September 2012, the company became a 100% subsidiary of UBIS Austria. The next step came on 1 March 2013 with the integration of DOMUS Facility Management GmbH in UBIS Austria. This was merged entirely into the Real Estate service line of UBIS Austria.

All services are now consolidated under one umbrella – Information and Communication Technology (ICT), Back Office and Middle Office, Security, Procurement and also Real Estate. The main client of UBiS Austria is Bank Austria, which now requests and receives the ser-vices it needs as a financial service provider from one single pro-vider. At the end of 2013, 2,200 employees were working in UBIS Austria, including the subsidiaries in Poland and Romania. Overall UBiS has around 11,000 employees working in 4 legal entities and several branches in 9 European countries as well as one branch in New York and one in Singapore.

2013 – Global joint venture between UBiS and iBm. Value Trans-formation Services (V-TServices), the new joint venture between UniCredit Business Integrated Solutions and IBM, officially started its activities on 1 September 2013. This joint venture was the result of the Gibson project, focusing on improving the ICT infrastructure – a consequence of the Newton Program. The main goal of the Newton Program is to rationalise the activities and units within the GBS area of the Group – increasing internal efficiency by using the process knowledge and technical assets of the Group. To achieve this goal and increase the performance of the systems and also reduce costs a partner was sought with international experience – and IBM appeared as a suitable choice here. The entire Group will be able to benefit from this cooperation on a lasting basis: on the one hand costs and performance are being improved, and on the other hand access to innovations of a global market leader is opening up new possibilities and opportunities. The company is active in Italy, Ger-many, Austria, the Czech Republic, Slovakia and Hungary. The goal of V-TServices is, for the time being, to mainly provide UniCredit with IT services. Later the IT services could also be provided for other companies of the financial industry and the public sector.

UBIS will continue to be responsible as a hub for the coordination and control of the outsourced services. This role is being played by UBIS RTO (Retained Organisation) in the countries Austria, Ger-many and Italy.

EuroSiG – the joint iT platform. The introduction of EuroSIG in October 2012 in Bank Austria means the IT platform is now fully in use in four countries, including Austria. On 30 June 2013 the EuroSIG Austria project officially came to an end. The activities were handed over to the lines as scheduled. Follow-up projects to stabilise individual applications (e. g. Direct Banking) and to optimise pro-cesses have been drawn up.

Projects together with Bank Austria. Work has been and is still being done to press ahead with and carry out other major projects with UBIS involvement. Know Your Customer, EuroMIB, SmartBanking Solutions and regulatory projects such as FATCA and SEPA are just a few examples here. Worth emphasising is the challenging but ulti-mately successful MBS 6.0 use for Bank Austria, which was the only bank in Austria to use this in time.

And in the coming years UBIS Austria will also be called on to ensure the best possible cooperation: with the launch of the Austria Cam-pus project, Bank Austria is – like in the past – drawing on the tech-nical know-how and expertise of the Real Estate service line of its partner UBIS Austria.

Operational safety and data securityDay-to-day business and the need to process and save the data of Bank Austria’s private and business customers call for a clear strategy for the safe and cautious handling of sensitive data. Appropriate meas-ures must be in place to prevent data loss as a result of faulty systems and to make it impossible for a third party to gain access to such data.

Bank Austria focuses on state-of-the-art solutions to assure opera-tional safety and data security for maximum protection of the relevant infrastructure components. A core focus of security management is the protection of web applications (web application firewall), vulnera-bility assessments, process optimisation and the crucial quality assur-ance of Bank Austria’s security architecture through penetration tests.

Bank Austria employees receive security-related training in all areas (e. g. data security, Austrian Data Security Act) to prevent damaging events caused by malware (computer viruses, trojans, worms) and social engineering attacks (phishing). They are instructed to com-ply with the rules of conduct in general and receive instructions to this effect immediately in the case of specific events, and they have been informed of particular issues via awareness programmes. Bank Austria customers are informed of security precautions in Internet banking via the Bank Austria website and the Bank Austria Internet banking portals, and of current attacks or fraud attempts.


Management Report


Report on research and development Bank Austria’s business purpose is to provide banking services. The production process of a bank does not involve research and development in an industrial sense. But day-to-day business opera-tions continuously benefit from development activities. Generally, Bank Austria aims to meet the needs of different customer groups with simple products. Expenditure on product development, method-ological progress in risk management or on the continuous expan-sion of the bank’s reporting system is included in current expenses.

In the area of information and communication technology (ICT), investment planning takes place at UniCredit level. It is based on local requests and considers synergies which may be unlocked by the cross-regional approach. Expenditure on information and com-munication technology (investment budgets) which can be capitalised represents cash outflows at UBIS. This is different to the current expenses which are charged to the bank and the individual business segments (via Global Banking Services, which is part of the Corpo-rate Center). Measured as a proportion of operating income, cash outflows relating to ICT investments in CEE are about 3.7%, as high as those in Western Europe.

If the workstreams of the three-year plan are broken down by func-tional aspects, the investment amount of the immediate business-related iCT projects is much higher than in previous years, both in absolute and proportionate terms. This is explained by the numerous retail banking initiatives with a view to stepping up the digitalisation of banking business. In this context, the focus in Austria is on our major medium-term SmartBanking project. But the current three-year period will also see substantial investments in IT infrastructure for the Austria Campus, especially as the construction of the new headquarters will take into account the need for a more flexible “new working world” (desk sharing, mobile workplaces etc). Expenses for development work as a result of regulatory requirements has risen significantly in a longer term comparison. In the current three-year plan about 30% of the overall project budget is earmarked for regu-latory requirements. The implementation of these projects is also responsible for a large portion of the budget for external consulting services (regulatory projects account for almost 50% of the cost of consulting services).

New working world for head office functionsThe historic representative buildings of the European financial ser-vices sector are outdated for a number of reasons. These are pri-marily the different way in which banks now present themselves, the permanent process of change experienced by centralised head office functions, a new world of knowledge work, and last but not least, technology and rationalisation requirements.

Austria Campus … Instead of constantly adapting our existing buildings we are investing in a newly-designed headquarters at the “Austria Campus”. By 2018, we will there bundle the head office functions which are currently scattered among different locations. About 6,000 employees will relocate to two of the new buildings which will be built on the Austria Campus. The new Austria Campus with a gross floor area of about 200,000 m2 will be built on the site of the former Northern Railway Station, currently waste land within Vienna’s inner city precincts, in the heart of an up-and-coming urban development area close to Vienna’s Praterstern. The offices will be complemented by the bank’s infrastructure and social facilities, and various shops. The zoning procedure for the plots earmarked for development was completed in April 2013. The final phase for the head building structure of the group of buildings, the “Gate to the Northern Railway Station”, took place in March 2013 in the form of a competition for realising the structure. In February 2014 we completed the sale, agreed in December 2013, of the historic bank building in Vienna’s 1st district, Schottengasse 6–8. Bank Austria will rent the Schottengasse property until the Austria Campus is completed. In addition, a Letter of Intent is the basis for discussions with a potential investor for the Austria Campus; these could end in an agreement within the next few months.

… more than a construction project: The new headquarters will reduce costs and bring employees together, shortening distances to be covered while accentuating our common vision. Moreover, the new design of the head office functions is one of our major moderni-sation projects: with flexible and transparent office architecture, and fitted with state-of-the-art technology, we are creating a new wor-king world. We installed an information platform in 2013 to closely involve employees and prepare them for the forthcoming change process, and conducted an initial extensive survey of the future needs of users. This is complemented by reports of experiences and feedback, which we collect in a “test office” on a daily basis.

UniCredit Center Am Kaiserwasser. In July 2013, Bank Austria opened its centre for sport, leisure, events and training seminars at Am Kaiserwasser in Vienna’s 22nd district. The centre covers an area of 20,000 m2, of which 6,400 m2 is floor area. The investment volume totalled €19 million. Besides its sports and leisure facilities, UniCredit Center Am Kaiserwasser is used as an innovative training centre in line with the Working Family principle. With its areas set aside for learning and development, which are fitted with advanced equipment to meet modern standards, it is also the location of the new UniCredit Academy Austria. UniCredit Center Am Kaiserwasser complements Turin as a second cross-regional centre for manage-ment development; about 4,000 employees from throughout UniCredit Group are expected every year as participants in various events. The faciliy is also used for events for customers and employees.


The new Retail & Corporates Division set up at the beginning of 2013 essentially covers two large subdivisions: Retail, which com-prises customer segments ranging from mass-market to affluent customers; and Corporates, the subdivision serving the entire range of business customers, SMEs and medium-sized and large companies which do not access capital markets (including Real Estate and Public Sector). The Division also includes the special-ised FactorBank AG (0.6% of revenues). With 8% of all employees and an 11% share of allocated capital, the Retail & Corporates Division generated 21% of the bank’s total revenues and 69% of total operating income from Austrian customer business. The Division also has to absorb substantial costs which are in structural terms related to branch operations. Retail & Corporates contributed about 39% to profit before tax generated by Austrian customer business and 15% of the bank’s total profit before tax in 2013. Average primary funds of over €40 billion in Retail & Corporates make the business segment an important source of funding for the bank.

� Retail & Corporates accounts for three-quarters of Austrian interest-bearing business volume and was very strongly affected by persistently low interest rates in 2013, in combination with declining credit demand, high levels of liquidity and intense com-petition on terms. The impact of an interest rate environment that is close to zero is stronger the longer it lasts: higher-margin investments made in the past are reaching maturity to an increas-ing extent and can only be replaced with lower-margin products in the current interest rate environment. Private customers have largely taken advantage of the period of low interest rates to reduce their debts, as can be seen from trends experienced by banks in their business volume on the assets side and the liabili-ties side. However, sentiment brightened in the course of the reporting year as the advance in prices on stock markets

enhanced investors’ awareness of missed opportunities. Sales of higher-quality investment products in combination with a recovery of securities turnover resulted in an increase in net fees and commis-sions, primarily in the Retail subsegment.

� This environment was reflected in revenue trends in 2013: operating income declined by €51 million or 3% to €1,492 million. The decrease was mainly seen in net interest (– €46 million or –5% to €936 million). On the lending side, interest rate margins held up well at the previous year’s level, mainly as a result of developments in business with corporates. On the liabilities side, deposits were more or less unchanged thanks to increased acquisition efforts and attractive interest rates offered towards the year-end; however, the narrow interest rate spread continued to deteriorate significantly. Dividend income and other income from equity investments was €23 million in 2013, down by €14 million from the previous year, mainly because of a weaker performance of specialised banks in line with economic trends. Net fees and commissions amounted to €477 million in 2013, matching the previous year’s level (+0%), a good result as the continued decline in net fees and commissions from banking and financial services (accounts, payments, loan commissions, guarantees, derivatives) was offset by a favourable trend in investment management business. Net trading income (+€8 million to €33 million) includes gains on the buyback of Wohn-baubank bonds.

Trends in business with the two large customer groups varied con-siderably: in line with market developments in Austria, retail banking was impacted by a decline in lending volume as private households still preferred consolidating their debt position through early repay-ment of loans. Although the interest margin widened somewhat recently, the figure for 2013 as a whole was still below the previous year’s level. Nevertheless, the situation improved as the year

Development of business segments

Retail & CorporatesBusiness segment as a whole (incl. FactorBank) of which: Retail of which: Corporates(€ million) 2013 2012 1) CHAnGE 2013 2012 1) CHAnGE 2013 2012 1) CHAnGE

Operating income 1,492 1,543 –51 –3% 768 798 –31 –4% 716 737 –22 –3%Operating costs –1,143 –1,117 –26 +2% –766 –758 –8 +1% –369 –353 –16 +5%Operating profit 349 425 –76 –18% 1 40 –39 – 97% 346 384 –38 –10%Net write-downs of loans –136 –160 +24 –15% –40 –81 +41 –51% – 95 –78 –17 +22%Net operating profit 213 265 –52 –20% –38 –41 +3 –6% 251 306 –55 –18%Profit before tax 175 211 –36 –17% –57 –81 +24 –29% 232 292 –60 –21%Loans to customers (avg.) 40,624 41,372 –748 –2% 14,060 14,796 –736 –5% 26,233 26,355 –122 –0%Primary funds (avg.) 41,202 42,614 –1,412 –3% 22,350 22,761 –411 –2% 18,832 19,842 –1,010 –5%Risk-weighted assets (avg.) 2) 17,572 17,589 –17 –0% 7,909 8,491 –583 –7% 9,407 8,851 +556 +6%Average equity 3) 1,832 1,928 – 96 –5% 701 927 –226 –24% 1,107 989 +118 +12%

1) For segment reporting purposes, the comparative figures for 2012 were recast to reflect the structure and methodology of the 2013 reporting period (see the segment reporting section in the notes to the consolidated financial statements on pages 154 to 155 of this report. / 2) Average risk-weighted assets under Basel 2.5 (all risks). / 3) Standardised capital; capital allocation to subsidiaries reflects actual IFRS capital. The difference compared with the consolidated equity of Bank Austria is shown in the Corporate Center. See segment reporting section on pages 152 to 161. / This information applies to all business segment tables.


Management Report


progressed. We achieved significant growth of new business in 2013 with an increase of €970 million or 14%; within the total figure, housing construction finance rose by 20%. We placed emphasis on offering attractive fixed-rate loans to help customers benefit from the low interest rate environment in the longer term. However, in view of more favourable initial interest rates, there was still strong demand for loans with variable terms and conditions. While deposit volume declined only slightly, spreads narrowed significantly, leading to a fall in interest income, and this had an impact on overall developments. This was the main reason why net interest declined by 12% to €427 million. Deposits with longer maturities have become particu-larly valuable for banks ahead of the new Basel 3 rules including the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). In the middle of October 2013 we therefore started offering regional savings accounts with an interest rate of 1.25% for a deposit period of 24 months, a rate that clearly exceeds other offers currently available in the market. Given the low level of interest rates we concentrated on investment alternatives responding to our cus-tomers’ individual risk appetite. New sales of investment fund units were up by 30% on the previous year, exceeding the one billion euro mark. Total fund volume in business with retail customers rose by 3% to €5.8 billion. We also placed a wide range of pension planning products including VorsorgePlusPension, Pension Management and pension products and life insurance policies available from Bank Austria’s partner ERGO. “Vermögensverwaltung 5Invest” is an asset management service which we offer selectively, starting from €100,000 in assets available for investment; customers can choose from five investment approaches, depending on their risk tolerance (conservative, traditional, balanced, dynamic and progressive). This service provides them with flexible asset management otherwise available only in the Private Banking segment. As securities business picked up (+17%), the continued decline in net fees and commis-sions generated by account and payment services was more than offset, with net fees and commissions in the Retail subsegment rising by 4% to €307 million. In addition to sales activities through the Austrian branch network, credit card business – comprising the consolidated companies Card Complete (previously VISA) and Diners Club – again made an important and growing contribution to overall results, both directly (i. e. primarily via net fees and commissions) and indirectly through downstream settlement companies (reflected in other operating income). This means that the fall in revenues which was due to the net interest performance was limited to –4%.

Lending volume in the Corporates subsegment was slightly below the previous year’s level – as in the market as a whole – and mar-gins rose slightly on account of ongoing repricing. In the context of our initiative for small and medium-sized businesses we remained a reliable financing partner for SMEs, using our specific advisory tools and concentrating on innovation loans and loans under financial assistance programmes. The cooperation agreement concluded with the European Investment Bank Group and the European Commission

in summer 2012 has given us a genuine USP. We are the first Euro-pean bank and – so far – the only Austrian bank to grant loans backed by a 50% guarantee of the European Investment Fund (EIF) to innovation-oriented customers under the Risk Sharing Instrument (RSI). The cost benefit resulting from the guarantee is fully passed on to customers. In 2013, the total amount of loans granted on this basis was about €50 million and another €40 million or so will soon be made available. The great success of this initiative has encour-aged us to enlarge and extend the cooperation agreement in 2013, so that €160 million is now available in the period to the end of 2015. On the deposits side, although interest rates are historically low, we succeeded in maintaining volume at about €17 billion (including the bank’s own issues) by making attractive offers across various maturity bands. The revenue contribution from these deposits rose strongly. Our “Dispo+” account is an attractive product which will also make it easier for us to meet the Basel 3 liquidity rules. Overall, net interest generated by the Corporates subsegment grew by 2% to €504 million. Net fees and commissions reflect the fact that fees for European payment transactions are no longer applica-ble. In our advisory services we consequently focused on our exper-tise in the payments sector in connection with the switch to SEPA. Seminars for customers in all Austrian regions, a section dedicated to this topic on Bank Austria’s website together with video clips, and many advisory talks held by our experts with customers helped us

2008 2009 2010 2011 2012 2013

Bank lending rates to non-financial corporates% p.a.

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00ItalySpainFranceGermanyAustria

ECB, MFI interest rates, new business, average, all maturities (excluding revolving loans and overdrafts)


gain a leading position in an area which concerns every one of our corporate customers. As guarantee commissions and loan commis-sions in business with corporate customers declined, net fees and commissions in Corporates were down by 7% to €166 million in 2013. An analysis by customer segment shows that besides corpo-rate customers in a narrower sense, the activities of our Real Estate and Public Sector units significantly supported business performance, primarily with growing net interest. These two areas accounted for about 30% of operating income in the Corporates subsegment.

� operating costs in the reporting period were up by a mere 2% on the previous year. The average number of staff decreased by 18 to 4,217 FTEs in 2013; a comparison based on end-of-year fig-ures shows a stronger decline of 134 FTEs, reflecting initial branch closures under the SmartBanking project. Payroll costs remained unchanged, despite the wage drift. Other administrative expenses rose by €20 million or 3% to €715 million as follow-up work in connection with the introduction of EuroSIG involved additional costs and expenses related to sales initiatives (SmartBanking, branch restructuring) started to be incurred in the fourth quarter of 2013. net write-downs of loans and provisions for guarantees and commitments declined by €24 million or 15% to €136 million; the decrease was mainly accounted for by the Retail subsegment. The cost of risk, at 33 basis points, remained at a very low level not only on the Retail side (28 bp) but also in the Corporates subsegment (36 bp). Restraint displayed by consumers and a relatively good liquidity position in the corporate sector – both facts are reflected in decreasing insolvency numbers – as well as further model parame-ters made it possible to reduce portfolio-based specific loan loss pro-visions made in previous years. net operating profit (operating profit less net write-downs of loans and provisions for guarantees and com-mitments) generated by the Retail & Corporates business segment in 2013 reached €213 million; this compares with €265 million for 2012. The decline of €52 million or 20% resulted from both cus-tomer segments (see table). The balance of non-operating items down to profit before tax was a net charge of €38 million, improving by €16 million compared with the previous year although the nega-tive net result from investments was slightly higher than in the previ-ous year (– €33 million after – €24 million).

➔ In 2013, Retail & Corporates generated a profit before tax of €175 million (– €36 million or –17%). Based on a lower amount of allocated equity (–3%), return on equity (ROE before tax) was 9.4% (2012: 11.0%). While operating income in the two subdivisions was more or less equal, Corporates benefited from a significantly lower cost / income ratio (48%) and achieved a profit before tax of €232 million (–21%) in 2013. The Retail subdivision closed the year with a negative contribution to results (– €57 million) as it had to absorb the substantial costs associated with branch operations. The cost / income ratio of 98% in retail banking is the highest among

the bank’s Divisions, reflecting the gradual erosion of revenues which has been seen over many years. A slight decline in operating income (2013: –4%) – due to economic trends – therefore suffices for the Retail subdivision to move into the red. The current struc-tures cannot be expected to bring any significant revenue growth in the medium term, either. Apart from the moderate outlook for growth, consumer behaviour and the use of sales channels in retail banking have changed considerably (demography, digitalisation). In 2013 we therefore started to take strategic measures, under the “SmartBanking” and “Bank Austria 2020” initiatives, by which we are pursuing a forward-looking strategy for sustained revenue growth, using current trends in consumer behaviour (digitalisation) to gain market share while enhancing efficiency in sales activities and reducing costs with an innovative business model.

� With the introduction across Austria of our virtual SmartBanking branch, which is an essential first step in our new service approach, in September 2013 and the advertising campaign that accompa-nied it, we have won 6,600 new customers in the market. At the end of 2013, the number of customers served via SmartBanking totalled 57,000. We aim to win 20,000 new customers in the market annually until 2017, and to serve 350,000 customers via SmartBanking by then. About 70 SmartBanking employees currently hold some 800 advisory talks per month via video telephony. Customer satisfaction levels have risen significantly, customers par-ticularly appreciate the bank’s extended service hours from 8 a.m. to 8 p.m. Our business customers can also use electronic channels including video telephony, independent of their location and also outside branch opening hours. Further elements will be added to our attractive range of modern business banking services in the coming months. These will include an app for business customers, a new version of our BusinessNet online banking platform and a “Smart” account.

Our ongoing strategic repositioning is turning a classic universal bank into an innovative modern retail bank which covers basic financial services needs of customers in Austria by providing a range of simple and low-cost services while also offering high-qual-ity advisory services through a stationary network and via Smart-Banking. This involves a two-pronged approach in the Retail & Cor-porates branch network: the “basic services” bank for everyday banking transactions, available around the clock and with top qual-ity; and the “advisory services” bank, where specialised experts are available for highly qualified services – at branches and via Smart-Banking (video telephony, telephone, SMS, e-mail, OnlineBanking and MobileBanking). Starting in the second quarter of 2014 we will open the first newly designed pilot branches based on the new ser-vice model in Vienna and other Austrian regions. (For more details see “Strategic projects” in the section on “Non-financial indicators” on page 23).


Management Report


Private Banking(€ million) 2013 2012 CHAnGE

Operating income 156 141 +15 +11%Operating costs –109 –107 –3 +3%Operating profit 46 34 +12 +36%Net write-downs of loans –1 0 –1 n.m.Net operating profit 46 34 +11 +33%Profit before tax 44 33 +11 +34%Total financial assets (avg.) 18,935 17,915 +1,020 +6%Primary funds (avg.) 7,813 7,576 +236 +3%Loans to customers (avg.) 620 613 +8 +1%Risk-weighted assets (avg.) 661 954 –292 –31%Average equity 157 168 –12 –7%

n.m. = not meaningful

The Private Banking segment, with the two well-known brands Bank Austria Private Banking – the private banking arm of a major bank – and Schoellerbank – a traditional private banking institution – is the undisputed market leader in Austria’s private banking market. At the end of 2013, assets under management totalled €19.2 billion, with the Private Banking Division continuing to hold the top position in the Austrian private banking market. Two-thirds of the customers of Bank Austria Private Banking use the entire range of services offered by Bank Austria as a universal bank, while also taking advantage of Private Banking advisory services to meet their specific needs. Schoellerbank is perceived by its clients primarily as an insti-tution specialising in asset management services. With a presence in 24 locations throughout Austria, the Private Banking Division’s 539 employees (FTEs, year-end 2013) serve about 34,000 high net worth individuals and some 1,200 of the 3,000 Austrian private foundations.

� Private Banking can look back on a very successful year. This is reflected in profit before tax, which improved by one-third in 2013, and in the steady rise in assets under management also in periods of market volatility during the reporting year. The increase in volumes is attributable both to the favourable performance and to the success in winning new customers. The further upturn in asset management business was particularly gratifying: for the bank, this is linked to higher management performance and value creation; in a low inter-est rate environment customers benefit from active and flexible port-folio management, depending on their individual risk appetite.

The diversified and flexible approach was of even greater relevance in the 2013 investment year. A comparison of year-end 2013 with year-end 2012 shows that the rise in global stock market prices was the strongest in the last four years (MSCI world index: +30%) although 2013 was interspersed with some periods of uncertainty. The reporting year finally saw the end of the multi-year bull market in bonds. The end was heralded when, in May 2013, the Federal Reserve started to discuss tapering its monthly bond purchases.

This led markets to anticipate a turnaround in interest rates. Prices of US Treasuries and euro government bonds fell in a comparison of performance (year-end 2013/2012), notwithstanding a temporary recovery. After several good years, prices of CEE government bonds and euro corporate bonds and mortgage bonds rose only moderately. The BRIC countries, which in previous years were among the pre-ferred investment destinations, lost more than 7%, and stock mar-kets in CEE also lost ground (–2%; MSCI regional indices in euro). In November /December the balance of payments problems of some major emerging markets led to renewed uncertainty, despite a marked improvement in economic prospects of the industrial coun-tries. Boosted by an unprecedented impetus from monetary policy, Japan’s stock exchange was one of the top performers in 2013 (+57%), although this was accompanied by competitive currency depreciation (–22% against the euro). The Swiss franc remained well below the intervention threshold of 1.20 (end of 2013: 1.2276 EUR/CHF), and the gold price also failed to recover fully after falling sharply in April 2013 and June 2013 (closing price: 1,205 US$/oz, down by 28% year-on-year).

� In 2013, total financial assets of the Private Banking Division increased by 4% to €19.2 billion (December 2013/2012). (In aver-age terms for 2012 and 2013, total financial assets increased by 6% in 2013.) In asset management, a value creation-intensive service, it was particularly gratifying to note that assets under man-agement grew at a disproportionately strong rate of €660 million or 12% on account of the good performance and net inflows of funds. The trend steadily moved upwards throughout the reporting year. Performance was hardly affected by periods of temporary weakness in financial markets in mid-May/June and November /mid-December, which were quickly overcome. This investment category experienced a steady net inflow of funds (with the exception of stagnation in November). The VermögensManagement 5Invest asset management product was very successful in 2013, with volume growing by 43% to €827 million. Thanks to a predominance of equities, and most particularly of Japanese shares, even a balanced portfolio widely diversified in terms of risk achieved a return of 9%, well above the underlying benchmark of 7%. The strong performance of asset man-agement activities was at the expense of assets under custody, which declined by 3%. The portfolio share of asset management has exceeded that of safe-custody business since May 2013; at the end of 2013 the ratio was 33% to 31%. 36% of managed funds are still invested as direct deposits, representing further potential for increas-ing the proportion of funds under active asset management.

� In the income statement for 2013, operating income rose by 11% to €156 million. Net fees and commissions – the most impor-tant income component as it accounts for two-thirds (65%) of oper-ating income – increased by 10% to €101 million. In line with the general trend, fee-based income from asset management services grew at a disproportionately strong rate, while fee-based income from custody services and securities trading declined. Unlike other


divisions, Private Banking saw an increase in net interest despite the adverse interest rate environment; this was up 9% to €52 million. As interest margins on the assets and liabilities sides improved slightly, the increase in net interest is explained by volume trends. While the growth of deposits was significant, 2013 also saw dispro-portionately strong growth of loans from a low base: in 2013, private customers in the top market segment expressed interest in the acquisition of real estate (for their own use, as a source of income for the future, apartment buildings, shopping centres or specialist retail centres, business parks, production facilities, etc.) which was increasingly financed through borrowed funds, a development which also reflects the interest rate environment.

In the Private Banking Division, the 11% increase in operating income in 2013 compared with a modest 3% rise in operating costs to €109 million. Within this item, payroll costs were unchanged, with staffing levels falling by 5 FTEs in average terms for the year (and below the planned figures). Other administrative expenses rose more strongly, by 7%. In 2013, the cost / income ratio of the Private Bank-ing Division, which has a strong focus on personal advisory services, was 69.9%, 5.5 percentage points below the level of the previous year. With net write-downs of loans and provisions for guarantees and commitments amounting to a low €802,000 and the balance of non-operating items more or less unchanged (– €2 million), profit before tax in 2013 was €44 million (2012: €33 million). As capital alloca-tion to this service-intensive business segment is low (declining by 7%), return on equity (ROE before tax) was 28.0% (2012: 19.5%).

� With the Bank Austria Private Banking business model we embrace a holistic service philosophy geared to meeting clients’ spe-cific needs. This is complemented by a broad range of services. Given high market volatility, a period of low interest rates and the absence of easily identifiable trends, we give priority to asset optimisation over short-term performance targets and focus on managing risk through wide diversification. Our holistic advisory approach covers liquidity planning, analyses of financial and portfolio structures, asset transfers and retirement planning. Our new e-magazine “Private Banking für Unternehmer” (available in German only) presents our advisory approach and range of client services in a concise manner.

Our advisory services are supported by Portfolio Quality Analysis (PQA), an innovative analysis tool which monitors portfolios to ascer-tain whether there is any unused return potential and/or insufficient diversification of risk, and makes the necessary adjustments. The inclusion of specialists (portfolio quality analysts, investment managers, wealth advisors, credit experts, legal experts) is of grow-ing relevance for client advisory services and for meeting clients’ needs. In addition, the risk profile test (based on a method developed by the Max Planck Institute) gives clients an objective analysis of their financial risk profile. On this basis it helps them assess risks and opportunities when they make investment decisions.

Investment advisory and asset management services are based on our market view as a component of our advisory approach. Under our Preferred Partners concept we select our products in close cooper-ation with eleven of the largest and most renowned global fund man-agement companies, which are analysed and selected in a detailed due diligence process. This also provided the basis for the standard-ised “VermögensManagment5Invest” asset management product. Clients can choose from five investment approaches, depending on their personal risk tolerance and specific investment goals. The qual-ity of the 5Invest portfolios is regularly appraised and certified by the Institut für Vermögensaufbau, an independent institution. The product is now also available as an insurance-linked investment scheme.

Bank Austria sees private foundations as an interesting growth market. Our team of experts in the private foundations competence centre supports clients with economic and legal issues relating to succession planning. There are currently 3,035 private foundations in Austria, of which Bank Austria, as market leader, serves 1,159, cor-responding to a market share of 38%. We believe that succession planning and inheritance, in particular, holds out enormous poten-tial for the asset management segment. In the course of the next thirty years, an amount of about €17 billion in financial assets will be bequeathed to persons each year in Austria. Potential heirs, including grandchildren, participate in individual next generation discussions with clients or at “tea-time” events in small groups with experts, selected public notaries and the bank’s private foundations special-ists. Within Bank Austria we have further intensified our cross-selling activities with a view to making the owners and managers of compa-nies which are among our corporate customers aware of the opportunities available in Private Banking; these activities are pur-sued jointly with the relationship managers serving the companies. Efforts made under this growth strategy within the bank have already proved successful. Since 2011 this cooperation has generated over €300 million in assets under management. Unlocking synergies in this way has paved the way for organic growth without the need to think of acquisitions or similar measures.

Schoellerbank celebrated its 180th anniversary in 2013. Alexander Schoeller, one of the nineteenth century’s most successful entrepre-neurs, founded a banking and wholesale trading house in Vienna in 1833. Today, as a wholly-owned subsidiary of UniCredit Bank Austria AG, Schoellerbank can look back on a long and successful tradition. With a presence in twelve locations it covers virtually all of Austria and is Austria’s largest private banking institution. At the end of 2013 it had total financial assets of €8.4 billion, of which assets under management totalled €3.6 billion (43%). Schoellerbank’s investment philosophy is based on the simple, but successful, principle: “It is better to invest than to speculate”. Classic asset management, together with investment advisory services and retirement planning, belong to its core competence areas, and together with its own investment management company this sub-segment has made an important contribution to overall results in the challenging



Management Report

environment of the last few years. Schoellerbank has regularly been recognised as the best private banking institution in Austria and all the German-speaking countries: Elite Report, an intensive test involving portfolio analyses and anonymous advisory talks which include the participation of chartered accountants, has always ranked Schoellerbank among the top asset managers in the ten years in which the test report has been published so far. In 2013, as in the previous year, it reached first place among 350 private banking institutions; an impressive achievement. Schoellerbank is also to provide a basis for the further growth of the Private Banking Division as the exclusive contact in Austria for high net worth individuals served by UniCredit in Central and Eastern Europe.

Corporate & Investment Banking (CIB)(€ million) 2013 2012 CHAnGE

Operating income 508 520 –12 –2%Operating costs –226 –237 +11 –5%Operating profit 282 283 –1 –0%Net write-downs of loans –53 –48 –6 +11%Net operating profit 229 235 –6 –3%Profit before tax 231 211 +20 +10%Loans to customers (avg.) 14,300 14,975 –675 –5%Primary funds (avg.) 9,156 8,328 +828 +10%Risk-weighted assets (avg.) 9,087 9,465 –378 –4%Average equity 984 958 +25 +3%

The reorganisation of Austrian customer business at the beginning of 2013 involved the transfer of the Corporates, Real Estate and Public Sector customer segments to the Retail & Corporates Divi-sion. Since then the Corporate & investment Banking (CIB) busi-ness segment has focused on serving multinational companies and large international customers, providing them with capital market services and/or investment banking solutions tailored to their spe-cific needs. CIB also serves banks, asset managers, institutional customers, insurance companies and selected real estate custom-ers and funds. At the beginning of 2013, we assumed regional responsibility within UniCredit Group for markets in South Africa, in the Nordic countries, in Spain, Portugal and the Netherlands, mak-ing it easier for large international companies to access Austria and CEE and vice versa. Senior Bankers provide services to selected top customers with a focus on investment banking (ECM, DCM, M&A). In cooperation with relationship managers of corporate cus-tomers, CIB meets customers’ commercial banking product needs. Integrated in the international network of UniCredit’s CIB Division, CIB uses the financial market expertise of a major international bank to perform important functions as a product provider for other Divisions; these products include structured finance; export and trade finance; cash management solutions; risk management to hedge currency risk, commodity risk and interest rate risk; and capital market and investment products.

Operating income matrix: product view/network view2013, € million / +/–%

Finance & Advisory Markets

Global Transaction

Banking

CIBtotal

network 177 24 144 346+14% +42% +11% +15%

Counterparts –4 165 … 162n.m. –28% … –26%

Total 174 190 144 508+22% –24% +11% –2%

In organisational terms, the CIB business segment has a matrix structure comprising two customer groups, i. e. Network (commer-cial customers) and Counterparts, and the following three product lines: Finance & Advisory (F&A): loan products /credit advisory, Corporate Finance & Advisory, Loan Syndication, Capital Markets (equities, bonds), Leveraged Buy-out, Project & Commodity Finance, Structured Trade & Export Finance, Real Estate Financing, Principal Investments; markets: fixed-income and foreign-exchange market activities; credit-related transactions; structured products; Corporate Treasury Sales; implementation of asset / liability and liquidity man-agement, and of funding and the Bank Austria / treasury function; Global Transaction Banking (GTB): Cash Management & eBanking, Supply Chain Finance, Trade Finance, Structured Trade & Export Finance, Global Securities Services. � The economic environment in Austria did not start to improve until the latter part of 2013, with industry giving initial impetus. Domestic demand was stagnant throughout the year, the stimulus provided by exports remained moderate, and inventory management had a negative influence. Although internal financing capacity was strong and financing terms and conditions were very favourable, companies’ investment in equipment declined significantly although sentiment brightened considerably towards year-end 2013. Demand for finance and transaction-related banking services was therefore weak in 2013. Strategic projects (M&A, capital measures, etc.) were postponed. Corporate liquidity remained generally high and was held at banks – selected on the basis of strict criteria – mainly in the form of short-term deposits. Ahead of Basel 3, banks competed in making attractive offers to attract longer-term deposits. On the lending side, there was stronger demand for short-term finance and services (such as cash management), especially in foreign trade with emerging markets. The reversal of investor sentiment in bond markets which started in May/June 2013 caused uncertainty, besides other factors prompting companies to wait with their plans for medium-term and long-term corporate finance. However, in response to structural changes in the banking sector and in view of attractive terms and conditions for finance via capital markets, companies turned to capital markets to a greater extent. Over the past ten years, bond


issues as a proportion of total external financing has more than doubled in Austria, too, rising from 10% to 23%. In financial mar-kets, interest rate expectations moved up and down, and balance-of-payments problems of major emerging markets resulted in significant changes in values in the fixed-income segment as well as volatility and currency depreciation in foreign exchange markets.

� Although Corporate & Investment Banking (CIB) was faced with a mixed operating environment, the business segment had a success-ful year. Profit before tax rose by 10% to €231 million in 2013, supported by high operating income, significant cost savings and a risk profile that remained favourable. operating income totalled €508 million and was thus only €12 million or 2% lower than in the previous year. In customer business (Network) all product lines – F&A, Markets and GTB – generated double-digit revenue growth, achieving a combined increase of 15% to €346 million, which accounted for two-thirds of CIB’s operating income. The focused ser-vice approach for multinational companies thus led to a significant increase in revenues from customer business. Within the total figure, Finance & Advisory benefited from consistent repricing of customer interest rates to generate a significant increase of €22 million or 14% to €177 million, despite a slightly declining lending volume and weak new business. Global Transaction Banking, responsible for numerous services and short-term deposits, achieved revenue growth of €15 million or 11% to €144 million; the increase was due to a higher volume of deposits and to lower interest rates on sight deposits. Trade Finance also exceeded expectations in 2013. Operating income generated by Counterparts was €165 million, still a strong performance even if it did not match the exceptionally high level of €248 million recorded in the previous year. The main reason for this was the fact that the yield curve continued to decline and was flat throughout 2013. The ABS portfolio, derivatives business with customers and operating income of CAIB Polska, a CIB subsidi-ary, also fell short of expectations.

Within operating income, net interest was €346 million, down by €88 million or 20% from the previous year. All of the decline was accounted for by Markets /Counterparts operations (– €106 million to €109 million), which reflects the base effect of an exceptionally strong net interest performance in the previous year (€215 million). Net interest generated by commercial banking activities rose signifi-cantly, by €21 million or 10% to €233 million, with more or less equal contributions to growth coming from lending business and the deposits side. Total volume matched the previous year’s level; a decline in loans was offset by strong growth on the liabilities side (mainly in sight deposits), with margins improving on both sides as a result of consistent repricing measures. Average lending volume of CIB in 2013 amounted to €14.3 billion (–5%) and the average volume of deposits plus the bank’s own issues totalled €9.2 billion (+10%). net fees and commissions in the CIB business segment rose by €13 million or 15% to €99 million in 2013. Growth was driven by Global Transaction Banking and Financing & Advisory, and

net fees and commissions in Markets also remained at a high level. A product-based analysis shows strong growth in net fees and com-missions from guarantees and credit derivatives, and also from safe custody business and securities trading. net trading, hedging and fair value income in 2013 reached €54 million, marking a turna-round from the negative trading result of – €3 million in the previous year. While the swing was mainly accounted for by Markets /Counter-parts, trading activities in customer business (Markets /Network) also developed very favourably.

The moderate decline in operating income was more or less offset by the positive cost trend: operating costs in the CIB Division were down by €11 million or 5% to €226 million, largely due to a €10 million or 11% decline in payroll costs. Staff numbers fell by 79 FTEs (–12%) to 577 FTEs in average terms for 2013, primarily as a result of the closure of some CEE brokerage houses (–60 FTEs) which were still allocated to the CIB Division in 2013. Other adminis-trative expenses almost matched the level of 2012, partly due to IT expenses for regulatory changes, including SEPA. In 2013, net write-downs of loans and provisions for guarantees and com-mitments were €53 million. In CIB, the cost of risk (provisioning charge/average lending volume) remained very low at 37 basis points (2012: 32 bp).

The above developments resulted in net operating profit of €229 million in 2013 compared with €235 million in the previous year. Overall, the balance of non-operating items down to profit before tax was positive in 2013 (+€3 million) after a negative figure in 2012 (– €24 million). No provisions for risks and charges had to be made, and no additions to such provisions were required. Provisions made in 2012 (and not used) for integration/ restructuring costs relating to the winding up of the CEE brokerage subsidiaries were partly released, and the net result from investments was almost balanced (– €2 million). In 2013, profit before tax generated by the CIB Division rose by €20 million or 10% to €231 million. Return on equity (ROE before tax) improved by 1.5 percentage points to 23.5%. With just under one-third (31%) of allocated equity, the CIB business segment accounted for more than one-half (51%) of the profit before tax generated by Austrian customer business in 2013.

� The CIB Division’s capital market expertise, the presence of the global UniCredit Division in all international financial centres and the excellent access provided to our core regions in Western, Central and Eastern Europe and 50 countries worldwide are an essential compet-itive advantage for Bank Austria.

Loans remain the key product in our business relationships. Notwith-standing moderate demand for loans, the Corporate & Investment Banking Division took a pro-active approach in making loans available to the business sector in 2013; lending volume most recently amounted to about €14 billion. If the Austrian economy experiences a sustainable recovery in 2014 – the credit cycle follows economic



Management Report

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BBB

Yield on bank bonds vs. corporate bondsiBoxx Bond Indices, yield to maturity, terms of 3 to 5 years, weighted

Sovereign bondsCovered bonds Bank bondsCorporate bonds

0.00

0.50

1.00

1.50

2.00

2.50

3.00

0.69

1.34

0.98

1.40 1.401.25

1.76

1.37

2.81

2.08

Rating

Year-end 2013

trends with a time lag of two to three quarters – we can make loan facilities available to Austrian companies within a very short time. Such a response is facilitated by the moderate demand for credit and active balance-sheet management. We are moreover working more closely with institutional investors who have long-term capital at their disposal and want to make long-term investments.

We actively support our customers in their efforts to more effectively plan their liquidity, interest-rate, currency and funding needs. As Aus-tria’s leading corporate bank and long-term finance partner we offer risk management instruments and strategic financial advisory ser-vices (Capital Structure Advisory), working with customers to make analyses of balance sheets and financing flows and draw up custom-ised solutions. For this purpose we use IT-supported analysis and advisory instruments such as the WorkingCapitalCheck, stress simu-lation, RatingBeratung, BusinessPlanner (on a database basis), BranchenCheck and VerschuldungsKapazitätsRechner.

In addition to the demand-related effects induced by economic trends there is a structural trend which is linked to the implementation of Basel 3. Capital market products will increasingly replace credit prod-ucts, though certainly not entirely. We expect to see sizeable bond flotations on the Austrian bond market. Redemptions due in 2014 will provide the market with about €6 billion. In Austria there are about

80 borrowers with 140 bonds outstanding (excluding banks and the Republic of Austria). The first half of 2014 will see stronger issue activ-ity in anticipation of rising yields and higher spreads. We want to fur-ther strengthen our top position in the European and Austrian capital markets in 2014. In 2013, 28 (2012: 29) Austrian companies made use of capital market products such as bond-based funding or loans against borrowers’ notes with a higher overall volume; seven compa-nies availed themselves of such instruments for the first time. The global UniCredit CIB Division claims top positions for eurobond issues in Europe in the league tables (no. 3). Activities range from interna-tional benchmark bonds, domestic bonds for private investors, hybrid bonds and private placements to loans against borrowers’ notes. In the area of syndicated finance, the global UniCredit is no. 2 in the league tables. On this basis, in combination with capital strength, we can take large volumes on our books and subsequently place them in credit and capital markets.

The Basel 3 effects will have a stronger impact on the deposit side when, ahead of the implementation of liquidity and funding requirements (LCR and NSFR), efforts primarily focus on acquiring deposits with terms over and beyond money market maturities. We were the first bank in Austria to offer products with a term longer than 31 days and with an interest rate that was higher than that for call money (e. g. the Dispokonto Plus account and fixed deposits). With this initiative we generated deposit volume of €4 billion (in respect of deposits with a term of more than 31 days) in December 2013 and January 2014.

As a leading export finance bank with the largest network in CEE and throughout the world within UniCredit, we support the export industry – not least as some 42,000 companies are involved in exports. Throughout Austria, Bank Austria handles one-half of the export loans covered by Oesterreichische Kontrollbank. Almost every second export letter of credit is routed via Bank Austria, and in the area of foreign guarantees the bank has a market share of 40%. 2013 again saw strong demand for export finance products (tied finance credit and purchase of accounts receivable). These products offer our customers liquidity, competitive advantages through favoura-ble financing terms, and protection against risk. Our focus on tradi-tional growth markets such as China and Russia is complemented by global activities which include the extension of soft loans. The US financial magazine “Global Finance” named Bank Austria “Best Trade Finance Bank” in Austria for 2014, a distinction which the bank has received six years in succession. This was the result of an annual sur-vey among analysts, managers and technology experts. The award was also presented to the banking subsidiaries in Bulgaria, the Czech Republic and Ukraine. UniCredit was voted “Best Trade Finance Bank” in Central and Eastern Europe. The key selection criteria for the awards were transaction volume, geographic reach, customer ser-vices, competitive pricing and innovative technology.


Central Eastern Europe (CEE)(€ million) 2013 2012 CHAnGE CONST.*)

Operating income 4,929 4,630 +299 +6% +11%Operating costs –2,162 –2,075 –87 +4% +7%Operating profit 2,767 2,555 +212 +8% +13%Net write-downs of loans –1,222 –761 –461 +61% +64%Net operating profit 1,545 1,794 –249 –14% – 9%Profit before tax 1,641 1,722 –80 –5% +1%Loans to customers (avg.) 70,263 66,392 +3,871 +6% +9%Primary funds (avg.) 61,058 57,721 +3,337 +6% +9%Risk-weighted assets (avg.) 82,367 84,185 –1,817 –2% –0%Average equity 14,206 13,061 +1,145 +9% +11%

*) const. = at constant exchange rates

� Conditions in the major regions of Central and Eastern Europe again varied considerably in 2013, with the patterns in the regions changing in the course of the year: in the first six months, the closely integrated EU countries were still impacted by the weak economic growth experienced by the countries in Western Europe and by their own consolidation policies. But economic growth strengthened as the year progressed. The banking environment in large countries with a high degree of economic autonomy, initially very favourable, deterio-rated in the second half of the year. In Turkey, which has a significant impact on results (though consolidated proportionately at 41%), retail business was initially affected by an economic policy which damp-ened growth. Towards the end of the year, the reversal of portfolio capital inflows triggered potential balance of payments problems, resulting in currency depreciation and a sharp rise in interest rates. In Russia, the banking sector continued to expand strongly especially in business with corporate customers, but growth in this segment was impacted by structural problems and a steady outflow of capital weakened the country’s currency. The depreciation of the Turkish lira (by an annual average of −9%, and in a comparison of year-end 2012/2013 by −20%) and the Russian rouble (−6% and −11%, respectively), combined with the depreciation of the Czech crown in September (−3%/−8%) as a result of pro-active measures, had an impact on overall results (amounts denominated in local currency are translated into euro at average annual exchange rates); depending on the nature of the total figure, currency depreciation sliced 3 to 4 per-centage points off the growth rates.

Notwithstanding the lacklustre environment, the CEE Division was Bank Austria’s mainstay of growth and main source of revenue in 2013: with 56% of average lending volume it gener-ated 76% of the bank’s operating profit and 78% of the profit before tax in terms of overall customer business (Bank Austria without the Corporate Center). Commercial banking business con-tinues to generate substantial operating income, and on account of the low cost intensity (cost / income ratio 42.9% compared with 53.4% for the bank as a whole) a large portion of this feeds through to profit before tax.

� Following the hesitant recovery of the global economy over the past few years it is clear that the recovery process after a financial market crisis is protracted and moderate, and that a much lower figure needs to be assumed for the growth poten-tial. A further factor is the growing degree of economic maturity of the advanced CEE economies – in other words, a weakening of the impetus provided by the convergence process. While the growth trend in CEE is still considerably above that of the Western European economies, it will probably always be well below the CEE growth rates to which we became accustomed in the first and second decades of the economic upswing in the region. The current growth trend is moreover impacted by economic cycles and specific structural weaknesses; in some exposed countries also by vulnerability to external shocks.

This general reassessment led to two developments in the 2013 consolidated financial statements: first, we significantly increased loan loss provisions although there was already a marked improvement in additions to impaired loans. The increase in net write-downs of loans and provisions for guaran-tees and commitments from €761 million to €1,222 million (+€461 million) led to an improvement in the coverage ratio for impaired loans already classified as such. Secondly, in the new scenario, the goodwill impairment test performed in respect of the companies in which we have an equity interest resulted in a goodwill impairment charge which reduced goodwill to nil. As a non-operating measure taken in the context of equity inter-est management, the goodwill impairment charge is recognised in the Corporate Center (the CEE business segment only includes local goodwill impairment charges of €9 million for Russian subsidiaries).

For the purposes of implementing our multi-year plan and fol-lowing the completion of our withdrawal from Kazakhstan, the banks in Ukraine, which were recently merged, were classified as a disposal group held for sale. In the income statement for the bank as a whole all income statement items relating to Ukraine are included below profit before tax under “Total profit or loss after tax from discontinued operations”. In this context, non-operating items of the income statement for the CEE busi-ness segment reflect only the current impact of Ukraine, without valuation adjustments. In Estonia, Latvia and Lithuania we are restructuring banking business. After surrendering the local banking licence as at 1 January 2014 and selling banking licence-related products, we will only be active in the leasing business in the Baltic countries (for details see section A.9 in the notes to the consolidated financial statements on page 117). We sold our insurance operations in Turkey in 2013 and entered into a strategic cooperation agreement with the buyer. On the other hand, we acquired retail banking assets in Romania to reinforce our strengths in this area. 2013 moreover saw a fur-ther streamlining of our organisational structure. We integrated



Management Report

our bank in Slovakia with the banking subsidiary in the Czech Republic with a view to unlocking synergies; the comparative figures for 2012 were recast to reflect all changes.

� Notwithstanding the above-mentioned additions to loan loss pro-visions, the CEE business segment achieved a good result in 2013 with a profit before tax of €1,641 million. The slight decline of €80 million or 5% from the previous year is explained by exchange rate movements (adjusted for exchange rate movements: +1%).

operating income rose by 6% compared with 2012 (at constant exchange rates: +11%) to €4,929 million. Among the income com-ponents, net interest was up 2% (adjusted for exchange rate move-ments: +6%) to €3,091 million, a more moderate increase than in previous years. In the Central European group of countries, net inter-est declined slightly (–6%/ adjusted for exchange rate movements, –3%). Given the high degree of integration and convergence of these countries, trends from West European countries spread throughout this region in 2013 (a development which may also move in the oppo-site direction again). Net interest in SEE rose slightly, by 2%, with good growth achieved in Romania (+10%) and Serbia (+8%). The overall net interest performance also reflects the restructuring of banking business in the Baltic countries to focus on leasing activities, but this had no material impact. The largest contribution of any CEE country in our perimeter to overall net interest came from the bank in Turkey, with €732 million (although Bank Austria only has a 41% shareholding in the bank). Currency depreciation in average terms for the year led to a decrease in euro terms (–6%); expressed in local currency, net interest rose at a comparatively low 3%. While average volume growth in 2013 was still strong (+20% in local currency terms), the interest margin was down by over 80 basis points from the previous year, due to a rise in interest rates in the second half of the year and various restrictive measures which impacted funding costs. Net interest generated in Russia in 2013 rose substantially, by 13% (adjusted for exchange rate movements, +20%), as strong volume growth (+9%/+12%) combined with margin improvements. Overall, it should be noted that the interest margin (net interest /average lending volume) in the CEE business segment declined in 2013, as in 2012, from 457bp to 444bp. At this level, it is still significantly higher than for the bank as a whole (312bp), even after the provisioning charge (279bp compared with 203bp).

net fees and commissions (€1,040 million) rose strongly over the previous year (by 9%, adjusted for exchange rate movements: +13%) and – unlike net interest – in all countries including Central Europe (especially Hungary) and South-East Europe. Contributions to growth came from account and payment services, and from lending business in Turkey and Bulgaria. Securities business also experienced an upturn, although this was largely limited to business with corpo-rate customers where it was driven by underwriting operations, credit insurance and guarantees. In the retail segment, contributions also came from the sale of insurance policies in some countries. Central

Europe made the strongest contribution to the increase in net fees and commissions (+€63 million /+32%); in Hungary the strong rise (+€47 million) partly reflected higher charges (for accounts, pay-ments, transactions, credit cards) in response to the financial trans-action tax introduced in 2013, which amounted to €67 million and is included in other administrative expenses. Russia also recorded strong growth rates (+9%, adjusted for exchange rate movements: +16%), generated partly by underwriting business. Turkey’s performance was less favourable (–1%, adjusted for exchange rate movements: +9%), partly on account of economic-policy measures dampening growth in credit card business.

net trading income came to €705 million, well up on the figure for 2012 (€531 million). Strong increases in net trading income were recorded in Russia, Turkey, Romania, in the Czech Republic /Slovakia and Hungary. In Russia, gains on the sale of shares in MICEX, the Russian trading platform, were substantial as in 2012, but these were now generated for the last time (€145 million after €76 million). In the reporting year, realised gains on financial mar-ket investments (primarily government bonds) in several countries (Russia, Romania, Turkey, Czech Republic) made positive contribu-tions. Apart from this development, the improvement took place in countries with flexible exchange rates and significant capital transactions, where trading activities in customer business play an important role. All countries made positive contributions to overall net trading income, with the largest coming from Russia (€269 million) and Turkey (€143 million), followed by the Czech Republic /Slovakia (€90 million), Romania (€85 million), Croatia (€49 million) and Hungary (€36 million).

� operating costs in CEE totalled €2,162 million in 2013. They grew by 4%/8% year-on-year, a rate which is well below revenue growth. In 2013, bank levies and the financial transaction tax (€114 million) were three times the 2012 figure (€36 million). Without the bank levies and the financial transaction tax (FTT), costs in CEE (in euro terms) remained constant. The cost / income ratio (without bank levies, but including the FTT) therefore improved by more than 1 percentage point to 42.9%, a figure that remains over 10 percentage points below that for the bank as a whole. Payroll costs in CEE in euro terms were more or less unchanged (–0.3%); adjusted for exchange rate movements they rose by a low 4%. The average number of employees (40,843 FTEs) was down by 689 FTEs (2%) in the reporting year (pro-rata figures for banks in which equity interests are held, without Kazakhstan and Ukraine). Programmes for optimising the branch network and enhancing efficiency were under-way in most countries. The above-average growth of costs in Roma-nia (+10%) was due to the acquisition in August 2013 of the retail portfolio (+128 FTEs) of the Royal Bank of Scotland. The sale of insurance operations in Turkey (Yapı Kredi Sigorta, YKS), on the other hand, resulted in a decline of about 1,800 FTEs. Almost all of the increase in other administrative expenses (+8%/+11%) in CEE was due to the spontaneous rise in Hungarian levies.


operating profit in the CEE business segment rose by €212 million or 8% (adjusted for exchange rate movements: +13%) to €2,767 million as revenue growth combined with cost stability.

� As additions to loan loss provisions were made, net write-downs of loans and provisions for guarantees and commit-ments in the CEE business segment’s income statement increased by €461 million or 61% to €1,222 million. As a result, the cover-age ratio improved in almost all countries, with the increase varying from country to country. In percentage terms, the Central European countries recorded the strongest combined increase in net write-downs of loans and provisions for guarantees and commitments (+€107 million, +77%). However, at 157bp, the cost of risk in these countries remained below the average figure of 174bp for CEE as a whole. In Hungary and Slovenia, the relatively low provisioning charges doubled in 2013. A stronger increase of €167 million or 45% was seen in the region of South-East Europe (SEE). Within SEE, net write-downs of loans and provisions for guarantees and commitments in Romania rose strongly once more, by €83 million to €174 million, although the country’s economic performance in 2013 was relatively good. The cost of risk in Roma-nia reached 461bp, the highest level in CEE. In Croatia, loan loss provisions were increased already in mid-2013, with further addi-tions at the end of 2013 bringing the total charge to €186 million (up by €34 million on the previous year, cost of risk: 196bp), which reflects the bank’s size and high market share. At our banks in

Turkey and Russia, net write-downs of loans and provisions for guarantees and commitments in euro terms increased at compara-tively low rates of 6% and 16%, respectively, although some seg-ments of retail banking (credit card business, consumer credit) were under strain; adjusted for exchange rate movements, the increases were 16% and 23%, respectively. The cost of risk was 105bp in Turkey and 62bp in Russia, well below the CEE average as the local banks benefited from a well-balanced business struc-ture with a high proportion of large customers. The Profit Centre Vienna of the CEE business segment includes the charge for loan loss provisions for cross-regional portfolios such as international project finance, and the provisioning charge for a portion of the exposures of Ukrsotsbank which was transferred to UniCredit Bank Austria by means of a subparticipation agreement at the beginning of 2013 to replace an expired guarantee.

� In 2013, the CEE business segment achieved a net operating profit (operating profit less net write-downs of loans and provisions for guarantees and commitments) of €1,545 million. The decline of €249 million or 14% (adjusted for exchange rate movements: – 9%) is explained by the additional loan loss provisions. Additions to provisions for risks and charges were €40 million, lower than in the previous year (€63 million); the additions mainly relate to provi-sions in Turkey for the bonus points programme in card business, and therefore to current retail banking business. Integration /restructuring costs (€32 million, after €1 million in the previous year) relate to the integration of the banking subsidiaries in Slova-kia and the Czech Republic, and to a lesser extent to provisions for the restructuring of the Hungarian branch network and for the sur-render of the banking licence in the Baltic states as part of the strategic concentration on leasing business. Net income/ loss from investments improved significantly from – €8 million in 2012 to +€169 million in the reporting year, primarily on account of capital gains on the sale of insurance operations in Turkey (see the group of consolidated companies on page 117 of the notes to the consol-idated financial statements).

Profit before tax for 2013 amounted to €1,641 million, a figure which is €80 million or 5% lower than that for the previous year, but 1% above the 2012 figure when adjusted for exchange rate movements. Average risk-weighted assets (RWAs, all types of risk) of the CEE Division (€82.4 billion) were slightly below the level of the previous year (–2%); at constant exchange rates they were a little higher. Equity increased more strongly, by 9% to €14.2 billion. On this basis, return on equity (ROE before tax) came to 11.6% (2012: 13.2%). Despite the large amount of equity allocated to the CEE business segment and the high cost of equity, CEE generated a marginal Economic Value Added (EVA) of €125 million.

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

(€ million) 2013 2012+/– €

million +/– %

CoST oF RiSK2013

Austria 219 208 +11 +5% 35 bpCEE 1,222 761 +461 +61% 174bpRomania 174 92 +83 +91% 461bpSerbia 42 26 +16 +60% 325bpSlovenia 60 30 +30 >100% 285bpHungary 89 35 +53 >100% 276bpBulgaria 117 81 +35 +43% 258bpCroatia 186 151 +34 +23% 196bpTurkey 156 147 +9 +6% 105bpBosnia and Herzegovina 15 16 –1 –8% 101bpCzech Rep./Slovakia 99 75 +24 +32% 94bpBaltics 4 4 +0 +0% 91bpRussia 77 67 +11 +16% 62bpPCV*) and other 203 37 +167 >100% 340bp

Bank as a whole 1,441 969 +472 +49% 109 bp

CEE countries listed according to cost of risk. *) PCV= Profit Centre Vienna includes cross-regional portfolios of special financing transactions and guarantees of Bank Austria AG.



Management Report

Reports on CEE banking subsidiaries Turkey: 2013 was a year in which the first half was marked by improving fundamentals and strong economic growth, while the second half was impacted by Fed tapering and domestic political uncertainties. During the second half, Turkey, like other emerging markets, experienced capital outflows which resulted in currency depreciation and a rise in interest rates. In this environ-ment, the Turkish banking sector achieved 33% y/y growth in loans, 24% y/y growth in deposits and stable net income.

In 2013, Koç Financial Services (KFS), the financial holding company controlling 81.8% of Yapı Kredi, effectively strengthened its capital and liquidity while maintaining a resilient performance.

Consolidated net profit increased by 73% to 3.2 billion Turkish Lira (after minority interests). Through the closing of the sale of its insurance business in July 2013, KFS booked a capital gain of about 1.3 billion Turkish Lira in the local books. Excluding the capital gain, net income increased by 17% to 1.9 billion Turkish Lira.

Yapı Kredi’s local capital adequacy ratio was realised at 16.0% (−30 bp y /y) as of the end of 2013, one of the highest levels in the sector (sector: 14.6%, −266 bp y /y). In addition to leveraging on its conservative balance sheet, Yapı Kredi undertook focused action to strengthen its capital base throughout the year, such as the sale of its insurance business, the realignment of the securi-ties portfolio, the renewal of sub-debt and risk-weighted asset optimisation.

In terms of volume, total loans increased by 27% y/y, driven by both consumer and corporate lending. In asset gathering, deposits increased by 23%, driven mainly by foreign currency deposits. In 2013, the Group continued to focus on diversifying its funding activities as a key strategic area and raised US$5.2 billion through syndications, securitisations, bond issues and other financial instruments.

Total revenues increased to 7.6 billion Turkish Lira (7.9% y /y), driven by the strong contribution of core revenues and positive impact of other income. The cumulative net interest margin was in line with guidance at 2.9%, confirming the Group’s ability to navigate in a challenging rate environment. Fee growth of 8.6% y /y was driven by value-generating lending growth and by a positive contribution from asset management and bancassurance activities. The Group continued to pursue its disciplined cost man-agement policy, with 6.7% y /y growth driven by strict manage-ment of ordinary costs and ongoing investments for growth.

In 2013, asset quality remained intact. The NPL ratio was 3.5%.

The Group provides high quality products and services to its loyal and diversified customer base of 8.8 million through a wide-spread service network. Yapı Kredi’s branch network consists of 971 branches covering all regions in Turkey. In addition, Yapı Kredi has promoted the use of its alternative delivery channels (ADCs) which handle 83% of total banking transactions. These ADCs comprise 3,000 ATMs, innovative Internet banking (3.2 million users), leading mobile banking (500,000 users) and two award-winning call centres (42 million customer contacts).

Russia: ZAo UniCredit Bank (UCBR) in 2013 once again confirmed its position as the leading international bank in Russia. With total assets amounting to 888 billion Russian roubles, UCBR kept its seventh position among the top ten banks. With a net profit of about 24 billion Russian roubles the bank achieved the highest net profit in its history and generated a strong return on equity of about 20%. This excellent result was supported by a one-off effect from the disposal of shares in CJSC “MICEX” (Moscow Interbank Currency Exchange). Net of this effect (both in 2012 and 2013) net profit increased y / y by 26%. The bank’s revenues increased steadily during the year, reaching a total amount of 45.4 billion Russian roubles, 27% more than in the previous year (or 19% net of the one-off effect from the disposal of shares in “MICEX”). At 28.1 billion Russian roubles, net inter-est income remained the main source of the bank’s revenues, driven by an increase in business volume: about 9% y /y growth in loans and 5% y /y increase in deposits which, together with successful placements of own issues (28% y /y volume increase), contributed to a very sound loan /deposit ratio of 94%. Operating expenses amounted to 12.3 billion Russian roubles and continued to be strictly monitored, leading to a very efficient cost / income ratio of 27% (31% net of the “MICEX” effect). Sound risk management led to a further improvement in asset quality with an excellent cost of risk ratio of 0.6%. In December 2013 Standard & Poor’s confirmed the bank’s BBB rating, the highest rating in the Russian banking sector (at the same level as the country rating).

UniCredit Bank Russia serves almost 1,450,000 customers through its network of 105 branches.

The CIB Division maintained its position as the main contributor to the bank’s total revenues and profit before taxes. Revenue growth y /y was 18%, totalling 23.5 billion Russian roubles. Customer satisfaction results confirmed UniCredit as the best performer compared with its main peers with a growing positive gap to market across the years. CIB continued to serve the bulk of the


largest corporate clients in Russia, actively supporting cross-bor-der cooperation while dynamically developing and expanding rela-tionships with international companies and regional corporates. The bank strengthened its reputation as a leading financial insti-tution on the Russian market, in part by increasing the share of structured loans in its portfolio and offering financial advisory services. In 2013 UniCredit confirmed its strong position in trade finance and its performance in debt capital market business improved significantly.

The Retail Division achieved an outstanding 24% y/y growth in revenues (totalling 12.1 billion Russian roubles), confirming its sustainable performance and capacity to outperform the market. Thanks to the bank’s reliable reputation, deposits from private individuals increased by more than 22% y/y. In 2013, the Retail Division focused on strengthening customer relationships: its new model for servicing SME customers was successfully launched, the new operational CRM MyClient implemented, and mobile applications for iOS and Android upgraded – all supporting new approaches in customer services and bringing UniCredit closer to the customer. Retail sales underlined its leading role in the area of car loans: it was ranked second among the main retail banks in the government’s car subsidising programme according to the Ministry of Industry and Trade of the Russian Federation.

Croatia: In a challenging environment, Zagrebačka banka (ZABA) Group succeeded in keeping revenues very close to last year’s level (−1.8% y /y) and in maintaining its high level of oper-ational efficiency. The prolonged recession and stricter regulations on the classification of loans weighed on the group’s financial performance, requiring higher provisioning charges. Bottom-line, the group still achieved a net profit of 649 million Croatian kuna.

The group continued with a strong focus on fundamentals of sustainable operations: a stable and diversified deposit base, high capital adequacy level, strong balance sheet structure, responsi-ble risk management, high level of productivity and efficiency, on-going learning and innovation.

The bank’s strong market position, customer trust, product range, client orientation and highly qualified employees and product and process excellence are foundations of the future.

In the retail segment, the bank reaffirmed its position as a market leader with a 24.4% market share in deposits by private individu-als and retail loans. The group seized all opportunities for growth, with many commercial activities and products launched: commer-cial campaigns targeting small entrepreneurs, in cooperation with

the Croatian Chamber of Craftsmen; new Visa business card for entrepreneurs of small businesses and corporate clients; ongo-ing promotion of the MasterCard Student Card; new insurance products in cooperation with Allianz; new m-banking functions; a 40% share in the government’s housing programme.

In the corporate segment, the bank was successful in increasing loans to customers and its market share despite negative market trends and increased competition for a limited number of quality opportunities. Market share in corporate loans reached 29.5% and market share in corporate deposits increased to 26.6%.

An ongoing pro-active approach resulted in the group being the leader in setting new market trends in identifying and structuring financial schemes to meet customers` specific financial needs. As one of the pioneers of energy efficiency (EE) and renewable energy (RE) loans in Croatia, the group continued with its strategic commitment to offer financial solutions for EE and RE projects, gaining a leading position in this market niche.Multi-year cooperation with international financial institutions and funds resulted in over €100 million in new funding to support SMEs, EE and RE projects.

In light of recent EU membership, EU-funded projects are seen as a potential growth catalyst in forthcoming years. In order to expand participation in this growing market segment, besides financing products the group also provides professional support and advisory services in relation to EU funds. The group contin-ued to be the absolute leader in the Croatian investment banking segment. In the capital markets segment, ZABA arranged or co-arranged bond issues in the total amount of 8.4 billion Croatian kuna. Structured Finance arranged a number of deals, most notably a 1.5 billion Croatian kuna financing for the construction of the new terminal of Zagreb Airport. Corporate Finance was mandated for all significant corporate finance advisory trans-actions in Croatia and SEE. Markets maintained their dominant role in providing financial market products to a wide range of corporate and institutional clients.

Czech Republic, Slovakia: UniCredit Bank Czech Republic and Slovakia a.s. is the new name of the bank operating in the two countries. The bank was created by merging UniCredit Bank Czech Republic and UniCredit Bank Slovakia. The integration project, which was launched in the second half of 2012, was successfully accomplished by the legal merger of the two legal entities as of 1 December 2013. The new bank is registered in the Czech Republic and operates in Slovakia in the form of a foreign branch. Despite the intensive integration activities during



Management Report

the year, both banks were able to operate without any adverse impact on business, meeting their targets and posting excellent business results.

Revenues grew by 8%, leveraging on initial synergies from the integration of the two banks, especially thanks to know-how transfer. One of the main success areas was corporate structured financing, where the bank participated in most of the large trans-actions concluded on both markets. The successful implementa-tion of consumer finance know-how was a key driver in the retail segment in Slovakia. Strong trading results from customer-based trading as well as proprietary trading also contributed to revenue growth.

Dynamic 12% growth in lending volume was generated mainly by retail mortgage and consumer financing and by SME financ-ing. While asset growth was strong, deposits increased at an even faster pace, by 15% y/y. This positive development on the liabilities side further improved the bank’s self-financing ability and created more scope for a future expansion of its lending activities. The bank increased deposit volume in both the retail and corporate segments, reflecting successful efforts in winning customers in line with the bank’s strategy to expand its customer base.

Prudent cost management together with initial synergy effects from the integration project resulted in a decrease of the cost base by approximately 2%. As loan loss provisions were increased compared to the previous year, the coverage ratio of non-performing loans improved. In combination with integration costs this impacted net profit in 2013, which reached a level of about €121 million. Overall, the bank considers 2013 to have been a very successful year in terms of business performance and in terms of enhancement of the bank’s financial stability. Integration of both banks is the basis for continuity in this respect.

UniCredit Bank Czech Republic and Slovakia was awarded high profile awards in various categories in 2013. The most notable awards were Best Cash Management in CEE, Best Project Finance House in CEE, Global Finance Award and Best Cash Management in the Czech Republic. In addition, for its retail activities, the bank received 2 prizes under the prestigious Zlata koruna Award in the mortgages and consumer finance category. For its operations in Slovakia, the bank was awarded the prize for Best Acquirer 2013 by VISA for the fastest growth in merchant volume via POS terminals and most recently it came in first place in pre-paid products for our innovative corporate pre-paid card.

Unlike its main competitors, UniCredit Bank Hungary remained profitable in 2013 thanks to its prompt response to the economic and institutional challenges. In 2013 revenues increased by 31% y/y. A decline in net interest income due to weak credit demand and falling market rates accompanied by a continuous cycle of monetary easing were offset by an outstanding trading result and income from net fees and commissions.

The significant annual growth of operating costs was attributable to the increased volume of extraordinary indirect taxes that accounted for 70% of other administrative expenses in 2013. Along with an unchanged special banking tax, the financial transaction tax (FTT) levied from January 2013 also burdened the financial sector. To compensate for these negative income effects, UniCredit Bank Hungary launched a network optimisation process and achieved savings in some core activities. As a result, gross operating profit grew by 5% y /y.

As loan loss provisions were increased compared to the previous year, the coverage ratio of non-performing loans improved. Net profit thus finally reached more than 6 billion Hungarian forint in 2013.

With lending volume and net repayments of private households remaining more or less unchanged, the positive effects of the Hun-garian central bank’s liquidity programme for the SME sector could only slow the overall declining trend of lending volume. The bank’s net loan to deposit ratio remained below 85% as total deposits increased by 4.5% y /y, supported by the corporate segment. Retail deposits, on the other hand, were shrinking throughout the year as households continued to transfer savings from deposits providing low returns into more attractive mutual funds and govern-ment securities. Assets under management thus grew by more than 22% y/y in 2013.

In 2013, uncertainties on Slovenian markets and continued recession impacted the banking sector, which again showed an overall net loss. The country avoided a bailout and some of the large competitors were re-capitalized following an asset quality review and stress testing in the banking sector. UniCredit Banka Slovenija d.d. was the strongest of the banks included in the asset quality review. The bank reported a capital adequacy ratio of 17% according to local regulations as of December 2013, 900bps above minimum regulatory requirements.

The commercial performance of UniCredit Banka Slovenija d.d. and Uctam upravljanje d.o.o. (a company specialised in managing assets derived from debt restructuring) was also influenced by the


overall worsening of the economic situation. Deleveraging in the corporate sector and weakening of both consumption and invest-ment activity significantly impacted the bank’s loan growth (−13% y/y) and resulted in a 7% y /y decrease of the bank’s revenues by. However, the bank managed to further increase fee and commission income by 14% y/y, driven by continuous growth of the customer base and the opening of new accounts. Customer deposits increased by 4% y /y, which helped the bank to improve the loan to deposit ratio to 148% compared to 183% in 2012. Operating costs were kept flat at €43 million y /y (while still absorbing an additional €2 million Slovenian bank levy and financial services tax in 2013) through a strong focus on cost management.

The overall result of Slovenian operations for 2013 was signifi-cantly affected by impairments of available-for-sale equity invest-ment in the total amount of €25 million, of which €6 million were recognised for shares owned by Uctam upravljanje d.o.o, and by loan loss provisions of €60 million.

In 2013, the bank received the EMEA Finance Award as the Best Bank, and the Euromoney awards as the Best Bank in Private Banking services and the Best Bank in cash management ser-vices. In addition, the bank received the Social Responsibility Award HORUS for the fourth consecutive year.

UniCredit Group in Bosnia and Herzegovina (B&H) in 2013 has reaffirmed its position as the largest and most profitable banking group measured by all main categories (total assets, loans, deposits, capital, revenues and net profit). The group operates through two banks, UniCredit Bank d.d. mostar and UniCredit Bank a.d. Banja luka, serving almost 1.2 million customers with the largest banking network of 124 branches.

During 2013 the group seized market opportunities for growth with many new and innovative commercial activities, aiming to support easy life banking through the enhancement of direct channels (mobile banking, e-commerce, 24-hour zone, deposit ATM, day-night vault and POS devices network), specifically designed loans (insured loans) and deposits. These were well received by customers, reflected in a further improvement in the customer satisfaction index. Based on such a proactive market approach, net profit increased to 72 million B&H Convertible Marks (+9% y/y), of which UniCredit Bank d.d. Mostar generated 56 million, and UniCredit Bank a.d. Banja Luka 17 million B&H Convertible Marks. The result was driven by higher revenues (+3%) and improved cost efficiency, and sup-ported by lower net loan loss provisions (−8%). Customer loans increased by 3.3% y /y, while the deposit base showed an increase of 4% y /y. The loan/deposit ratio, at 92%, shows a well-balanced trend and confirms the self-sustainability of the group in B&H. Market shares are above 20% in both loans and deposits.

Profit before tax in Central and Eastern Europe (CEE) (€ million)

Turkey

Croatia

Bulgaria

Bosnia and Herzegovina

Serbia

Hungary

Romania

Baltic states

Slovenia

PC Vienna and other

Russia

Czech Republic and Slovakia

–300 –200 –100 0 100 200 300 400 500 600 700 800 900

758

–206

–53

–11

–7

27

31

42

100

105

149

707

20122013


Management Report


The banks were committed to corporate social responsibility, reflected in a number of activities, and they carried out a series of initiatives related to projects on environmental protection and improving the quality of life in B&H. They won various awards from local institutions including a Crystal Prism for Best Bank in B&H, 3 Golden BAM awards (for total assets, total capital and ROE), “Employers of Choice” award, Euromoney awards as Best Bank in B&H and Best Bank in Transactional Operations in B&H.

Serbia: Despite the turbulence and spillover of the global crisis, the recovery of the Serbian economy is on track, driving real GDP growth in 2013 primarily through net exports and a solid year in the agricultural sector. Monetary policy measures com-bined with local currency stability and lower overall demand have returned inflation to within the central bank’s tolerance band. In combination with the announced structural reforms initiated by the government, this stable environment is attracting more foreign direct investment. The banking sector again displayed its stability, despite the overall slowdown in credit activity, high level of non-performing loans and a clear trend towards consolidation. The sector continued to be well capitalised and liquid, while also being highly fragmented and more competitive compared to other markets.

Despite the difficult business environment, UniCredit Bank Serbia managed to achieve sound financial results and to increase market share in the most important parameters. The bank is positioned as one of the top three players in the country, reflected in its role as market leader in terms of effi-ciency and productivity. In 2013, the bank managed to reach a higher level of self-sufficiency by improving the loan to deposit ratio by 11 percentage points, supported by an increase in stable funding and customer deposits. Thanks to sound revenue growth and cost containment, gross operating profit improved by 8% y /y. While higher net write-downs of loans led to an improvement in the coverage ratio, this also resulted in a lower net profit compared with the previous year. The bank serves its clients through a network of 74 branches. In 2013, the client base was further enlarged to 210,000 clients through an improved service model and the introduction of a number of innovative products and services.

In 2013, Romania’s GDP grew at the fastest pace in Central and South-East Europe for the first time since 2007 due to a favourable performance of industry and agriculture that managed to offset poor domestic demand. UniCredit Tiriac Bank (UCT) was one of the most active banks in the Romanian market in 2013. In August 2013, UCT successfully acquired the retail and Royal Preferred Banking portfolios of RBS Romania. In June 2013,

the first corporate bond issue by UCT was completed; it was oversubscribed by 110%. Subscriptions were made by over 30 local and international institutional investors (including EBRD and IFC, funds, insurance companies, local and international banks), reflecting the sound trust placed by the market in the bank. This initiative is very relevant for the Romanian capital market, representing a benchmark and contributing to its further development. The JEREMIE programme, supported by the Euro-pean Investment Fund, in 2013 continued to support lending to SMEs through better pricing and lower collateralisation require-ments.

UniCredit Tiriac Bank performed well in 2013, absorbing the effect of the RBS business integration and reporting a gross operating profit of 751 million Romanian leu (consolidated group figures), up 22% y /y. Total revenue reached 1.5 billion Romanian leu, up 15% y /y supported by fee income and the trading result. Operating costs were 739 million Romanian leu and the cost /income ratio 50%, down 288bp y / y. Loan loss provisions were increased compared to last year and totalled 771 million Roma-nian leu, resulting in a net profit of 70 million Romanian leu.

UniCredit Tiriac Bank records a strong and balanced financial position. The consolidated balance sheet reached 28.5 billion Romanian leu at the end of December 2013, up by more than 8% y /y. Overall growth was supported by the expansion of com-mercial business which allowed the bank to increase deposits by approximately 12%. The bank ended the reporting period with 188 branches and 3,171 employees.

The Bulgarian economy showed some signs of recovery in 2013, but there are so far no signs of any significant acceleration of growth. Increased exports and higher government spending helped GDP growth to rebound. The unemployment rate remained high and the deflationary pressure proved persistent. Markedly reduced reliance on external borrowing and a slowing in the growth of non-performing loans improved the resilience of Bul-garian banks. Customer deposits continued growing faster than customer loans, enhancing the system’s liquidity. Net profit in the banking sector was down by 6.6% y /y as of November, which reflects a combination of weaker operating income and nearly flat operational costs.

UniCredit Bulbank maintained its leading position in the market with total assets of 13 billion Bulgarian leva, up by 1.3% y /y. Gross loans to customers reached 9.9 billion Bulgarian leva (+3.3% y /y), with retail loans increasing by 4.9% y /y and cor-porate loans rising by 3.3% y /y. Customer deposits grew by 5.4% y /y with a significant contribution from retail deposits that


went up by 8.5% y /y, while corporate deposits grew by 3.1% y /y. The structural liquidity position improved with the net loan /deposit ratio declining to 104% from 107% in 2012. Total revenues increased by 3.3% y /y to 702 million Bulgarian leva. Higher lending volume and improved deposit margins contributed to the growth of net interest revenue by 5.2% y /y to 469 million Bulgarian leva. Net fee and commission income continued the trend of the previous year, rising by 7.8% y /y thanks to the launch of several innovative products in the retail area like the “Modula” flexible package product and contactless cards, structured products for private customers and stronger cooperation with the bank’s product factories for con-sumer financing, factoring and leasing. Operating costs were down by 0.9% y /y, leveraging on FTE optimisation activities. Efficiency was further enhanced and the cost / income ratio declined by 1.6 percentage points y / y, to 38.4% in 2013. As loan loss provi-sions were increased to 228 million Bulgarian leva, the coverage ratio of non-performing loan exposures improved. Net profit thus reached a level of about 175 million Bulgarian leva (−23% y /y).

In retail business, the first pilot branch of the future for UniCredit Group in CEE was opened in March 2013. It was built on “customer journey” experience and introduced a number of improvements in customer services and processes. The specialised subsidiary for con-sumer financing, UniCredit Consumer Financing, was fully integrated, giving a strong competitive advantage and possibilities for new cus-tomer acquisition. The CIB&PB Division put the focus on extracting value from innovation, product excellence and quality of service, which led to very high customer satisfaction. Opportunities for new client acquisition were discovered also with the launch of new EU subsidised instruments and new products in the areas of GTB, factor-ing and Private Banking.

In 2013 UniCredit Group successfully completed the integration of two institutions in Ukraine – PJSC “Ukrsotsbank” and PJSC “UniCredit Bank”. Since 2 December 2013 PJSC “Ukrsotsbank”, under the trademark UniCredit Bank, is the only bank representing UniCredit Group in Ukraine.

As of 31 December 2013, total assets of the newly integrated UniCredit Bank amounted to 43 billion Ukrainian hryvnias. The deposit base of the integrated bank grew by 6% y /y, while total loans increased by 2% y /y compared to the combined balance sheets of both banks as of the end of 2012. As of 31 December 2013, the net loans to deposit ratio of the inte-grated bank totalled 130% against 141% of the combined ratio at the beginning of 2013.

The integrated branch network consists of 402 multifunctional outlets, four of which will serve Private Banking clients. The number of the bank’s full-time employees after integration totalled 6,143. The noteworthy achievement of the integration was the smooth migration of UniCredit Bank’s clients to the joint bank. As a result, the total number of the bank’s corporate business clients reached 6,285, while the number of retail clients exceeded 1 million. The number of SME business clients totalled 60,000.

Besides the integration process, the bank’s commercial activi-ties in 2013 focused on strengthening the market position and on maintaining the bank’s status as the leading international bank in Ukraine. The Retail Division continued to optimise its branch network, with a stronger focus on innovations and expanding Internet and mobile banking features. The customer base kept growing and more companies signed up for the bank’s salary projects, resulting in over 400,000 salary cards clients. Growth of non-lending operations like trade finance, cash management, factoring and transactional services boosted fee and commission income by 6% y /y, while salary projects and cash collection services supported the bank’s Hryvnia liquidity. In a still challenging market environment the bank increased loan loss provisions, which led to an improvement in the coverage ratio of non-performing loans.


Management Report


Income statement of the consolidated banking subsidiaries in CEE 1)

(€ million)

SlovEniA BUlGARiA RomAniA

2013 2012 2013 2012 2013 2012

Net interest 48 55 239 227 186 169Dividends and income from equity investments 0 2 1 1 0 0Net fee and commission income 26 23 91 84 66 61Net trading income 1 2 22 33 85 59Net other operating income/expenses 0 0 6 3 0 2operating income 76 82 359 348 337 291operating costs –43 –43 –138 –139 –167 –152operating profit 33 39 221 209 170 139Net write-downs of loans –60 –30 –117 –81 –174 – 92net operating profit –27 9 105 127 –4 47Provisions for risks and charges 0 0 –5 3 –1 –1Integration/ restructuring costs 0 0 0 0 0 0Net income from investments –25 –26 1 1 –2 0Profit before tax –53 –17 100 131 –7 46

Customer loans (end of period) 1,895 2,256 4,613 4,501 3,771 3,751Customer deposits and debt securities in issue (end of period) 1,283 1,231 4,428 4,199 3,492 3,036

Exchange rate (period average) 1.0000 1.0000 1.9558 1.9558 4.41899 4.45931 Appreciation/depreciation against the euro 0.0% 0.0% +0.9%

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

(€ million)

CEE BUSinESS SEGmEnT 2) CZECH REPUBliC, SlovAKiA HUnGARY

2013 2012 2013 2012 2013 2012

Net interest 3,091 3,032 313 322 200 217Dividends and income from equity investments 13 16 1 2 0 1Net fee and commission income 1,040 958 128 115 107 60Net trading income 705 531 90 68 36 17Net other operating income/expenses 80 93 1 1 3 –22operating income 4,929 4,630 533 508 346 272operating costs –2,162 –2,075 –265 –276 –218 –146operating profit 2,767 2,555 267 232 129 126Net write-downs of loans –1,222 –761 – 99 –75 –89 –35net operating profit 1,545 1,794 169 157 40 91Provisions for risks and charges –40 –63 0 2 –3 –2Integration/ restructuring costs –32 –1 –17 –1 –8 0

Net income from investments 169 –8 –3 4 –1 1Profit before tax 1,641 1,722 149 162 27 90

Customer loans (end of period) 69,170 68,051 10,563 10,254 3,065 3,300Customer deposits and debt securities in issue (end of period) 63,615 62,486 12,736 12,055 3,620 3,524

Exchange rate (period average) 103.95 3) 100.00 25.9797 25.1491 296.873 289.249 Appreciation/depreciation against the euro –3.8% –3.2% –2.6%


(€ million)

TURKEY 4) RUSSiA BAlTiCS

2013 2012 2013 2012 2013 2012

Net interest 732 778 660 583 8 15Dividends and income from equity investments 2 3 5 3 0 0Net fee and commission income 323 325 129 118 1 2Net trading income 143 86 269 199 1 2Net other operating income/expenses 21 45 10 –1 –3 0operating income 1,221 1,237 1,074 901 8 19operating costs –505 –518 –291 –282 – 9 –14operating profit 716 719 783 619 –2 5Net write-downs of loans –156 –147 –77 –67 –4 –4net operating profit 560 572 705 553 –5 1Provisions for risks and charges –29 –66 –1 0 0 0Integration/ restructuring costs 0 0 0 0 –6 0

Net income from investments 228 6 3 0 0 0Profit before tax 758 512 707 553 –11 1

Customer loans (end of period) 14,669 14,436 12,049 12,462 123 603Customer deposits and debt securities in issue (end of period) 14,012 13,734 12,796 13,504 0 397

Exchange rate (period average) 2.53354 2.31354 42.337 39.9262 0.701463 5) 0.69727 Appreciation/depreciation against the euro –8.6% –5.7% –0.6%

(€ million)

CRoATiA BoSniA SERBiA

2013 2012 2013 2012 2013 2012

Net interest 325 348 94 90 88 81Dividends and income from equity investments 5 5 0 0 0 0Net fee and commission income 118 118 34 33 17 16Net trading income 49 41 6 5 10 11Net other operating income/expenses 45 44 –1 1 0 –1operating income 542 556 133 129 115 108operating costs –250 –251 –76 –75 –42 –39operating profit 292 305 57 53 73 68Net write-downs of loans –186 –151 –15 –16 –42 –26net operating profit 106 154 42 37 31 42Provisions for risks and charges 0 –1 0 1 0 0Integration/ restructuring costs 0 0 0 0 0 0Net income from investments –1 6 0 0 0 0Profit before tax 105 160 42 38 31 42

Customer loans (end of period) 9,518 9,302 1,526 1,477 1,266 1,357Customer deposits and debt securities in issue (end of period) 8,463 8,272 1,675 1,665 907 900

Exchange rate (period average) 7.57862 7.52167 1.9558 1.9558 113.087 113.036 Appreciation/depreciation against the euro –0.8% 0.0% –0.0%

4) pro quota / 5) Latvian lat (LVL).



Management Report

Economic scenario � In 2013 the global economy started to recover later than expected, but recovery is gaining momentum in early 2014. The global Purchasing Managers’ Index (JPMorgan global Manufacturing PMI) was recently well above the growth threshold, matching the level at the beginning of 2011. World trade is also growing notice-ably, and the global leading indicator of UniCredit Research is sig-nalling that this process will intensify over the next 12 to 18 months. The acceleration of growth in the coming two years will originate in the industrial countries. In contrast to the basic situation a year ago, the indicators for all regions are now pointing upwards. It seems that the expansionary monetary policies pursued over the past years are gradually taking effect now that the burdens resulting from the crisis have been removed, the financial position of private households is improving and the restrictive fiscal policy impact is easing off. Emerging markets, on the other hand, are experiencing a phase of consolidation and a reorientation towards sustainable growth models. While economic growth in these markets, at about 5½%, is still higher than in the industrial countries, the doubling of the rate of growth in the industrial countries from over 1% to more than 2% is equally significant. The expansion of world output will rise from 3% in 2013 to 3.7% in 2014, continuing to increase slightly in 2015 (+3.9%).

� The European economy has so far coped well with the euro crisis, initiating trend-setting reforms such as strengthening the Maastricht process or establishing the banking union – and now it is releasing the brakes. After shrinking by an average of about ½% in the past two years, with wide divergence among the various markets, the European countries are now again moving forward in the same direction. Overall, our economists forecast real growth of 1.5% for 2014 and 1.8% for 2015, levels which represent the upper limit of the expected range. Yet this scenario is significantly lower than the rates of expansion at which the economy emerged from five major financial crises in the post-war period. For the first time in many years, domestic demand will take up the stimulus provided by world trade to drive growth, in the form of investment in equipment which has been postponed for a long time. Companies’ productivity, profits and financing terms have improved. Moreover, in the period from 2010 to 2013, most countries in the euro area reduced their struc-tural budget deficits by more than three percentage points. The con-solidation requirement for 2014 is as low as 0.3% of GDP. This and the very low rate of inflation should benefit private consumption, though the increase will remain very moderate in view of the labour market situation. With an increase of 2½% in its GDP, Germany will remain the engine of growth, pulling with it the peripheral countries via intra-EU trade thanks to their improved competitiveness on pric-ing. We expect that in 2014/2015, Italy and Spain will achieve real growth of 0.7%/1.4% and 0.8%/1.4%, respectively.

In 2014, the ECB will again do all it can to ensure the supply of liquidity and reactivate the transmission mechanism to the entire euro area. It will probably take unconventional measures for this purpose in the near future. One of the possibilities is a further long-term tender, which could be linked to banks’ lending activities. This new liquidity should contribute to shielding the euro area from the tightening of financing conditions imported from the US (and triggered by the Fed), thus helping primarily South European banks to meet growing credit demand on reasonable terms. We do not expect interest rates to change in 2014, neither down (despite speculation about a negative deposit rate, whose disadvantages outweigh any advantages in our view) nor up. The ECB will proba-bly leave its current forward guidance unchanged throughout 2014. This should help to restrict the contagion effect resulting from the Fed’s tapering of securities purchases. Our base scenario for the ECB’s key interest rate envisages an initial increase of one-quarter of a percentage point to occur not before mid-2015; the long-term interest rate (10-year benchmark yield) may partly decouple from US interest rate movements, reaching 2.5% at the end of 2014 and not exceeding 3% until the middle of 2015 while the TED spread will widen to 130bp. Nevertheless, we see the euro firmer, all the more so as the euro is regaining its previous status in cen-tral banks’ portfolios.

� The Austrian economy will strongly benefit from Europe’s more favourable economic environment in the coming two years, not only from growth in Germany (+2.5% in both years) but also from recovery in Italy (+0.7%/+1.3%) and Central and Eastern Europe (+2.1%/+2.5%). Results of the Bank Austria Purchasing Manag-ers’ Index survey, climbing to 53 points around the turn of the year, showed optimistic expectations. The Bank Austria Business Indicator confirmed the upward trend in the past few months and recently attained the highest level since the middle of 2011. On a weighted average of Austria’s trading partners, business sentiment has visibly improved and this has had a favourable effect on Austrian compa-nies; both index components already exceed the multi-year aver-ages. While the recovery of export markets is kick-starting the Austrian economy, domestic demand will ultimately again become the main driver of growth, accounting for three-quarters of the increase. In contrast to the previous year, the economy benefits in the early part of 2014 from a growth momentum of +0.5% achieved in the final quarter of 2013 and this provides a strong base. We expect real GDP growth to rise from 0.3% to 2.0% in 2014, with a further slight acceleration in 2015. Industrial output, which more or less stagnated in 2013 (+0.6%), will accelerate as the cur-rent year progresses and may reach an average 4% in 2014.

Investment and consumption are picking up in line with growing export demand. As companies carry out replacement and expansion investment projects which have so far been postponed, the invest-

Outlook


ment tailback will be gradually resolved in the coming months. A strong internal financing capacity and continued favourable financing terms and conditions will provide essential support in this development. We expect a turnaround in investment in equipment, from a decline of 2.5% to growth of almost 8% in 2014. Investment in construction will also increase moderately (+1.7%/+1.9%). Private consumption, which fell in 2013, is expected to rise slightly, by 0.7% and 0.8%, respectively, in the coming years. The moderate increase in energy prices will be one of the factors contributing to this growth; we see the price of crude oil at a level below 106 US$/bl, also as a result of the relaxation of the Iran embargo. Demand will translate into growing pressure on prices (CPI) in the course of 2014 and the agreed measures to raise taxes and levies will also push up prices. Nevertheless, the inflation rate in Austria will remain below 2% in 2014 and 2015. Employment will continue to grow in the period to 2015 (+1.2% annually) and the unemployment rate will not decline until later in this period (2014: 5.0%, 2015: 4.7%), reflecting an increase in the labour supply. Disposable incomes will grow more strongly than in 2013; as wage increases will be more or less stable, growth will mainly come from investment income, which will rise again after declining in the past year. The savings ratio, which dropped signifi-cantly in the recent past, will consequently stabilise (from 6.5% to 7.7% in 2014 and 7.0% in 2015).

We do not expect any major changes in demand for commercial banking products and services. The longer-term trends in this industry are largely determined by excess liquidity and the interest rate environment, which is close to zero. There are still higher-yield-ing investments which were made in the past and are now matur-ing. The strong growth of deposits held with banks by private households weakened noticeably towards the end of 2013, and foreseeable interest rate trends hardly offer attractive replacements. The switch from deleveraging and debt reduction to expansion and borrowing will proceed slowly as household incomes grow only moderately. The usual time lag in response will also be a factor: growth of corporate lending has traditionally followed economic trends with a time lag of about three quarters. In 2013, markets anticipated a significant portion of economic and earnings trends, and previous investment favourites (BRIC) lost much of their attrac-tion. We nevertheless expect investors’ risk appetite to grow. For this reason, and because of the modest prospects offered by longer-term bonds when interest rates start to rise, investors are likely to remain interested in real estate and also in equities. Banks themselves will continue to face difficult market conditions in 2014 and 2015: while the yield curve in the base scenario will gradually but steadily steepen, enabling banks to generate more income from maturity transformation, uncertainty will need to be overcome in connection with asset quality reviews and stress tests, the related measures to tap capital markets, and regulatory and fiscal burdens.

� Countries within the perimeter of our operations in Central and Eastern Europe (CEE)*) will achieve real GDP growth of 1.9% in 2014 and 2.4% in 2015. Growth will be driven by industrial out-put, which increased by over 5% in 2013. This performance, which is rather moderate by CEE standards, reflects a change in growth drivers. As in previous years, our broadly diversified pres-ence enables us to balance out heterogeneous developments: while the four Central European countries benefit the most from recovery in nearby Western Europe, with the prospect of achieving a pronounced turnaround – driven by industry – from stagnation (–0.4%) to growth of 2.2% (and 2.6% in the subsequent year), expansion in SEE will be less pronounced, at about 1½%, in the coming two years. This compares with a slowdown in Russia and Turkey, the previous growth drivers, where the economic momen-tum will weaken by about one-half to 1½% in 2014 and recover to about 2½% in 2015. While CEE will remain a growth market overall, the high growth rates seen in years before the financial crisis will not return.

The upswing in the industrial sector in the CEE/EU countries (with the exception of Croatia) will continue in 2014. Close links in the manufacturing sector will be further intensified with direct invest-ment (including reinvested profits). As in Western Europe, restraint with regard to investment projects may be gradually resolved. Following strict budget consolidation in the past years, governments now have more leeway for expansionary measures. With various elections forthcoming, pressure is increasing to use such leeway at least up to the budgetary limits set under the Maastricht rules. Monetary conditions and resistance to potential external shocks have also improved in those CEE countries which are EU member states. In various countries the rate of inflation is below the central bank’s target level and will rise only slowly. However, the phase of interest rate reductions will probably end in the second half of 2014. Credit expansion in CEE countries which are EU member states should accelerate at a moderate pace, thanks to stronger demand from companies, primarily in the Czech Republic and in Slovakia, but stagnation in Hungary and a continued decline in Romania and Slovenia (restructuring) will curb this development in 2014. Funds from EU assistance schemes are now being better absorbed in these countries. Banks will probably no longer reduce their foreign liabilities to any significant extent as international liquidity will remain abundant, not least as a result of the ECB’s policy. Under the base scenario, the CEE/EU countries should also record inflows of portfolio investments after the strong outflows seen in the recent past; however, there will be no boom in such

*) Bank Austria perimeter without Poland (under management responsibility of UniCredit), without the Baltic countries, without Kazakhstan. The perimeter includes Central Europe (CE) = the Czech Republic, Slovakia, Hungary and Slovenia; South-East Europe (SEE) = Romania, Bulgaria, Croatia, Bosnia and Herzegovina, and Serbia; Russia, Ukraine; Turkey.



Management Report

inflows. Risks are associated with the banking sectors in Slovenia, where the restructuring process has been initiated, and in Croatia, where the economy is in its sixth year of recession. We expect that the other countries in the Western Balkans will concentrate on reforms which they have to carry out in response to demands by international lenders and to implement IMF conditionality.

Developments in Turkey, both in the real economy and in mone-tary terms, are moving in the opposite direction to those in the EU member states and will pause in 2014. Our economists see a decline in economic growth from a strong 4.2% in 2013 to nil in 2014. Growth in 2015 will be 2.8%, lagging behind the levels achieved in the boom years of 2010 and 2011 (+9.2% and +8.8%, respectively). Given the country’s external vulnerability, Turkey will need to take restrictive measures with a view to dampening domestic demand. Thanks to strong exports and a weaker import pull, the current account deficit will decline from 6.8% of GDP in 2013 to 3.8% in 2014 and 2.6% in 2015. Financing this deficit has become difficult as portfolio inflows have ceased and hard-currency transfers have declined. A continued downward spiral of currency depreciation would result in even stronger inflation than the forecast annual 6½%. The adjustment process involves higher funding costs for the local banking sector (including the minimum reserve policy and FX deposits) and a mix of stronger foreign exchange market inter-vention and sustainable positive real interest rates. Moreover, measures taken in 2013 to dampen consumer loans (credit card boom) are taking effect. Private consumption and investment will therefore decline by about 2% in 2014 (and rise only slightly in 2015). After the boom years with credit expansion of 30%, the trend has slowed already and lending volume will probably grow by 18% in 2014 after 27% in 2013; at this rate, credit expansion is moving closer to deposit growth in Turkey, too. But the impaired loans ratio of about 3% is still the lowest in any of the CEE coun-tries within our perimeter. As can be seen from sensitivity to the Fed tapering discussion, the principal risk in this scenario in view of a shortage of foreign exchange is a renewed turnaround in capital flows, resulting in a further round of currency depreciation. Political unrest is also a new phenomenon. With local authority elections due to be held in March 2014, presidential elections scheduled for August 2014 and parliamentary elections probably taking place in 2015, fiscal policy is likely to be eased.

In Russia, the past year marked the beginning of a long period of adjustment. Progress in fighting inflation (central bank target: 5–6%, declining to 4.5% in 2015), more flexibility in rouble exchange rate management, and budget consolidation (including debt ceilings) are important steps forward. But as long as the country’s economy is focused on oil exports to such a great extent, these measures will not suffice to generate stronger

sustainable growth. The economy is therefore expected to grow by about 2% in 2014 and 2015 (after 1.3% in the previous year). With the creeping capital flight which started in 2009, the econo-my’s dependence on foreign capital has been rising, despite the export revenues and substantial holdings of foreign exchange. The difference between the current account surplus and domestic capital outflows is progressively moving into negative territory. A more flexible exchange rate regime with the prospect of floating may serve as a buffer in the event of a further decline in oil mar-ket prices. But significant currency depreciation involves the risk of continued capital outflows. While credit expansion in consumer loans by local banks is close to overheating, the growth rate of corporate loans is only one half of the figure for retail loans. Overall we expect credit growth to weaken slightly, to 15%, in 2014. As in the past few years, the impaired loans ratio in Russia should remain between 14% and 15%, slightly higher than the CEE average of just under 12%.

The political crisis in Ukraine came to a head in February, leading to political upheaval which has recently assumed geopolitical dimensions in the region. Country risk premiums (CDS) exceed 1,000 bp. In response to capital flight and dwindling currency reserves, the currency had to be left to float and depreciated by 26% by the editorial close of this report. The crisis in Ukraine is currently the major risk factor for CEE. A further escalation could also lead to disturbances in Ukraine’s neighbouring countries, especially if the already high political and economic risks continue to increase. However, as economic trends in large neighbouring countries have stabilised, repercussions should remain limited.

➔ According to the forecasts of our economists, the CEE coun-tries within the Bank Austria perimeter (GDP-weighted) will achieve real growth of 1.5% in the current year and 2.3% in 2015. The Bank Austria market including Austria will expand at the same rates (see table). On this basis, continued strong monetary expansion in CEE (including higher inflation) determines nominal GDP growth. Since 2010, after the boom years came to an end, credit expansion has been moving closely in line with these developments and it will therefore continue to grow. Additional impetus to growth of volume and transactions in commercial banking business is provided in these countries by the processes of modernisation and advancing to higher levels of maturity, as well as increasing market penetra-tion with banking products.

Banks in CEE are shifting to a new, more self-sustaining busi-ness model. More sustainable funding from local sources is steadily gaining in importance. Credit expansion is being brought more into line with the accrual of deposits. Without Russia and Turkey, loans in CEE increased by 20% from 2008 to 2013, while deposits grew by 34% (adjusted for exchange rate movements).


In the pre-Lehman boom years, the rate of credit expansion (2005–2008: +113%) was double the rate of deposit growth (+55%). Subsequently, the loans-to-deposits ratio improved from 114% in 2008 to 102% in 2013.

While facing many challenges, the CEE banking sector has main-tained its high level of profitability, which is far higher than in Western Europe: return on assets (ROA) generated by CEE banks is forecast at an average 1.5% for 2014. Figures for the various countries range from 2.0% in Turkey and 1.8% in Russia to 1.4% in the Czech Republic and 1.1% in Slovakia all the way to 0.1% in Romania and Hungary (Slovenia is a special case with –2.1%); this compares with 0.3% for German banks (for 2013, according to the IMF).

Outlook for Bank Austria’s performance� The bank’s operating performance will depend on whether the expected economic recovery will be sufficiently sustainable while overcoming disruptions to enable credit demand to get underway. The time lag between an economic upturn and a revival of credit demand is normally two to three quarters. It will therefore still be some time before we see a discernible recovery of volumes in Austria, not least because the business sector still has a sufficient liquidity cushion and private individuals still tend to reduce their debt. In Austria, deposits will rise only slowly, especially as invested funds will be increasingly drawn. In CEE, the prospects for stronger credit growth in the closely integrated EU countries are good, while the dynamic upturn in Russia and Turkey has already weakened. In addition to the unpredictable crisis in Ukraine and the region of the Black Sea, the main risks include a renewed withdrawal of portfolio investments followed by strong currency depreciation.

net interest will still be impacted by the low interest rate environ-ment in 2014. We believe key interest rates will remain unchanged. Some CEE countries may see further convergence of interest rates as a result of the sharp decline in inflation. The divergent central bank policies between the US and the euro area may lead to some disruption and to a slight upward slope in the yield curve in 2014. Any revenue generated from maturity transformation will remain insignificant, however. net fees and commissions recovered visibly in the year to date from 2013, a trend which should con-tinue as foreign trade gathers momentum and securities business picks up again. Thanks to our undisputed position as market leader we can also assist and closely advise large companies with their equity capital measures and long-term finance requirements, and help medium-sized companies access capital markets as soon as they no longer exercise restraint. On this basis, we anticipate an improvement in operating income in 2014.

We expect a number of benefits from the implementation of our new business model, which includes the Bank Austria 2020 initia-tive described earlier on in the report: first, it will give an impetus to revenue and help us to expand market share; second, it will result in significant efficiency enhancement over the medium term while lowering the structurally high cost / income ratio, primarily in retail business with Austrian customers. With the innovative Smart-Banking project we are taking advantage of the trends in consumer behaviour and digitalisation; our differentiated branch strategy is closely geared to meeting customers’ specific needs, both as a basic services bank and as an advisory bank. These initiatives, with their strong visibility, support our efforts in winning new customers and have a positive additional effect of significant efficiency enhancement. We will speed up the related change under the Bank Austria 2020 project with models to reduce the number of

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

2011 2012 2013e 2014p 2015p

World (imF, PPP) +3.7 +3.1 +3.0 +3.7 +3.9China +9.3 +7.8 +7.7 +7.3 +7.0USA +1.8 +2.8 +1.9 +2.9 +2.5Euro area +1.5 –0.6 –0.4 +1.5 +1.8…Austria +2.6 +0.9 +0.3 +2.0 +2.1Czech Republic +1.8 –0.9 –1.1 +2.5 +3.0Slovakia +3.2 +1.8 +0.9 +2.9 +3.6Hungary +1.6 –1.7 +1.1 +2.5 +2.0Slovenia +0.6 –2.5 –2.4 –0.9 +0.7Central Europe (CE) +1.9 –0.8 –0.2 +2.2 +2.6Poland +4.5 +1.9 +1.6 +2.9 +3.2Bulgaria +1.8 +0.8 +0.5 +1.5 +2.1Romania +2.2 +0.7 +2.6 +2.1 +2.4Croatia +0.0 –2.0 –0.8 –1.0 +1.0Bosnia and Herzegovina +1.0 –0.9 +0.9 +1.5 +2.5Serbia +1.6 –1.7 +1.8 +1.6 +2.5South-East Europe (SEE) +1.6 –0.1 +1.5 +1.4 +2.1Russia +4.3 +3.4 +1.3 +2.0 +2.8Turkey +8.8 +2.2 +4.2 +0.0 +2.3Russia and Turkey +5.6 +3.0 +2.2 +1.4 +2.3Ukraine +5.2 +0.2 –1.4

CEE1), GDP-weighted +4.7 +2.1 +1.6 +1.5 +2.3CEE1), Bank Austria-weighted 2) +4.0 +0.7 +1.3 +1.0 +2.2

Bank Austria market 3), GDP-weighted +4.5 +2.0 +1.5 +1.5 +2.3Bank Austria market 3), Bank Austria-weighted 2) +3.5 +0.8 +1.0 +1.3 +2.2

1) Without Poland, without the Baltic countries and without Kazakhstan. / 2) Bank Austria market = Austria and CEE. / 3) Bank Austria-weighted = weighted by contribution of Bank Austria’s subsidiaries to operating income in CEE.Source: UniCredit Research (world: IMF/DIW). UniCredit forecasts for CEE: annual forecast at the end of December 2013.



Management Report

employees so that the effects resulting from lower costs can soon be realised. Similar projects are underway in many CEE countries. As regards the trend in the charge for loan loss provisions, it is encouraging that additions to impaired loans have slowed mark-edly. The process of working out the impaired loans that have already been classified as such is likely to lag some way behind the business cycle and may still require some time. Overall, we continue to expect a stable operating performance.

� Within non-operating items, the recognition of an impairment charge reducing goodwill to nil, a measure taken on the basis of goodwill impairment tests, led to a net loss in 2013. This means that in this context, there will be no further burdens weighing on results. We also took initiatives to reduce risk and to optimise capital allocation. The decision to classify our banking subsidiary in Ukraine as held for sale is consistent with our withdrawal from Kazakhstan, which has been concluded, and in line with our policy of focusing on defined core countries.

Realising the intended disposal may involve further expenses in 2014; in this context, apart from the actual results of the sale, additional factors such as exchange rate movements will have an influence. Further currency depreciation would impact both current profit or loss and equity capital. After the far-reaching adjustment measures we are again focusing on the bank’s sound operating performance. In the medium term, after completing the initiated structural improvements to optimise revenues and risk, we will be able to use growth opportunities with a lean balance sheet and a

focused business model. In particular, our capital generation capa-bilities have improved. On this basis, we are getting ready to meet the regulatory requirements, which will become more stringent. In the forthcoming years we will be focusing on further strengthening the capital base for further organic growth by continuing to concen-trate on core business and mitigating risk, as well as by retaining future profits.

� In response to the financial market crisis, the regulatory envi-ronment, at EU level, has certainly made significant progress in stabilising the global financial sector. CRD IV, the EU Directive implementing the Basel 3 package, came into force as of 1 Janu-ary 2014. In this connection, new instruments relating to liquidity ratios and funding requirements, such as the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR), still have to be tested and calibrated. In October 2013, the Council of the Euro-pean Union adopted the Single Supervisory Mechanism, whereby the ECB will be empowered to supervise large banks in the euro area as from the end of 2014. This measure constitutes the first central component of the European banking union. The assumption of the ECB’s new role as the banking supervisory authority will be preceded by a scrutiny of the balance sheets of about 130 EU banks and the next stress test by the European Banking Authority in the second quarter of 2014. Bank Austria has been preparing itself for this new environment for some time, and with its sound capital base and good liquidity position it is well placed to meet the new requirements. Definitions such as those relating to the catego-ries of impaired loans moreover comply with the strictest criteria.


Vienna, 5 March 2014

The Management Board

Willibald Cernko Gianni Franco Papa CEO Support Services CEE Banking Division (Chief Executive Officer) (Deputy CEO)

Helmut Bernkopf Francesco Giordano Dieter Hengl Commercial Banking Division CFO Finance Corporate & Investment (Retail & Corporates) Banking Division

Jürgen Kullnigg Doris Tomanek Robert Zadrazil CRO Risk Management Human Resources Austria & CEE Private Banking Division


in accordance with International Financial Reporting Standards (IFRSs)

Consolidated Financial Statements

Consolidated Income Statement for the year ended 31 December 2013 60

Income statement 60

Consolidated Statement of Comprehensive Income 61Statement of comprehensive income 61Earnings per share 61

Statement of Financial Position at 31 December 2013 62

Statement of Changes in Equity 63

Statement of Cash Flows 64


Consolidated Financial Statements in accordance with IFRSs

Income statement for the year ended 31 December 2013 (€ million)

Notes 2013 2012

Interest income and similar revenues B.1 7,508 8,316Interest expense and similar charges B.1 –3,376 –4,206Net interest margin 4,132 4,110Fee and commission income B.2 2,161 2,033Fee and commission expense B.2 –463 –497Net fees and commissions 1,698 1,536Dividend income and similar revenue B.3 25 30Gains and losses on financial assets and liabilities held for trading B.4 565 539Fair value adjustments in hedge accounting B.5 12 –8Gains and losses on disposal of: B.6 321 237

a) loans 2 –5b) available-for-sale financial assets 305 90c) held-to-maturity investments 3 25d) financial liabilities 11 126

Gains and losses on financial assets / liabilities at fair value through profit or loss B.7 37 –5OperatiNg iNcOme 6,791 6,438Impairment losses on: B.8 –1,500 –1,041

a) loans –1,416 – 976b) available-for-sale financial assets –56 –63c) held-to-maturity investments – –16d) other financial assets –28 14

Net income from financial activities 5,290 5,397Premiums earned (net) B.9 83 161Other income (net) from insurance activities B.10 –65 –123Net income from financial and insurance activities 5,308 5,435Administrative costs: –3,697 –3,513

a) staff expense B.11 –1,992 –1,914b) other administrative expense B.12 –1,705 –1,599

Net provisions for risks and charges B.13 –56 –332Impairment /write-backs on property, plant and equipment B.14 –215 –175Impairment /write-backs on intangible assets B.15 –112 – 98Other net operating income B.16 94 109OperatiNg cOsts –3,986 –4,009Profit (loss) of associates B.17 –135 –185Gains and losses on tangible and intangible assets measured at fair value –1 –Impairment of goodwill –1,957 –34Gains and losses on disposal of investments B.18 66 19tOtal prOfit Or lOss befOre tax frOm cONtiNuiNg OperatiONs –704 1,226Tax expense (income) related to profit or loss from continuing operations B.19 –534 –326total profit or loss after tax from continuing operations –1,237 900Total profit or loss after tax from discontinued operations B.20 –392 –440Net prOfit Or lOss fOr the year –1,629 460Attributable to:

Owners of the parent company from continuing operations –1,263 863 from discontinued operations –340 –440Non-controlling interests from continuing operations 25 38 from discontinued operations –52 –Earnings per share (in €, basic and diluted) from continuing operations –5.46 3.73 from discontinued operations –1.47 –1.90

of the Bank Austria Group for the year ended 31 December 2013

Consolidated Income Statement



Consolidated Statement of Comprehensive Income

Statement of comprehensive income (€ million)

1 jaN. –31 dec. 2013

1 jaN. –31 dec. 2012

total profit or loss after tax from continuing operations –1,237 900total profit or loss after tax from discontinued operations –392 –440Net prOfit Or lOss fOr the year –1,629 460Other comprehensive incomeitems that will not be reclassified to profit or loss –17 –690

Actuarial gains or (–) losses on defined benefit plans –23 – 921Income tax relating to items that will not be reclassified 6 230

items that may be reclassified to profit or loss –1,662 794Foreign currency translation –1,033 178

Translation gains or (–) losses taken to equity –1,324 178Transferred to profit or loss 291 –

Cash flow hedges [effective portion] –89 –136Valuation gains or (–) losses taken to equity –46 –140Transferred to profit or loss –43 3

Available-for-sale financial assets –573 936Valuation gains or (–) losses taken to equity –437 998Transferred to profit or loss –135 –63

Non-current assets and disposal groups held for sale –4 –18Valuation gains or (–) losses taken to equity –5 –18Transferred to profit or loss 1 –

Share of other recognised income and expense of investments in subsidiaries and joint ventures –106 2Income tax relating to items that may be reclassified to profit or (–) loss 144 –167

Gains/ losses on assets available for sale (available-for-sale reserve) 112 –192Gains / losses on assets available for sale (available-for-sale reserve) of associates 2 – 9Gains / losses on cash flow hedges (cash flow hedge reserve) 34 33Gains / losses on cash flow hedges (cash flow hedge reserve) of associates –5 1

tOtal cOmpreheNsive iNcOme fOr the periOd –3,304 582comprehensive income after tax from continuing operations –3,029 1,040comprehensive income after tax from discontinued operations –274 –458

Attributable to non-controlling interests from continuing operations –27 –38 from discontinued operations 54 –Attributable to owners of the parent company from continuing operations –3,002 1,077 from discontinued operations –328 –458

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

1 jaN. –31 dec. 2013

1 jaN. –31 dec. 2012

Earnings per share from comprehensive income after tax from continuing operations –13.10 4.50Earnings per share from comprehensive income after tax from discontinued operations –1.19 –1.98



of the Bank Austria Group at 31 December 2013

Statement of Financial Position

Assets (€ million)

Notes 31 dec. 2013 31 dec. 2012

Cash and cash balances C.1 2,663 2,754Financial assets held for trading C.2 2,434 2,855Financial assets at fair value through profit or loss C.3 343 426Available-for-sale financial assets C.4 21,502 21,063Held-to-maturity investments C.5 1,586 1,895Loans and receivables with banks C.6 24,967 28,112Loans and receivables with customers C.7 129,121 132,424Hedging derivatives C.8 2,913 4,125Changes in fair value of portfolio hedged items (+/–) C.9 33 54Investments in associates and joint ventures C.10 2,032 2,348Insurance reserves attributable to reinsurers – 1Property, plant and equipment C.11 2,208 2,509

of which held for investment 866 782Intangible assets C.12 219 2,459

of which goodwill – 2,127Tax assets 1,061 1,336

a) current tax assets 73 52b) deferred tax assets C.13 988 1,284

Non-current assets and disposal groups classified as held for sale C.14 3,714 3,788Other assets C.15 1,414 1,446tOtal assets 196,210 207,596

Liabilities and equity (€ million)

Notes 31 dec. 2013 31 dec. 2012

Deposits from banks C.16 27,020 31,061Deposits from customers C.17 108,935 110,563Debt securities in issue C.18 29,049 28,063Financial liabilities held for trading C.19 1,625 2,196Financial liabilities at fair value through profit or loss C.20 788 1,152Hedging derivatives C.21 2,273 2,989Changes in fair value of portfolio hedged items (+/–) – –Tax liabilities 590 856

a) current tax liabilities 25 88b) deferred tax liabilities C.22 565 768

Liabilities included in disposal groups classified as held for sale C.23 2,242 3,506Other liabilities C.24 3,481 3,428Provisions for risks and charges C.25 5,155 5,389

a) post-retirement benefit obligations 4,647 4,600b) other provisions 507 789

Insurance reserves – 201Equity C.26 15,052 18,192

of which non-controlling interests (+/–) 485 530tOtal liabilities aNd equity 196,210 207,596


Statement of Changes in Equity


(€ million)

subscribed capital

capital reserves

retaiNed earNiNgs

fOreigN curreNcy

traNslatiON

cash flOW hedge

reserve

available-fOr-sale reserve

cash flOW hedge aNd

afs reserve assOciates

actuarial lOsses iN

accOrdaNce With ias 19

share- hOlders’

equity

NON-cON-trOlliNg

iNterests equity

as at 1 january 2012 1,681 7,097 10,380 –1,898 348 149 11 –642 17,127 534 17,661Changes in the group of consolidated companies 0 –15 –15Shares in controlling companies 3 3 3Net profit or loss for the period 423 423 38 461Other comprehensive income 2 163 – 95 701 29 –690 109 0 109Dividend paid 0 –27 –27as at 31 dec. 2012 1,681 7,100 10,805 –1,735 253 850 40 –1,332 17,662 530 18,192

subscribed capital

capital reserves

retaiNed earNiNgs

fOreigN curreNcy

traNslatiON

cash flOW hedge

reserve

available-fOr-sale reserve

cash flOW hedge aNd

afs reserve assOciates

actuarial lOsses iN

accOrdaNce With ias 19

share- hOlders’

equity

NON-cON-trOlliNg

iNterests equity

as at 1 january 2013 1,681 7,100 10,805 –1,735 253 850 40 –1,332 17,662 530 18,192Changes in the group of consolidated companies 189 189Shares in controlling companies 4 4 0 4Net profit or loss for the period –1,603 –1,603 –27 –1,629Recognised income and expenses –106 –847 –74 –459 7 –17 –1,496 –185 –1,681Dividend paid 0 –22 –22Other changes *) –1,051 1,051 0 0as at 31 dec. 2013 1,681 6,052 10,147 –2,582 178 392 46 –1,349 14,567 485 15,052

*) Release of capital reserve pursuant to Section 229 (7) of the Austrian Business Code (UGB)



Statement of Cash Flows

(€ million)

2013 2012

Net prOfit Or lOss –1,629 460Non-cash items included in net profit, and adjustments to reconcile net profit to cash flows from operating activities

Depreciation, amortisation, net write-downs of loans, and changes in fair values 4,294 2,100Increase in staff-related provisions and other provisions 321 600Increase/decrease in other non-cash items –136 –335Interest income/ interest expenses from investing activities 113 –241Gains / losses on disposal of intangible assets, property, plant and equipment, and investments –339 –256

sub-tOtal 2,624 2,328Increase/decrease in operating assets and liabilities after adjustment for non-cash components

Financial assets held for trading 523 603Loans and receivables with banks and customers 1,079 –4,387Other asset items 498 – 938Financial liabilities held for trading –899 –250Deposits from banks and customers –2,921 7,110Debt securities in issue 1,796 –1,183Other liabilities items –1,255 833

cash flOWs frOm OperatiNg activities 1,445 4,115of which: cash flows from operating activities of discontinued operations 7 98

Proceeds from disposal ofinvestments 14,276 8,798property, plant and equipment 52 65

Payments for purchases ofinvestments –15,890 –12,677property, plant and equipment –385 –440

Proceeds from sales (less cash disposed of) of subsidiaries 416 6Payments for acquisition (less cash acquired) of subsidiaries –87 –Other changes 545 287cash flOWs frOm iNvestiNg activities –1,073 –3,961

of which: cash flows from investing activities of discontinued operations –12 59Proceeds from capital increase – –Dividends paid – –Subordinated liabilities and other financial activities (net) –542 –26cash flOWs frOm fiNaNciNg activities –542 –26

of which: cash flows from financing activities of discontinued operations –3 11cash aNd cash equivaleNts frOm cONtiNuiNg OperatiONs at eNd Of previOus periOd 2,754 2,921Cash and cash equivalents from discontinued operations at end of previous period 293 –cash aNd cash equivaleNts at eNd Of previOus periOd 3,046 2,921Cash flows from operating activities 1,445 4,115Cash flows from investing activities –1,073 –3,961Cash flows from financing activities –542 –26Effects of exchange rate changes –22 –3cash aNd cash equivaleNts at eNd Of periOd 2,854 3,046cash and cash equivalents from discontinued operations 191 293cash and cash equivalents from continuing operations 2,663 2,754payments for taxes, interest and dividendsIncome taxes paid from operating activities –360 –88Interest received from operating activities 7,033 8,034 from investing activities 946 1,133Interest paid from operating activities –2,700 –3,614 from investing activities – 932 – 942Dividends received from investing activities 62 60



Notes to the Consolidated Financial Statements

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

A – Accounting policies 69

B – Notes to the income statement 121

C – Notes to the statement of financial position 133

D – Segment reporting 151

E – Risk report 163

F – Additional disclosures 211

Concluding Remarks of the Management Board of UniCredit Bank Austria AG 227

Report of the Auditors 228

Report of the Supervisory Board for 2013 230


A – Accounting policies

A.1 – Information on the company 70

A.2 – Basis for the preparation of the financial statements 70

A.3 – Consolidation principles 71

A.4 – Application of amended and new IASs and IFRSs 73 A.4.1 – Effects arising from changes in accounting methods 73 A.4.2 – New and amended financial reporting standards not yet adopted by the Group 73

A.5 – Significant accounting policies 75 A.5.1 – Business Combinations 75 A.5.2 – Foreign currency translation 76 A.5.3 – Financial instruments 77

A.6 – Information on other financial statement line items 88 A.6.1 – Cash and cash equivalents 88 A.6.2 – Property, plant and equipment; investment property 88 A.6.3 – Intangible assets 89 A.6.4 – Non-current assets held for sale 90 A.6.5 – Income tax 90 A.6.6 – Other assets 91 A.6.7 – Deposits from banks/customers, debt securities in issue 91 A.6.8 – Insurance assets and liabilities 91 A.6.9 – Provisions for risks and charges and contingent liabilities 91 A.6.10 – Equity 94 A.6.11 – Net interest 94 A.6.12 – Fees and commissions 94 A.6.13 – Dividends 94 A.6.14 – Gains and losses on disposals of financial instruments 94 A.6.15 – Gains and losses on financial assets / liabilities at fair value through profit or loss 94 A.6.16 – Impairment losses on loans/ Impairment losses on other financial transactions 94 A.6.17 – Impairment /write-backs on property, plant and equipment and on intangible assets 95 A.6.18 – Profit (loss) of associates 95 A.6.19 – Gains and losses on disposal of investments 95

A.7 – Information on Fair Value 95 A.7.1 – General overview 95 A.7.2 – Fair value hierarchy 96 A.7.3 – Day One Profit /Loss 99 A.7.4 – Additional information on fair value 100 A.7.5 – Transfer between portfolios 106

A.8 – Impairment test 107

A.9 – Group of consolidated companies and changes in the group of consolidated companies of the Bank Austria Group in 2013 110



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

A.2 – Basis for the preparation of the financial statementsThe consolidated financial statements of Bank Austria for the year ended 31 December 2013 and the comparative information have been prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB), including the interpretation documents issued by the SIC and IFRIC, and endorsed by the European Commission up to 31 December 2013, pursuant to EU Regula-tion 1606/2002. The additional disclosure requirements according to Section 245a UGB (Austrian Business Code) and Section 59a of the Austrian Banking Act as well as the disclosure requirements specified in the Accounting Manual of UniCredit S. p. A., the ultimate parent company, required to be applied throughout the Group were taken into account in the preparation of the consolidated financial statements.

The following documents have been used to interpret and support the application of IFRS, even though they have not all been endorsed by the European Commission:• FrameworkforthePreparationandPresentationofFinancialStatementsissuedbytheIASBin2010;• ImplementationGuidance,BasisforConclusionsandanyotherdocumentspreparedbytheIASBortheIFRSInterpretationsCommitteesupplement-ingtheIFRS;

• ESMA(EuropeanSecuritiesandMarketsAuthority)andConsobdocumentsontheapplicationofspecificIFRSprovisions.• InterpretativedocumentsontheapplicationofIFRSinAustriapreparedbytheAustrianFinancialReportingandAdvisoryCommittee(AFRAC)

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

The consolidated financial statements are prepared in euros, the presentation currency of the Group. Unless indicated otherwise, all figures are in millions of euros (€).

These consolidated accounts have been prepared on the assumption that the business is a going concern in accordance with IAS 1, as there is no uncertainty as to the company’s ability to continue its business operations. The measurement criteria adopted are therefore consistent with this assumption and with the principles of accrual based accounting, the relevance and materiality of accounting information, and the prevalence of economic substance over legal form. These criteria have not changed with respect to the previous year.

Risk and uncertainty due to use of estimated figuresThe preparation of financial statements under IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting principles and the amounts of assets and liabilities and income and expenses reported in the consolidated financial statements, as well as the disclosure concerning contingent assets and liabilities. Estimates and related assumptions are based on previous experience and other factors considered reasonable under the circumstances and have been used to estimate the carrying values of assets and liabilities for which evidence of value is not readily available from other sources.

Valuation is particularly complex given the uncertainty in the macroeconomic and market environment, which is characterised by both the volatility in the financial parameters defined for the valuation process and signs of deterioration in credit quality.

The parameters and information used to check the above-mentioned values are therefore significantly affected by such factors, which could change rapidly in ways that are currently unforeseeable, such that further effects on future carrying amounts cannot be ruled out.

Estimates and assumptions are regularly reviewed. Any changes resulting from these reviews are recognised in the period in which these reviews are carried out, provided that the change only concerns that period. If the revision concerns both current and future periods, it is recognised accordingly in both current and future periods.

A – Accounting policies (CONTINuED)


Uncertainty affecting estimates is generally inherent in the measurement of: • fairvalueoffinancialinstrumentsnotlistedinactivemarkets;• loansandreceivables,investmentsand,ingeneral,anyotherfinancialassets / liabilities;• postemploymentbenefitobligationsandotheremployeebenefits;• provisionsforrisksandcharges,contingentliabilitiesandcontingentassets;• goodwillandotherintangibleassetsaswellas• deferredtaxassets.

This is because the measurement of these items is mainly dependent on both the evolution of socio-economic conditions and the performance of the financial markets, which affect interest rates, securities prices, actuarial assumptions and, more generally, the creditworthiness of borrowers and counterparties.

A more detailed description of the relevant estimates and assumptions used in the consolidated financial statements of the Bank Austria Group as well as quantitative sensitivity analyses are disclosed in detail in the relevant notes to the consolidated financial statements.

A.3 – Consolidation principlesThis section outlines the consolidation criteria and principles used to prepare the consolidated accounts at December 31, 2013

Consolidated AccountsThe financial information in the consolidated financial statements includes that of the parent company, UniCredit Bank Austria AG, together with its subsidiaries as at 31 December 2013.

Amounts in foreign currencies are converted at closing exchange rates in the balance sheet, whereas the average exchange rate for the year is used for the income statement.The accounts and the explanatory notes of the main consolidated subsidiaries prepared under IFRS are subject to audit by leading audit companies.

SubsidiariesSubsidiaries are entities in which:• Theparentcompanyowns,directlyorindirectlythroughsubsidiaries,morethanhalfofthevotingpowerunless,inexceptionalcircumstances,

it can be clearly demonstrated that such ownership does not constitute control.• Theparentcompanyownshalforlessofthevotingpower,buthas: – controlovermorethanhalfofthevotingrightsbyvirtueofanagreementwithotherinvestors; – powertodeterminethefinancialandoperatingpoliciesoftheentityunderastatuteoranagreement; – power to appoint or remove the majority of the members of the board of directors or equivalent governing body and the entity is managed by

thatboardorbody;or – power to cast the majority of votes at meetings of the board of directors or equivalent governing body and the entity is managed by that board

or body.

The existence and effect of potential voting rights that are currently exercisable or convertible, are considered when assessing whether an entity has the power to govern the financial and operating policies of another entity.

The list of subsidiaries also includes any special-purpose entities as required by SIC 12.Under the SIC 12 interpretation Bank Austria is required to consolidate special purpose entities for which, in substance, the majority of the risks and rewards incident to the activities of these special-purpose entities is attributable to the Bank or, in substance, the Bank controls the special purpose entities. An interest in the equity capital of the special-purpose entities is immaterial.

Equity interests held by third parties in a special-purpose entity consolidated by the Bank in accordance with SIC 12 are recognised under non-con-trolling interests.

The carrying amount of an ownership interest in a fully consolidated entity held by the parent company or another group company is eliminated – against the recognition of the assets and liabilities of the investee – as an offsetting entry to the corresponding portion of equity of the subsidiary due to the Group.

Intragroup balances, off-balance sheet transactions, income and expenses and gains / losses between consolidated companies are eliminated in full.




A subsidiary’s income and expenses are included in the consolidation from the date the parent acquires control. On disposal of a subsidiary, its income and expenses are consolidated up to the date of disposal, i. e., until the parent ceases to control the subsidiary. The difference between the proceeds from the disposal of the subsidiary and the carrying amount of its net assets is recognised in the item “Gains and losses on disposal of investments” in profit and loss for fully consolidated entities.

Minority interests are recognised in the consolidated balance sheet item “Non-controlling interests” separately from liabilities and parent share-holders’ equity. Minority interests in the profit or loss of the group are separately disclosed under the item “Non-controlling interests” of the consolidated income statement.

With respect to subsidiaries included in the scope of consolidation for the first time, the fair value of the price paid to obtain control of them is measured at the acquisition date.

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

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

AssociatesThese are entities over which an investor has significant influence and which are not subsidiaries or joint ventures. It is presumed that:• theinvestorhassignificantinfluenceiftheinvestorholds,directlyorindirectly,atleast20percentofthevotingpowerofaninvestee;• isabletoexercisesignificantinfluencethrough: – representationontheboardofdirectorsorequivalentgoverningbodyoftheinvestee; – participationinpolicy-makingprocess,includingparticipationindecisionsaboutdividendsorotherdistributions; – materialtransactionsbetweentheinvestorandtheinvestee; – interchangeofmanagerialpersonnel; – provision of essential technical information.

Investments in associates are recognised using the equity method. The carrying amount includes goodwill (less any impairment loss). The inves-tor’s share of the profit and loss of the investee after the date of acquisition is recognised in the item “Profit (Loss) of associates” in the income statement. Distributions received from an investee reduce the carrying amount of the investment.

Gains and losses on transactions between fully or proportionately consolidated entities and associates are eliminated according to the percent-age interest in the associate.

The changes in the revaluation reserves of associates, which are recorded as a contra item to changes in value of assets and liabilities that are relevant to this purpose, are reported separately in the Statement of Comprehensive Income.


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

A.4.1 – Effects arising from changes in accounting methodsExcept for the changes below, the accounting policies applied are consistent with those of the previous financial year.

New and amended financial reporting standards adopted in 2013The Group has adopted the following new standards and amendments to standards, with a date of initial application of 1 January 2013.

IFRS 13 Fair Value MeasurementThe standard became effective on 1 January 2013 and clarifies the definition of fair value as an exit price, which is defined as a price at which an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions and introduces more comprehensive disclosure requirements on fair value measurement. The change did not have a significant impact on the measurement of the group’s assets and liabilities, but new disclosures were added to the financial statements, in order to meet the new requirements under IFRS 13. This refers to qualitative descriptions of the valuation methods applied as well as new quantitative disclosures (above all the breakdown of fair values into Fair Value Levels also for assets and liabilities measured at cost.)

IAS 19 Employee BenefitsThe revised IAS 19 became effective on 1 January 2013. Significant changes relate to the elimination of allowed alternatives in the treatment of actuarial gains and losses in connection with provisions for post-employment benefits in defined benefit plans as well as the discounting and measurement of plan assets in relation to such provisions. For the Bank Austria Group, the effects of this change are negligible, as the accounting policy for Bank Austria group has already been the measurement of actuarial gains and losses against other comprehensive income also in prior years, thus not resulting in a change in this respect, also because the Bank Austria Group does currently not have plan assets in relation to its defined benefit plans, so that also from this side the amendments did not have an impact. The only effect on the group financial statements are the extended disclosure requirements introduced by the new standard.

Amendments to IAS 1 Presentation of Financial StatementsAs a result of the various amendments to IAS 1 becoming effective on 1 January 2013, of which the most relevant refers to the changes in presentation of items of other comprehensive income, the group has modified the presentation of items of OCI in its statement of comprehensive income. The amendments require the components of other comprehensive income to be grouped according to whether such items may be reclassified subsequently to the income statement.

Amendments to IFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and Financial LiabilitiesAs a result of the amendments to IFRS 7 regarding disclosures in connection with offsetting financial assets and financial liabilities, which became effective on 1 January 2013, the group has expanded disclosures in this context (compare Note F.7)

Other AmendmentsThe Amendment to IFRS 1 regarding government loans as well as the new IFRIC 20 regarding stripping costs in the Production Phase of a Surface Mine are not relevant for our group.

A.4.2 – New and amended financial reporting standards not yet adopted by the GroupIFRS 9 Financial InstrumentsSince November 2008, the IASB has been working to replace its financial instruments standard (IAS 39). The IASB structured its project into three phases:phase 1: classification and measurement of financial assets and financial liabilitiesThe IASB issued IFRS9 Financial instruments (2009) and IFRS 9 (2010), which contain the requirements for the classification and measurement of financial assets and liabilities. In November 2012, the IASB issued an exposure draft(ED) on limited amendments to the classification and measurement requirements of IFRS 9. The IASB plans to issue a final standard by mid-2014.phase 2: impairment methodologyIASB and FASB were working jointly on a model for the impairment of financial assets based on the expected credit losses, which would replace the current incurred loss model in IAS 39. Differing proposals were published by IASB in November 2009 and in May 2010 by FASB.At the July 2012 joint meeting the FASB expressed concern about the direction of the joint project and in December 2012 issued an ED of its own impairment model. The IASB continued to develop separately its three-bucket impairment model, and issued a new ED in March 2013. A final standard issued by IASB is planned mid-2014.




phase 3: hedge accountingThe IASB has split the hedge accounting phase into two parts: general hedging and macro hedging. The IASB issued a new general hedging standard as part of IFRS 9 in November 2013, and is working towards issuing a discussion paper on macro hedging in early 2014.

None of the parts of IFRS 9 have been endorsed by the European Union, therefore our group does not early adopt any of the parts of IFRS 9. The potential effects on the financial statements of Phase 1 (Classification and measurement) are expected to be significant, as it is currently expected, based on the current Standard and taking the Exposure Draft into account, that more financial assets will have to be carried at fair value through profit or loss than has been the case so far as many of the mass products sold in Austria and also in various CEE countries are likely not to meet the criteria for solely payments on principal and interest (SPPI), that will be required for a treatment at amortised cost under IFRS 9.

Phase 2 is expected to result in an increase in loan loss provisions, as not only the incurred, but also the expected loss will have to be provided for. Moreover, the group is currently investigating the various options offered by the new hedge accounting regulations (phase 3) that are expected to bring hedge accounting and risk management closer together. Due to the fact that the EU has announced, that only the complete set of IFRS 9 will be endorsed, we believe that the first-time application of IFRS 9 for the Bank Austria Group will not be before 1 January 2018.

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

The Group applies IFRS 10, IFRS 11, IFRS 12, the amended IAS 27, the amended IAS 28, and the consequential amendments from 1 January 2014.

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

ifrs 11 supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers. IFRS 11 classifies joint arrangements as either joint operations or joint ventures and focuses on the nature of the rights and obligations of the arrangement. For joint ventures IFRS requires the use of the equity method of accounting, eliminating the option to use the proportionateconsolidation method, presently applied by the Group.IFRS 11 brings a major change to the financial statements of Bank Austria Group, as our investment in Yapi Kredi ve Bankasi, a joint venture with our partner Koc Group in Turkey, and all the subsidiaries belonging to Yapi Kredi group, which are currently accounted for using proportionate consolidation based on IAS 31, will have to be accounted for using the equity method from 1 January 2014. This will have a large effect on our financial statements and would have led to a reduction in total assets of about € 16,082 million as at 31 December 2013.

ifrs 12 requires an entity to disclose the nature, associated risks, and financial effects of interests in subsidiaries, associates and joint arrangements and of unconsolidated structured entities. IFRS 12 requires more comprehensive disclosures in the notes than IAS 27 or SIC-12.As a preparation for the new and extended disclosure requirements resulting from IFRS 12, the group invests into database modules for the consolidation software, in order to be able to meet the new requirements in 2014.

Amendments to IAS 36 Recoverable amount disclosures for Non-Financial AssetsThe amendments refer to minor changes in the disclosures regarding recoverable amounts of non-financial assets and in particular cash generating units. They become effective on 1 January 2014 and are applied by the Group from that date.

Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge AccountingThis amendment of IAS 39 allows the continuation of hedge-accounting when a derivative is novated to a clearing counterparty and certain conditions are met. The amendment is a response to changes in laws and regulations for over-the-counter derivatives, requiring many of them to be transacted with a central counterparty or entity acting in a similar capacity. The amendment will become effective on 1 January 2014, Whether these amendments will have effects on the Bank Austria Group will depend on the ESMA’s final technical standard.


A.5 – Significant accounting policies

A.5.1 – Business CombinationsA business combination is a transaction through which an entity obtains control of a company or of a business segment, thus bringing together different businesses into one reporting entity.

A business combination may result in a parent-subsidiary relationship in which the acquirer is the parent and the acquiree a subsidiary of the acquirer. A business combination may involve the purchase of the net assets of another entity – in which case goodwill can arise – or the purchase of the equity of the other entity (mergers).

IFRS 3 requires that all business combinations shall be accounted for by applying the purchase method, that involves the following steps:• identifyinganacquirer;• measuringthecostofthebusinesscombination;and:• allocating,attheacquisitiondate,thecostofthebusinesscombinationtothefairvalueoftheassetsacquiredandliabilitiesandcontingent

liabilities assumed.

The cost of a business combination is the aggregate of the fair value, at the date of exchange, of assets given, liabilities incurred or assumed and equity instruments issued by the acquirer, in exchange for control of the acquiree.

The acquisition date is the date on which the acquirer effectively obtains control of the acquiree. When this is achieved through a single exchange transaction, the date of exchange coincides with the acquisition date.

Abusinesscombinationmayinvolvemorethanoneexchangetransaction;nevertheless,thecostofthebusinesscombinationremainsequaltothefair value of the amount paid at the acquisition date. This involves the revaluation at fair value – and the recognition of the effects in the income statement – of the equity investments previously held in the acquired entity.

The cost of a business combination is allocated by recognising the assets, the liabilities and the identifiable contingent liabilities of the acquired company at their acquisition-date fair value. Exceptions to this principle are deferred income tax assets and liabilities, employee benefits, indemnification assets, reacquired rights, non-current assets held for sale, and share-based payment transactions that are subject to review in accordance with the principle applicable to them.

A positive difference between the cost of the business combination and the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities so recognised is accounted for as goodwill.

After initial recognition, goodwill is tested for impairment at least annually.

If the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combi-nation, the acquirer shall reassess the fair values and recognise immediately any excess remaining after that reassessment in profit or loss.

If the acquisition concerns a percentage less than 100% of the assets of the acquired company, non-controlling interests are recognised.At the acquisition date, non-controlling interests are valued:• atfairvalueand• asaproportionofnon-controllinginterestsintheassets,liabilitiesandidentifiablecontingentliabilitiesoftheacquiredcompany. business combinations under common control (e. g. transfers of entities to and from other subsidiaries of UniCredit S. p. A. outside our Bank Austria Group) are accounted for based on book values, with any effects directly recognised in equity.

A reduction of a stake from a controlled entity to an entity with significant influence accounted for under the equity method is accounted for as a sale without any proportionate elimination of the result of deconsolidation regarding the percentage of ownership retained. The fair value of the retained investment is its deemed cost for the purpose of subsequent accounting.




A.5.2 – Foreign currency translationThe consolidated financial statements are prepared in euros, the presentation currency of the Group.

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

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

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange effective at the balance sheet date. Any resulting exchange differences are included in the income statement under “gains and losses on financial assets and liabilities held for trading”.

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

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

For consolidation purposes assets, liabilities and equity of foreign operations, the functional currency of which is not euro, are translated into the Group’s presentation currency at the closing rate of exchange of each period. Items of income and expenses are translated at the average rate of exchange for the reporting period. Differences arising from the use of spot and weighted average exchange rates and from the remeasurement of a foreign operation’s net assets at the closing rate of the period are recognised in the revaluation reserves.

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

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

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

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


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

2013 2012 chaNge iN %

averageeNd Of repOrt-

iNg periOd averageeNd Of repOrt-

iNg periOd averageeNd Of repOrt-

iNg periOd

Azerbaijani manat AZN 1.0418 1.0819 1.0088 1.0351 3.27% 4.52%Bosnian marka BAM 1.9558 1.9558 1.9558 1.9558 0.00% 0.00%Bulgarian lev BGN 1.9558 1.9558 1.9558 1.9558 0.00% 0.00%Swiss franc CHF 1.2311 1.2276 1.2053 1.2072 2.14% 1.69%Czech crown CZK 25.9797 27.4270 25.1491 25.1510 3.30% 9.05%Croatian kuna HRK 7.5786 7.6265 7.5217 7.5575 0.76% 0.91%Hungarian forint HUF 296.8730 297.0400 289.2490 292.3000 2.64% 1.62%Kirgyzstan som KGS 64.3337 67.8901 60.4034 62.5348 6.51% 8.56%Kazakh tenge KZT 202.1400 212.4386 191.5990 198.6210 5.50% 6.96%Lithuanian litas LTL 3.4528 3.4528 3.4528 3.4528 0.00% 0.00%Latvian lat LVL 0.7015 0.7028 0.6973 0.6977 0.60% 0.73%Polish zloty PLN 4.1975 4.1543 4.1847 4.0740 0.30% 1.97%Romanian leu RON 4.4190 4.4710 4.4593 4.4445 –0.90% 0.60%Serbian dinar RSD 113.0870 114.7915 113.0360 112.6050 0.05% 1.94%Russian rouble RUB 42.3370 45.3246 39.9262 40.3295 6.04% 12.39%Turkish lira TRY 2.5335 2.9605 2.3135 2.3551 9.51% 25.71%Ukrainian hryvnia UAH 10.7877 11.3292 10.3520 10.5836 4.21% 7.04%US dollar USD 1.3281 1.3791 1.2848 1.3194 3.37% 4.52%

A.5.3 – Financial instrumentsA.5.3.1 – General definitions in the context of financial instruments

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

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

The group classifies its financial instruments into the following categories:• atfairvaluethroughprofitandloss – held for trading – designated under the “fair value option”• availableforsale(AfS)• heldtomaturity(HtM)• loansandreceivables

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

Amortised costThe amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recogni-tion minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectability.

The effective interest method is a method of allocating the interest income or interest expense over the life of a financial asset or liability. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the net carrying amount of the financial asset or financial liability. The calculation includes all fees and points paid or received between parties to the con-tract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts.




Commissions forming an integral part of the effective interest rate include loan drawdown fees or underwriting fees relating to a financial asset not designated at fair value, e. g., fees received as compensation for the assessment of the issuer’s or borrower’s financial situation, for valuation and registration of security, and generally for the completion of the transaction (management fees).

Transaction costs include fees and commissions paid to agents (including employees acting as selling agents), advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Transaction costs do not include debt premiums or discounts, financing costs or internal administrative or holding costs.

Impairment of financial assetsAt each balance sheet date an entity assesses whether there is any objective evidence that a financial asset or group of financial assets is impaired.

A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impair-ment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Losses expected as a result of future events, no matter how likely, are not recognised.

Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to our attention about the following loss events:• significantfinancialdifficultyoftheissuerorobligor;• abreachofcontract,suchasadefaultordelinquencyininterestorprincipalpayments;• thelender,foreconomicorlegalreasonsrelatingtotheborrower’sfinancialdifficulty,grantingaconcessiontotheborrowerwhichthelenderwouldnototherwiseconsider;

• itbecomingprobablethattheborrowerwillenterbankruptcyorotherfinancialreorganisation;• thedisappearanceofanactivemarketforthatfinancialassetbecauseoffinancialdifficulties;however,thedisappearanceofanactivemarketduetothefactthatacompany’sfinancialinstrumentsarenolongertradedpubliclyisnoevidenceofimpairment;or

• observabledataindicatingthatthereisameasurabledecreaseintheestimatedfuturecashflowsfromagroupoffinancialassetssincethe initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including:

–adversechangesinthepaymentstatusofborrowersinthegroup;or – national or local economic conditions that correlate with defaults on the assets in the group.

Objective evidence of impairment for an investment in an equity instrument includes information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment may not be recovered.

If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i. e. the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allow-ance account. The amount of the loss is recognised in the profit and loss item “Impairment losses”.

If the terms of a loan, receivable or held-to-maturity investment are renegotiated or otherwise modified because of financial difficulties of the borrower or issuer, impairment is measured using the original effective interest rate before the modification of terms. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. If a loan, receivable or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral.


Objectiveevidenceofimpairmentisinitiallyassessedindividually;however,ifitisdeterminedthatthereisnoobjectiveevidenceofindividualimpairment, the asset is included in a group of financial assets with similar credit risk characteristics and assessed collectively.

Formula-based approaches and statistical methods may be used to assess impairment losses on a group of financial assets. Models used incorpo-rate the time value of money, and consider cash flows over the entire residual life of the asset (not just the following year) and do not give rise to an impairment loss on initial recognition of a financial asset. They take into account losses already sustained but not manifest in the group of finan-cial assets at the time of measurement, on the basis of past experience of losses on assets having a similar credit risk to the group of assets being measured.

Reversals of impairment lossesIf, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s creditworthiness), the previously recognised impairment loss is reversed and the amount of the reversal is recognised in profit and loss item “Impairment losses” except in the case of AfS equity instruments (see section 5.3.2 below).

The reversal shall not result – at the date the impairment is reversed – in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised.

DerecognitionDerecognition is the removal of a previously recognised financial asset or financial liability.

Before evaluating whether, and to what extent, derecognition is appropriate, under IAS 39 an entity should determine whether the relevant condi-tions apply to a financial asset in its entirety or to a part of a financial asset. The standard is applied to a part of financial assets being transferred if, and only if, the part being considered for derecognition meets one of the following conditions:• thepartcomprisesonlyspecificallyidentifiedcashflowsfromafinancialasset(oragroupofassets),e.g.interestcashflowsfromanasset;• thepartcomprisesaclearlyidentifiedpercentageofthecashflowsfromafinancialasset,e.g.,a90percentshareofallcashflowsfromanasset;

• thepartcomprisesonlyafullyproportionate(prorata)shareofspecificallyidentifiedcashflow,e.g.90percentshareofinterestcashflowsfrom an asset.

• Inallothercases,thestandardisappliedtothefinancialassetinitsentirety(ortothegroupofsimilarfinancialassetsintheirentirety).

A financial asset must be derecognised when the contractual rights to the cash flows from the financial asset expire or the contractual rights to receive the cash flows of the financial asset are transferred to a non-Group counterparty. Rights to cash flow are considered to be transferred even if contractual rights to receive the asset’s cash flow are retained but there is an obligation to pay this cash flow to one or more entities and all the following conditions are fulfilled (pass-through agreement):• thereisnoobligationontheGrouptopayamountsnotreceivedfromtheoriginalasset;• saleorpledgeoftheoriginalassetisnotallowed,unlessitsecurestheobligationtopaycashflow;• theGroupisobligedtotransferforthwithallcashflowsreceivedandmaynotinvestthem,exceptforliquidityinvestedfortheshortperiod

between the date of receipt and that of payment, provided that the interest accrued in that period is paid on.

Recognition is also subject to verification of effective transfer of all the risks and rewards of ownership of the financial asset. If the entity transfers substantially all the risks and rewards of ownership of the financial asset, the entity shall derecognise the asset (or group of assets) and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer.

Conversely, if the entity substantially retains all the risks and rewards of ownership of the asset (or group of assets), the entity shall continue to recognise the transferred asset(s). In this case it is necessary to recognise a liability corresponding to the amount received under the transfer and subsequently recognise all income accruing on the asset or expense accruing on the liability.

The main transactions that do not allow, under the above rules, total derecognition of a financial asset are securitisations, repurchase (sell and buybacks) and stock lending transactions.




In the case of securitisations the Group does not derecognise the financial asset on purchase of the equity tranche or provision of other forms of support of the structure which result in the Group retaining the credit risk of the securitised portfolio.

In the case of repurchase transactions and stock lending, the assets transacted are not derecognised since the terms of the transaction entail the retention of all their risks and rewards.

Lastly, it should be noted that securities lending transactions collateralised by other securities or not collateralised were recorded as off-balance sheet items.

A.5.3.2 – Categories of financial instrumentsFinancial assets and financial liabilities at fair value through profit or lossFinancial assets at fair value through profit or loss include financial assets held for trading and financial assets designated as at fair value through profit or loss upon initial recognition.

financial assets and financial liabilities held for trading (hft)A financial asset is classified as held for trading if it is:• acquiredorincurredprincipallyforthepurposeofsellingorrepurchasingitinthenearterm;• partofaportfolioofidentifiedfinancialinstrumentsthataremanagedtogetherandforwhichthereisevidenceofarecentactualpatternofshort-termprofit-taking;

• aderivative(exceptforderivativeswhichconstitutefinancialguarantees,seeSection5.3.3,andderivativesdesignatedashedginginstruments– see Section 5.3.3).

Like other financial instruments, on initial recognition, at settlement date, a held-for-trading financial asset is measured at its fair value, usually equal to the amount paid, excluding transaction costs and income, which are recognised in profit and loss even when directly attributable to the financial assets. Trading book derivatives are recognised at trade date.

After initial recognition these financial assets are measured at their fair value through profit or loss. An exception is represented by derivatives settled by delivery of an unlisted equity instrument whose fair value cannot be reliably measured, and which is therefore measured at cost.

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

A gain or loss arising from sale or redemption or a change in the fair value of an HfT financial instrument is recognised in the income statement item “Gains and losses on financial assets and liabilities held for trading”.Financial assets held for trading include securities held for trading and positive market values of derivative financial instruments, recognised at their fair values. The item financial liabilities held for trading shows negative market values of derivative financial instruments and short positions held in the trading portfolio.

derivativesA derivative is a financial instrument or other contract with all three of the following characteristics:• itsvaluechangesinresponsetothechangeinaspecifiedinterestrate,financialinstrumentprice,commodityprice,foreignexchangerate,indexofpricesorrates,creditratingorcreditindex,orothervariable(usuallycalledthe‘underlying’);

• itrequiresnoinitialnetinvestmentoraninitialnetinvestmentthatissmallerthanwouldberequiredforothertypesofcontractsthatwouldbeexpectedtohaveasimilarresponsetochangesinmarketfactors;

• itissettledatafuturedate.

An embedded derivative is a component of a hybrid (combined) instrument that also includes a non-derivative host contract, with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. A derivative that is attached to a financial instrument but is contractually transferable independently of that instrument, or has a different counterparty from that instrument, is not an embedded derivative, but a separate financial instrument.


An embedded derivative is separated from the host contract and recognised as a derivative if:• theeconomiccharacteristicsandrisksoftheembeddedderivativearenotcloselyrelatedtothoseofthehostcontract;• aseparateinstrumentwiththesametermsastheembeddedderivativewouldmeetthedefinitionofaderivative;• thehybrid(combined)instrumentisnotmeasuredentirelyatfairvaluethroughprofitorloss.

If it is necessary to separate an embedded derivative from its host contract, but it is not possible to measure the embedded derivative separately either at acquisition or at a subsequent financial reporting date, the entire combined contract is treated as a financial asset or financial liability at fair value through profit or loss.

When an embedded derivative is separated, the host contract is recognised according to its accounting classification.

Some derivatives are traded on organised exchanges where the terms of the contracts are standardised and quoted prices for the instruments are generally available publicly.

Non-exchange traded derivatives, commonly referred to as over-the-counter (OTC) derivatives, are transacted directly between market counter-parties with the terms of the contracts often tailored to the parties’ specific requirements. These trades are usually governed by general terms published by the International Swaps and Derivatives Association (ISDA) and may be accompanied by a Credit Support Annex (CSA), which details the requirements for the posting of collateral.

Generally, derivatives fall into the following categories:• forward-based derivatives are contracts with a mandatory requirement to settle at a set point in time in the future at a specified price.

The agreement stipulates the reference rate – e. g. interest rate or currency exchange rate – the settlement date and the notional value.• Aforwardcontractthatisexchange-tradedisgenerallyreferredtoasa“futurescontract”.Futuresaregenerallybasedoninterestrates,

currencies, commodities or stock market indices. OTC forward-based derivatives are generally referred to as ‘forward agreements’. The two most common types of OTC forward agreements are based on interest rates and foreign exchange rates.

• swap-based derivatives are contracts in which counterparties exchange, over a period of time, one stream of cash flows for another stream of cash flows. The cash flows are normally calculated with reference to a notional amount, which is often not exchanged by the counterparties – e. g. interest rate swaps.

• Option-based derivatives include contracts that give one party the right, but not the obligation, to engage in a transaction to buy or sell an asset on a set date or within a set period of time at a particular (strike) price. Options can be exchange-traded or OTC.

All derivatives are initially measured at fair value.

Subsequent to initial recognition all derivatives are measured at fair value with changes in fair value recognised in profit or loss.

financial instruments at fair value through profit or loss (fair value option)Any financial instrument may be designated as a financial instrument measured at fair value through profit and loss on initial recognition, in accordance with the provisions of IAS 39, except for the following:•investmentsinequityinstrumentsforwhichthereisnopricequotedinactivemarketsandwhosefairvaluecannotbereliablydetermined;•derivatives.

Financial assets and liabilities classified in this category are those that have been designated by management upon initial recognition under the so-called “fair value option”. Management may only designate an instrument at fair value through profit and loss upon initial recognition when the following criteria are met:• Thedesignationeliminatesorsignificantlyreducestheinconsistenttreatmentthatwouldotherwisearisefrommeasuringtheassetsorliabili-

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

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

required by the contract.




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

FIaFV includes financial assets and liabilities:(i) not belonging to regulatory trading book, whose risk is: •connectedwithdebtpositionsmeasuredatfairvalue •andmanagedbytheuseofderivativesnottreatableasaccountinghedges.(ii) represented by hybrid (combined) instruments containing embedded derivatives that otherwise should have been separated from the host

contract.

FIaFV are accounted for in a similar manner to HfT financial instruments (see above), however gains and losses, whether realised or unrealised, are recognised in item “Gains (losses) on financial assets and liabilities measured at fair value”.

Available-for-sale financial assets (AfS)Available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity investments, financial assets held for trading or financial assets at fair value through profit or loss. These assets are held for an indefinite period of time and can meet the need to ensure liquidity and face changes in interest rates, exchange rates and prices.

AfSfinancialassetsaremoneymarketinstruments,otherdebtinstrumentsorequityinstruments;theyincludesharesheldasnon-controllinginterests where these do not constitute controlling or associate interests, or joint control.

On initial recognition, at settlement date, an AfS financial asset is measured at fair value, which is usually equal to the consideration of the transaction, plus transaction costs and income directly attributable to the instrument. In subsequent periods AfS assets are measured at fair value, the interest on interest-bearing instruments being recognised at amortised cost in the income statement.

Equity instruments (shares) not listed in an active market and whose fair value cannot be reliably determined are valued at cost.If there is objective evidence of an impairment loss on an available-for-sale financial asset, the cumulative loss that had been recognised directly in the equity item “Revaluation reserves”, is removed from equity and recognised in profit or loss under the item “Impairment losses (b) available-for-sale financial assets”.

The loss of value is normally considered lasting if fair value falls to less than 50% of the carrying amount or lasts for more than 18 months. If however the fall in the fair value of the instrument is over 20% but less than or equal to 50% or continues for no less than 9 but no longer than 18 months, further market indicators are used for a review.If the results of the review are such as to prejudice the recovery of the amount originally invested, a lasting loss of value is recognised. The amount taken to profit and loss is the difference between the carrying amount (value of initial recognition less any impairment loss already recognised in profit or loss) and current fair value. Given the low volume of available-for-sale equity instruments, there is currently no material case in which this is applied in the Bank Austria Group. Where instruments are valued at amortised cost, the amount of the loss is determined as the difference between their carrying value and the present value of estimated future cash flows, discounted at the current market yield on similar financial assets.

Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available for sale are not reversed through profit or loss, but recognised in equity.

In respect of debt instruments, any circumstances indicating that the borrower / issuer is experiencing financial difficulties which could prejudice the collection of the principal or interest, represent an impairment loss. A lasting loss of value of equity instruments is assessed on the basis of indicators such as fair value below the carrying amount and adverse changes in the environment in which the company operates, as well as the issuer’s debt service difficulties.

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event such as an improvement in the debtor’s credit worthiness occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed and the amount of the reversal is recognised in the same profit or loss item. The reversal cannot result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised.


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 them to maturity.

If, during the financial year, more than an insignificant amount of held-to-maturity investments are sold or reclassified before maturity, the remaining HtM financial assets shall be reclassified as available-for-sale and no financial assets shall be classified as HtM investments for the two following financial years, unless the sales or reclassifications:• aresoclosetomaturityorthefinancialasset’scalldatethatchangesinthemarketrateofinterestwouldnothaveasignificanteffectonthefinancialasset’sfairvalue;

• occuraftersubstantiallyallofthefinancialasset’soriginalprincipalhasbeencollectedthroughscheduledpaymentsorprepayments;• areattributabletoanisolatedeventthatisbeyondthereportingentity’scontrol,isnon-recurringandcouldnothavebeenreasonably

anticipated.

After initial recognition at its fair value, which will usually be the price paid including transation costs and income directly attributable to the acquisition or provision of the financial asset (even if not yet settled), a, held-to-maturity investment is measured at amortised cost using the effective interest method. A gain or loss is recognised in profit or loss in the item “Gains and losses on disposal of held-to-maturity investments” when the financial asset is derecognised.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are recognised on the date of contract signing, which normally coincides with the date of disbursement to the borrower.

These items include debt instruments with the above characteristics or those subject to portfolio reclassification in accordance with the rules of IAS 39 (see Section A.7.5) and the net value of finance leases of assets under construction or awaiting lease, provided the leases have the characteristics of contracts entailing the transfer of risk.

After initial recognition at fair value, which is usually the price paid including transaction costs and income directly attributable to the acquisition or issuance of the financial asset (even if not yet paid), a loan or receivable is measured at amortised cost, which can be adjusted to take account of any write-downs/write-backs resulting from the valuation process.

A gain or loss on loans and receivables is recognised in profit or loss:•whenaloanorreceivableisderecognised:intheitem“Gainsandlossesondisposal”;or:•whenaloanorreceivableisimpaired(ortheimpairmentlosspreviouslyrecognisedisreversed):intheitem“Impairmentlosses(a)loansand

receivables”.

Interest on loans and receivables is recognised in profit or loss on an accrual basis by using the effective interest rate method under the item “Interest income and similar revenue”.

Delay interest is taken to the income statement on collection or receipt.

Loans and receivables are reviewed in order to identify those that, following events occurring after initial recognition, show objective evidence of possible impairment. These impaired loans are reviewed and analysed periodically at least once a year.

A loan or receivable is deemed impaired when it is considered that it will probably not be possible to recover all the amounts due according to the contractual terms, or equivalent value.

Allowancesforimpairmentofloansandreceivablesarebasedonthepresentvalueofexpectedcashflowsofprincipalandinterest;indetermin-ing the present value of future cash flows, the basic requirement is the identification of estimated collections, the timing of payments and the rate used.

The amount of the loss on impaired exposure classified as non-performing, doubtful or restructured according to the categories specified below, is the difference between the carrying value and the present value of estimated cash flows discounted at the original interest rate of the financial asset. If the original rate is not immediately available, or if obtaining it is too burdensome, its best approximation will be applied.




For all fixed rate positions the interest rate so determined is kept constant also in subsequent financial years, while for floating rate positions the interest rate is updated with respect to the floating component used as a reference while keeping the spread originally set constant.

Recovery times are estimated on the basis of any repayment schedules agreed with the borrower or included in a business plan or in forecasts based on historical recovery experience observed for similar classes of loans, taking into account the type of loan, the geographical location, the type of security and any other factors considered relevant.

Any subsequent change vis-à-vis initial expectations of the amount or timing of expected cash flows of principal and interest causes a change in allowances for impairment and is recognised in profit or loss in the item “Impairment losses (a) loans and receivables”.

In the notes to the financial statements, write-downs of impaired loans are classified as specific in the relevant income statement item even when the calculation is flat-rate or statistical, as indicated below.

When the reasons for the impairment no longer exist, and this assessment is objectively attributable to an event such as an improvement in the debtor’s creditworthiness occurred after the impairment, a reversal is made in the same profit or loss item, within the amount of the amortised cost that there would have been if there had been no impairments.

Derecognition of a loan or receivable in its entirety is made when the loan or receivable is deemed to be irrecoverable or is written off. Write-offs are recognised directly in profit or loss under the item “Impairment losses (a) loans and receivables” and reduce the amount of the principal of the loan or receivable. Reversals of all or part of amounts previously written off are recognised in the same item.

According to UniCredit Group guidelines, impaired loans and receivables are classified in the following categories:• Non-performing loans – formally impaired loans, being exposure to insolvent borrowers, even if the insolvency has not been recognised in

a court of law, or borrowers in a similar situation. Measurement is generally on a loan-by-loan basis, or for loans which are not significant individually, on a portfolio basis for homogeneous categories of loans.

• doubtful loans – exposure to borrowers experiencing temporary difficulties, which the group believes may be overcome within a reasonable period of time.

• restructured loans – exposure to borrowers with whom a rescheduling agreement has been entered into including renegotiated pricing at interest rates below market, reduction of principal and/or the conversion of part of a loan into shares.

• past due loans – total exposure to any borrower not included in the other categories, which at the end of the reporting period has expired facilities or unauthorised overdrafts that are more than 90 days past due.

In respect of loans and receivables on which no specific write-downs have been made, any impairment losses which have been incurred as at the end of the reporting period but have not yet been identified by the bank are covered by a portfolio-based write-down. In this context we use the Loss Confirmation Period Method. The Loss Confirmation Period is the period between the occurrence of a loss event or the default of a borrower and the time when the bank identifies the loss. The Loss Confirmation Period is determined on a differentiated basis for various loan portfolios. The loss which has been incurred but has not yet been identified is estimated by using Basel 2 parameters (expected loss – with a one-year time horizon) for the differentiated loan portfolios and the respective loss confirmation period.

Allowances for impairment reduce the loan or receivable’s carrying amount. The risk inherent in off-balance-sheet items, such as loan commit-ments, losses due to impairment of guarantees and comparable credit derivatives under IAS 39, is recognised in profit or loss under the item “Impairment losses (d) other financial assets”, offsetting the item “Other liabilities”.

A 5.3.3 Further definitions in the context of financial instrumentsRepo transactions and securities lendingSecurities received in a transaction that entails a contractual obligation to sell them at a later date or delivered under a contractual obligation to repurchase 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 in 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 secu-rities 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.

The same rules apply to securities lending transactions. Counterparty risk related to such securities lending or borrowing transactions is shown in the tables in section “E.6 – Credit risk”.


Finance leasesFinanceleaseseffectivelytransferalltherisksandbenefitsofownershipofanassettothelessee;ownershipoftheassetistransferredtothelessee, however not necessarily at contractual maturity.The lessee acquires the economic benefit of the use of the leased asset for most of its useful life, in exchange for a commitment to pay to the lessor an amount approximately equivalent to the fair value of the asset and related finance costs. Recognition in the lessor’s accounts is as follows:•inassets,thevalueoftheloan,lesstheprincipalofleasepaymentsdueandpaidbythelessee;•inprofitorloss,interestreceived.See the sections on “Property, plant and equipment” and “Intangible assets” below for the treatment of the lessee’s assets.

FactoringLoans acquired in factoring transactions with recourse are recognised to the extent of the advances granted to customers on their consideration. Loans acquired without recourse are recognised.

Loan securitisationsLoans and receivables also include loans securitised which cannot be derecognised under IAS 39.

Corresponding amounts received for the sale of securitised loans net of the amount of any issued securities and any other type of credit enhancement held in portfolio (retained risk) are recognised in the liability items “Deposits from banks” and “Deposits from customers”.

Both assets and liabilities are measured at amortised cost and interest received is recognised through profit or loss.

Impairment losses on securitised assets sold but not derecognised are reported in item “Impairment losses (a) loans and receivables”.

Hedge accountingHedging instruments are those created to hedge market risks (interest-rate, currency and price) to which the hedged positions are exposed.They may be described as follows:• Fairvaluehedge:ahedgeoftheexposuretochangesinfairvalueofarecognisedassetorliability,oranidentifiableportionofsuchanassetorliability;

• Cashflowhedge:ahedgeoftheexposuretovariabilityincashflowsthatisattributabletoaparticularriskassociatedwitharecognisedassetorliabilityorahighlyprobableforecasttransactionwhichcouldaffectprofitorlossinfutureperiods;

• Hedgeofanetinvestmentinaforeignentitywhoseoperationsarepresentedinacurrencyotherthaneuro.Hedgesofnetinvestmentsarecurrently not used by the Bank Austria Group.

Hedging derivatives are initially recognised on trade date and are valued at their fair value.

A hedging relationship qualifies for hedge accounting if there is formal designation and documentation of the hedging relationship including the risk management objective, the strategy for undertaking the hedge, and how the hedging instrument’s prospective and retrospective effective-ness will be assessed. It is necessary to assess the hedge’s effectiveness, at inception and in subsequent periods, in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk.

A hedge is regarded as highly effective if, at the inception of the hedge and in subsequent periods, it is determined prospectively to remain highly effective, and the retrospectively verified that the hedge ratio (i. e. the changes in fair value of hedged items and hedging instruments) is within a range of 80–125 per cent. The hedge is assessed on an ongoing basis and thus must prospectively remain highly effective throughout the financial reporting periods for which the hedge has been designated.

The assessment of effectiveness is made at each balance-sheet date or other reporting date.If the assessment does not confirm the effectiveness of the hedge, from that time on hedge accounting is discontinued in respect of the hedge and the hedging derivative is reclassified as a held-for-trading instrument.

Inaddition,thehedgingrelationshipceaseswhenthehedginginstrumentexpiresorissold,terminatedorexercised;thehedgeditemissold,expiresorisrepaid;oritisnolongerhighlyprobablethattheforecasttransactionwilloccur.




Hedging instruments are so designated when identifiable with an ultimate counterparty outside the Group.

Hedging derivatives are measured at fair value. Specifically:•fair value hedging – an effective fair value hedge is accounted for as follows: the gain or loss from remeasuring the hedging instrument at fairvalueisrecognisedthroughprofitorlossintheitem“Fairvalueadjustmentsinhedgeaccounting”;thegainorlossonthehedgeditemattributable to the hedged risk adjusts the carrying amount of the hedged item and is recognised through profit or loss in the same item. If the hedging relationship is terminated for reasons other than the sale of the hedged item, this is measured according to the original criterion dictated by the accounting standard applied to the relevant portfolio. In the case of interest-bearing instruments, the difference between the carrying amount of the hedged item on termination of the hedging and the carrying amount it would have had if the hedge had never existed, is recognised through profit or loss in interest receivable or payable over the residual life of the original hedge. The difference in fair value of the hedging derivative since the latest effectiveness testing date is recognised in profit or loss under the item “Fair value adjustments in hedge accounting”. If the hedged item is sold or repaid, the portion of fair value which is still unamortized is at once recognised through profit or loss in the item “Gains and losses on disposal or repurchase”.

•cash flow hedging – hedging instruments are valued at fair value. A change in the fair value of a hedging instrument that is considered effective is recognised in the equity item “Revaluation reserves”. The ineffective portion of the gain or loss is recognised through profit or loss in the item “Fair value adjustments in hedge accounting”. If a cash flow hedge is determined to be no longer effective or the hedging relation-ship is terminated, the cumulative gain or loss on the hedging instrument that remains recognised in “Revaluation reserves” from the period when the hedge was effective remains separately recognised in “Revaluation reserves” until the forecast hedged transaction occurs or is determinedtobenolongerpossible;inthelattercasegainsorlossesaretransferredthroughprofitorlossto“Fairvalueadjustmentsinhedge accounting”. The fair value changes recorded in item “Revaluation reserves” are also disclosed in the Statement of Comprehensive Income.

•hedging a net investment in a foreign entity – hedges of a net investment in a foreign entity are accounted for similarly to cash flow hedges. The gain or loss on the hedging instrument relating to the effective portion of the hedge that has been recognised directly in equity is recognised through profit or loss on disposal of the foreign entity.

Thefairvaluechangesrecordedinitem“Revaluationreserves”arealsodisclosedintheStatementofComprehensiveIncome;theineffectiveportion of the gain or loss is recognised through profit or loss in the item “Fair value adjustments in hedge accounting”.

•portfolio fair value hedge for financial assets (liabilities) – IAS 39 allows a fair-value item hedged against interest rate fluctuations to be not onlyasingleassetorliabilitybutalsoamonetarypositioncontainedinanumberoffinancialassetsorliabilities(orpartsofthem);accord-ingly, a group of derivatives can be used to offset fair-value fluctuations in hedged items due to changes in market rates. Macro hedging may not be used for net positions resulting from the offsetting of assets and liabilities. As for fair value micro hedging, macro hedging is considered highly effective if, at the inception of the hedge and in subsequent periods, changes in the fair value attributable to the hedged position are offset by changes in fair value of the hedging instrument and if the hedge ratio is retrospectively assessed falling within the range of 80–125 per cent. Net changes – gains or losses – in the fair value of the macro-hedged assets and liabilities attributable to the hedged risk are recognised in special line items on the asset or liability side and offset the profit and loss item “Fair value adjustments in hedge accounting”.

The ineffectiveness of the hedging arises to the extent that the change in the fair value of the hedging item differs from the change in the fair value of the hedged monetary position. The extent of hedge ineffectiveness is in any case recognised in the profit and loss item “Fair value adjustments in hedge accounting”.

If the hedging relationship is terminated, for reasons other than the sale of the hedged items, a cumulative gain or loss in the balance sheet line items is recognised through profit or loss in interest income or expenses, along the residual life of the hedged financial assets or liabilities.

If the latter are sold or repaid, unamortised fair value is at once recognised through profit and loss in the item “Gains and losses on disposal or repurchase”.

A portfolio fair value hedge is used by our Turkish bank Yapı ve Kredi Bankasi AS, by our Moscow-based banking subsidiary ZAO UniCredit Bank and by UniCredit Consumer Financing IFN S. A. in Romania. Yapı ve Kredi Bankasi AS uses cross-currency interest rate swaps to hedge part of its mortgage and car loan portfolios denominated in Turkish lira against the possible effects of changes in market interest rates and foreign exchange rates. In ZAO UniCredit Bank, portfolio fair value hedge accounting is part of an interest rate risk hedging strategy that helps to avoid discrepancies between the economic substance of deals concluded for hedging purposes and their accounting treatment. Interest rate swaps are designated as hedging instruments. UniCredit Consumer Financing IFN S. A. uses interest rate swaps to hedge a portfolio of euro-denominated fixed-rate loans against interest rate risk.

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


Guarantees and credit derivatives in the same classGuarantees and credit derivatives in the same class measured under IAS 39 (i. e. contracts under which the issuer makes pre-established payments in order to compensate the guaranteed party or buyer of protection for losses sustained due to default by a debtor on the maturity of a debt instru-ment) are initially and subsequently (on remeasurement following impairment losses) recognised in the item “Other liabilities”.On first recognition guarantees given are recognised at fair value, which usually corresponds to the amount received when the guarantee is issued.

After initial recognition, guarantees given are recognised at the greater of the initially recognised value, net of any amortised portion, and the estimated amount required to meet the obligation.The effects of valuation, related to any impairment of the underlying, are recognised in the same balance-sheet item contra item “Write-downs and write-backs due to impairment of other financial transactions” in the income statement.

Equity investmentsThe principles governing the recognition and measurement of equity investments under IAS 27 Consolidated and Separate Financial Statements, IAS 28 Investments in Associates, and IAS 31 Interests in Joint Ventures, are given in detail in Part A.3 – Consolidation principles.Remaining interests other than subsidiaries, associates and joint ventures, and interests recognised in items “Non-current assets and disposal groups classified as held for sale” and “Liabilities included in disposal groups classified as held for sale” are classified as AfS financial assets or financial assets at fair value through profit and loss and treated accordingly.

Liabilities, debt securities in issue and subordinated loansThe items “Deposits with banks”, “Deposits with customers” and “Debt securities in issue” are used for all forms of third-party funding other than trading liabilities or those valued at fair value through profit and loss.

These financial liabilities are recognised on the settlement date principle initially at fair value, which is normally the consideration received less trans-action costs directly attributable to the financial liability. Subsequently these instruments are measured at amortised cost using the effective interest method.

Hybrid debt instruments relating to equity instruments, foreign exchange, credit instruments or indexes, are treated as structured instruments. The embedded derivative is separated from the host contract and recognised as a derivative, provided that separation requirements are met, and recognised at fair value. Any subsequent changes in fair value are recognised in the profit and loss item “Gains and losses on financial assets and liabilities held for trading”.

The difference between the total amount received and the initial fair value of the embedded derivative is attributed to the host contract. Instruments convertible into treasury shares imply recognition, at the issuing date, of a financial liability and of the equity part, recognised in the item “Equity instruments”, any time contractual terms provide for physical delivery settlement.The equity part is initially measured at the residual value, i. e., the overall value of the instrument less the separately determined value of a financial liability with no conversion clause and the same cash flow.The financial liability is initially recognised at amortised cost using the effective interest method.

Securitiesinissuearerecognisednetofrepurchasedamounts;thedifferencebetweenthecarryingvalueoftheliabilityandtheamountpaidtorepurchase it is taken to profit and loss under item “Gains and losses on repurchases of financial liabilities”. Subsequent disposal by the issuer is considered as a new issue which does not produce gains or losses.

Our subsidiary Bank Austria Wohnbaubank AG has issued debt instruments theoretically involving convertibility to equity instruments (under IASB IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments), because this feature is required for providing tax advantages for the holder of the instruments. However, the embedded call options are deemed to have a fair value of zero upon issuance, as a conversion into equity does virtually never occur.

Group debts do not include covenants that would cause default or restructuring events.




A.6 – Information on other financial statement line items

A.6.1 – Cash and cash equivalentsThe amount of cash and cash equivalents stated in the statement of cash flows includes the cash holdings (cash and demand deposits with central banks). In addition to the cash and cash equivalents shown in the item Cash and cash balances in the statement of financial position, cash and cash equivalents also include those in the item Non-current assets and disposal groups classified as held for sale.

A.6.2 – Property, plant and equipment; investment propertyThe item includes:• land;• buildings;• furnitureandfixtures;• plantandmachinery;• othermachineryandequipment;and is divided between• assetsusedinthebusinessand• assetsheldasinvestments

assets used in the business are held for use in the production or supply of goods or services or for administrative purposes and are expected to be used during more than one period. This category also (conventionally) includes assets to be let or under construction and to be leased under a finance lease, only for those finance leases which provide for retention of risk by the lessor until the acceptance of the asset by the lessee and the start of rentals under the finance lease (see also section “loans and receivables” for finance leases with risk transfer).

The item includes assets used by the Group as lessee under a finance lease, or let /hired out by the Group as lessor under an operating lease.

Property, plant and equipment also include leasehold improvements relating to assets which can be which can be separately identified. They are classified according to the specific sub-items relating to the asset type (e. g. plants). Leasehold improvements are usually borne in order to make leased premises fit for the expected use. Improvements and additional expenses relating to property, plant and equipment identifiable but not separable are recognised in the item “Other assets”.

assets held for investment purposes (“Investment Property”) are properties covered by IAS 40, i. e. properties held (owned or under a finance lease) in order to derive rentals and/or a capital gain.

Property, plant and equipment are initially recognised at cost including all costs directly attributable to bringing the asset into use (transaction costs, professional fees, direct transport costs incurred in bringing the asset to the desired location. installation costs and dismantling costs).

Subsequent costs are added to the carrying amount or recognised as a separate asset only when it is probable that there will be future economic benefits in excess of those initially foreseen and the cost can be reliably measured. Other expenses borne at a later time (e. g. normal maintenance costs) are recognised in the year they are incurred in profit and loss items: • “Generalandadministrativeexpenses”,iftheyrefertoassetsusedinthebusiness;or:• “Othernetoperatingincome”,iftheyrefertopropertyheldforinvestment.

After being recognised as an asset, an item of property, plant and equipment is carried at cost less any accumulated depreciation and any cumulative impairment losses.

Exceptions are made for property investments underlying liabilities whose yield is linked to their fair value. For these latter assets the fair value model as per IAS 40 paragraph 32A is used.

An item with a finite useful life is subject to straight-line depreciation.


Useful life is usually assessed as follows:

prOperty, plaNt aNd equipmeNt (taNgible assets) useful life

Buildings max. 50 yearsMovables max. 25 yearsElectronic equipment max. 15 years

Other max. 10 yearsLeasehold improvements max. 25 years

An item with an indefinite useful life is not depreciated.

Land and buildings are recognised separately, even if acquired together. Land is not depreciated since it usually has an indefinite useful life. Buildings, conversely, have a finite useful life and are therefore subject to depreciation.

The estimate of the useful life of an asset is reviewed at least at each accounting period-end on the basis inter alia of the conditions of use of the asset, of maintenance conditions and expected obsolescence, and, if expectations differ from previous estimates, the depreciation amount for the current and subsequent financial years is adjusted accordingly.

If there is objective evidence that an asset has been impaired the carrying amount of the asset is compared with its recoverable value, equal to the greater of its fair value less selling cost and its value in use, i. e., the present value of future cash flow expected to originate from the asset. Any value adjustment is recognised in profit and loss item “Impairment /write-backs on property, plant and equipment”.

If the value of a previously impaired asset is restored, its increased carrying amount cannot exceed the net carrying amount it would have had if there had been no losses recognised on the prior-year impairment.

An item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use or sale in the future and any difference between sale proceeds or recoverable value and carrying value is recognised in the profit and loss item “Gains and losses on disposal of investments”.

A.6.3 – Intangible assetsAn intangible asset is an identifiable non-monetary asset without physical substance which is expected to be used during more than one period, and from which future economic benefits are probable.

Intangible assets are principally goodwill, software, brands and customer-related intangible assets.

Intangible assets other than goodwill are recognised at purchase cost, i. e. including any cost incurred to bring the asset into use, less accumulated amortisation and impairment losses.

An intangible asset with a finite life is subject to straight-line amortisation over its estimated useful life.

Useful life is usually assessed as follows:• software:4–6years• otherintangibleassets:4–20years• customerbase:3–20years

Intangible assets with an indefinite life are not amortised.

If there is objective evidence that an asset has been impaired, the carrying amount of the asset is compared with its recoverable value, equal to the greater of its fair value less selling cost and its value in use, i. e. the present value of future cash flows expected to originate from the asset. Any impairment loss is recognised in the profit and loss item “Impairment /write-backs on intangible assets”.

For an intangible asset with an indefinite life even if there are no indications of impairment, the carrying amount is compared annually with its recoverable value. If the carrying amount is greater than the recoverable value, the difference is recognised in the profit and loss item “Impairment /write-backs on intangible assets”.




If the value of a previously impaired intangible asset, other than goodwill is restored, its increased carrying amount cannot exceed the net carrying amount it would have had if there were no losses recognised on the prior-year impairment.

GoodwillIn accordance with IFRS3, goodwill is the excess of the cost of a business combination over the net fair value of the assets and liabilities acquired at the acquisition date. Intangible assets are recognised separately from goodwill when they are separable or arise from contractual or other legal rights, and their fair value can be measured reliably.

Goodwill arising from the acquisition of subsidiaries and joint ventures (consolidated proportionally) is recognised as an intangible asset, whereas goodwill arising from the acquisition of associates is included in the carrying value of the investments in associates.

At a subsequent financial reporting date, goodwill is recognised net of any cumulative impairment losses and is not amortised.

Goodwill is tested for impairment annually, as for other intangible assets with an indefinite useful life. To this end it is allocated to the Group’s business areas identified as the Cash Generating Units (CGUs). Goodwill is monitored by the CGUs at the lowest level in line with its business model.

Impairment losses on goodwill are recognised in the profit and loss item “Impairment of goodwill”. In respect of goodwill, no write-backs are allowed. Please see Section A.8. regarding the goodwill impairment test.

A.6.4 – Non-current assets held for saleNon-current assets or groups of associated assets / liabilities (i. e. so called “disposal groups”, which may also be cash generating units) whose sale is highly probable, are recognised in the item “Non-current assets and disposal groups classified as held for sale” and in the item “Liabilities included in disposal groups classified as held for sale”, respectively, at the lesser of the carrying amount and fair value net of disposal costs.

If a disposal group constitutes a separate material line of business or geographical operation, it is referred to as a “discontinued operation”.The balance of revenue and expense relating to discontinued operations and the measurement as determined above of discontinued operations, net of current and deferred tax, is recognised in the item “Total profit or loss after tax from discontinued operations”.

The revaluation reserves relating to Non-current assets held for sale, which are recorded as a contra item in other comprehensive income within equity, are reported separately in the Statement of Comprehensive Income (see Part D – Consolidated Comprehensive Income).

A.6.5 – Income taxTax assets and tax liabilities are recognised in the consolidated balance sheet respectively in the item “Tax assets” or in the item “Tax liabilities”.

In compliance with the “balance sheet liability method”, current and deferred tax items are:•currenttaxassets,i.e.amountoftaxpaidinexcessofincometaxdueinaccordancewithlocaltaxregulations;•currenttaxliabilities,i.e.amountofcorporatetaxdueinaccordancewithlocaltaxregulations;•deferredtaxassets,i.e.amountsofincometaxrecoverableinfuturefiscalyearsandattributableto: –deductibletemporarydifferences; –thecarryforwardofunusedtaxlosses;and – the carryforward of unused tax credits•deferredtaxliabilities,i.e.theamountsofincometaxdueinfuturefiscalyearsinrespectoftaxabletemporarydifferences.

Current and deferred tax assets and tax liabilities are calculated in accordance with local tax regulations and are recognised in profit or loss on an accrual basis.

In general, deferred tax assets and liabilities arise when there is a difference between the accounting treatment and the tax treatment of the carrying amount of an asset or liability.


Deferred tax assets and liabilities are recognised applying tax rates that at the balance sheet date are expected to apply in the period when the carrying amount of the asset will be recovered or the liability will be settled on the basis of tax regulations in force, and are periodically reviewed in order to reflect any changes in regulations.

Furthermore, deferred tax assets are recognised only to the extent that it is probable that sufficient taxable profit will be generated by the entity. In accordance with the provisions of IAS12, the probability that sufficient future taxable profit against which the deferred tax assets can be utilised will be available is reviewed periodically. The carrying amount of deferred tax assets should be reduced to the extent that it is not probable that sufficient taxable profit will be available.

Current and deferred taxes are recognised in profit and loss item “Tax expense (income) related to profit or loss from continuing operations”, except for tax relating to items that in the same or in another fiscal year are credited or charged directly to equity, such as those relating to gains or losses on available-for-sale financial assets and those relating to changes in the fair value of cash flow hedging instruments, whose changes in value are recognised, net of tax, directly in the Statement of Comprehensive Income – valuation reserves.

Pursuant to the group taxation rules introduced in Austria in 2005, Bank Austria has formed a group of companies. Profit and loss transfer agreements have been concluded with 24 group members, tax compensation agreements have been reached with 25 companies and there are 3 joint control arrangements. These agreements and arrangements do not include foreign companies.

A.6.6 – Other assetsThe components of this item are accounts receivable from deliveries of goods and the performance of services, tax claims and deferred tax assets.

A.6.7 – Deposits from banks/customers, debt securities in issueThese financial liabilities are recognised initially at fair value, net of transaction costs incurred. Subsequently these instruments are measured at amortised cost using the effective interest rate.

A.6.8 – Insurance assets and liabilitiesIFRS 4 defines an insurance contract as a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder.

These policies are recognised as follows:•intheprofitandlossitem“Otherincome(net)frominsuranceactivities”:grosspremiumincludingallamountsdueduringtheyearunderinsurancecontracts,netofcancellations.Premiumtransferredtoreinsurersduringtheyearisalsorecognisedinthisitem;

•intheliabilityitem“Insurancereserves”:contractualobligationstopolicyholders,calculatedanalyticallycontractbycontractusingtheprospectivemethod,onthebasisofdemographicandfinancialprojectionscurrentlyusedbythemarket;

•intheassetitem“Insurancereservesattributabletoreinsurers”:reinsurers’liabilities.

A.6.9 – Provisions for risks and charges and contingent liabilitiesA.6.9.1 – Long-term employee benefitsFor retirement provisions – i. e. provisions for employee benefits payable after the completion of employment – a distinction is made between defined-contribution plans and defined-benefit plans according to the economic nature of the plan.

In detail:•Defined-benefitplansprovideaseriesofbenefitsdependingonfactorssuchasage,yearsofserviceandcompensationpolicies.Underthistypeofplanactuarialandinvestmentrisksarebornebythecompany;

•Defined-contributionplansareplansunderwhichthecompanymakesfixedcontributions.Benefitsaretheresultoftheamountofcontributionspaid and return on contributions invested. The employer bears no actuarial and/or investment risks connected with this type of plans as it has no legal or implicit obligation to make further contributions, should the plan not be sufficient to provide benefit to all employees.




Defined-benefit plans are present-valued by an external actuary using the Projected Unit Credit Method.This method distributes the cost of benefits uniformly over the employee’s working life. Obligations are the present value of average future benefits pro rata to the ratio of years of service to theoretical seniority at the time of benefit payment.

The amount recognised as a liability in item Provisions for risks and charges – (a) Post-retirement benefit obligations is the present value of the obligation at the balance sheet date. The UniCredit Bank Austria AG sub-group currently does not have any plan assets. Pursuant to IAS 19, actuarial gains and losses are not recognised in profit or loss but directly in equity. Such gains and losses are stated in the table “Other comprehensive income”.

Under a commitment to provide defined benefits, UniCredit Bank Austria AG continues to recognise a pension provision for the entitlements of 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:• disabilityriskandrightstofuturebenefitsbasedonearlyretirementandpensionentitlementsofsurvivingdependants,totheextentthatthe

pension fund benefit is insufficient,• rightstofuturebenefitsundercommitmentstoprovidedirectbenefitsinindividualserviceagreements,• rightstofuturebenefitsrelatingtoadditionalpensionpaymentsforemployeesperformingmanualwork.

The present value of pension obligations and severance-payment obligations as well as anniversary bonuses is determined with due regard to internal service regulations, on the basis of the following actuarial assumptions:• discountrate/Austria:3.75%p.a.(2012:3,75%p.a.) On the basis of the Mercer Pension Discount Yield Curve and the cash flows determined for the pension plan for active employees and pen-

sioners, the interest rate is 3.80% (duration: 16 years). Ashorterdurationappliestoprovisionsforseverancepaymentsandanniversarybonuses;alowerinterestratecouldthereforebeappliedto

these plans. However, the company prefers a standard interest rate for all provisions. On this basis the interest rate used for all calculations as at 31 December 2013 is 3.75% (31 December 2012: 3.75%).

• increasesundercollectivebargainingagreements:2.45%p.a.(2012:2.45%p.a.);assumptionofincreasesforemployeesandpensioners• careertrendsincludingregularsalaryincreasesunderthecurrentcollectivebargainingagreementforemployeesofAustrianbanksandthe

effects of the transitional rules under the 2005 reform of Bank Austria’s staff regulations. The rate applied in calculating non-regular salary increaseswas0.25%p.a.(2012:0.25%p.a.);assumptionofincreasesforemployees.

• nodiscountforstaffturnover• retirementage:asabasisforcalculationinrespectofemployeesenjoying“permanenttenure”statusinaccordancewiththeinternalagree-

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.• 2008-PstatisticaltablesofAktuarvereinÖsterreich(life-expectancytablesforsalariedstaff)

Sensitivity analysis (€ million)

effect ON defiNed beNefit ObligatiON

Discount rate –0.25% 1800.25% –169

Salary increase rate –0.25% –490.25% 50

Pension increase rate –0.25% –1250.25% 131

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.


A.6.9.2 – Other provisionsProvisions for risks and charges are recognised when•theentityhasapresentobligation(legalorconstructive)asaresultofapastevent;•itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligation;and•areliableestimatecanbemadeoftheamountoftheobligation.

The amounts recognised as provisions are the best estimate of the expenditure required to settle the present obligation. The risks and uncertainties that inevitably surround the relevant events and circumstances are taken into account in reaching the best estimate of a provision.

Where the effect of the time value of money is significant, the amount of the provision should be the present value of the best estimate of the cost required to settle the obligation. The discount rate used reflects the current market assessments.

Provisions are reviewed periodically and adjusted to reflect the current best estimate. If it becomes clear that it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. Provisions are used only for expenses for which they were originally recognised. Allocations made in the year are recognised in the profit and loss item“Provisionsforrisksandcharges”andincludeincreasesduetothepassageoftime;theyarealsonetofanyreversal.

“Other provisions” also include obligations relating to benefits due to agents, specifically supplementary customer portfolio payments, merit pay-ments,contractualpaymentsandpaymentsundernon-competitionagreements,whicharemeasuredasperdefinedbenefitplans;accordinglythese obligations are calculated using the projected unit credit projection method (see above under Retirement Payments and Similar Obligations).

Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security, are possible obligations that arise from past events whose existence will be confirmed only by occurrence or non-occurrence, of one or more uncertain future events not wholly within the control of Bank Austria, or are present obligations that have arisen from past events but are not recognised because it is not probable thatsettlement will require the outflow of resources, or because the amount of obligation cannot be reliably measured.

Contingent liabilities are not recognised in the financial statements but are disclosed unless the probability of settlement is low.

A.6.9.3 – Share-based paymentsEquity-settled payments made to employees in consideration of services rendered, using equity instruments comprise:•Stockoptions;•Performanceshares(i.e.awardedonattainmentofcertainobjectives);•Restrictedshares(i.e.subjecttoalock-upperiod).

Considering the difficulty of reliably measuring the fair value of the services acquired against equity-settled payments, reference is made to the fair value of the instruments themselves, measured at the date of the allocation.

This fair value is recognised as cost in the profit and loss item “Administrative costs – staff expense” offsetting the Shareholders’ Equity item “Reserves”, on an accruals basis over the period in which the services are acquired.

The fair value of a cash-settled share-based payment, the services acquired and the liability incurred are measured at the fair value of the liability, recognised in the item “Other liabilities”. The fair value of the liability, as long as it remains unsettled, is remeasured at each balance sheet date and all changes in fair value are recognised in the profit and loss item “Administrative costs”.

A.6.9.4 – Other long-term employee benefitsLong-term employee benefits – e. g. long-service bonuses, paid on reaching a predefined number of years’ service – are recognised in the item “Other liabilities” on the basis of the measurement at the balance sheet date of the liability, also in this case determined by an external actuary using the Projected Unit Credit Method (see section “Provisions for risks and charges – post-employment benefits”).

Gains (losses) on this type of benefit are recognised at once through profit or loss.



A.6.10 – EquityEquity is composed of paid-in capital, i. e., capital made available to the company by shareholders (subscribed capital plus capital reserves), and earned capital (retained earnings, foreign currency translation reserves, IAS 39 reserves, actuarial gains / losses, profit carried forward from the previous year, and net profit). The IAS 39 reserves include gains and losses on available-for-sale financial assets (available-for-sale reserve), which are not recognised in income, and those components of hedge accounting in accordance with IAS 39 which are not included in income (cash flow hedge reserve), after adjustment for deferred taxes.

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

A.6.11 – Net interestInterest income and expense and similar income and expense items relate to monetary items – i. e. liquidity and debt, financial instruments held for trading, measured at fair value through profit or loss or available for sale, HtM financial assets, loans and receivables, deposits, and securities in issue.

Interest income and expense are recognised through profit or loss with respect to all instruments measured at amortised cost, using the effective interest method.

Interest also includes the net credit or debit balance of differentials and margins on financial derivatives:•hedginginterest-bearingassetsandliabilities;•HfTbutlinkedforbusinesspurposestoassetsandliabilitiesdesignatedasmeasuredatfairvalue(fairvalueoption);•linkedforbusinesspurposestoHfTassetsandliabilitiespayingdifferentialsormarginsondifferentmaturities.

A.6.12 – Fees and commissionsFee and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate.

Other fees and commission income, including account servicing fees, investment managing fees, sales commission, placement fees and syndication fees, are recognised as the related services are performed.Other fees and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received.

A.6.13 – Dividends Dividends are recognised in profit or loss in the financial year in which their distribution has been approved.

A.6.14 – 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.

A.6.15 – 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.

A.6.16 – Impairment losses on loans/Impairment losses on other financial transactionsThese items include write-downs of loans, write-offs and additions to provisions for guarantees and commitments, and income from write-backs as well as recoveries of loans previously written off.



A.6.17 – Impairment /write-backs on property, plant and equipment and on intangible assetsWrite-downs on assets held under finance leases are part of this item.

A.6.18 – Profit (loss) of associatesDividends received from associates are included in the item Dividend income.

A.6.19 – Gains and losses on disposal of investmentsThis item includes gains/losses on the disposal of investments in property and other assets.

A.7 – Information on Fair Value

A.7.1 – General overviewThis section presents a disclosure of reclassified financial instruments according to IAS 39 and information on fair value as required by IFRS 13.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i. e. an exit price).

The fair value of a financial liability with a demand feature (e. g. a demand deposit) is not less than the amount payable on demand, discounted from the first date that the amount could be required to be paid.

For financial instruments listed in active markets, fair value is determined on the basis of official prices in the principal market to which the Group has access (Mark to Market).

A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from a pricing service, dealer, broker, agency that determines prices or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. If a published price quotation in an active market does not exist for a financial instrument in its entirety, but active markets exist for its component parts, fair value is determined on the basis of the relevant market prices for the component parts.

If the observable prices in an active market for the identical item held by another party as an asset, or other observable inputs, such as the quoted price in a market that is not active for the identical item held by another party as an asset are not available, the Group should use another valuation technique, such as:(i) an income approach (e. g. a present value technique that takes into account the future cash flows that a market participant would expect to receive fromholdingtheliabilityorequityinstrumentasanasset);

(ii) a market approach (e. g. using quoted prices for similar liabilities or equity instruments held by other parties as assets).

The Group uses valuation models (Mark to Model) in keeping with the methods generally accepted and used by the market. Valuation models include techniques based on the discounting of future cash flows and on volatility estimates, and they are subject to revision both during their development and periodically in order to ensure their consistency with the objectives of the valuation.

These methods use inputs based on prices set in recent transactions for the instrument being valued and/or prices /quotations for instruments having similar characteristics in terms of risk profile.

Indeed, these prices /quotations are relevant for determining significant parameters in terms of the credit risk, liquidity risk and price risk of the instrument being valued.

Reference to these “market” parameters makes it possible to limit the discretionary nature of the valuation, and ensures that the resulting fair value can be verified.

If for one or more risk factors it is not possible to refer to market data, the valuation models employed use estimates based on historical data as inputs.



As a further guarantee of the objectivity of valuations derived from valuation models, the Group employs:• independentpriceverifications(IPVs);• fairvalueadjustments(FVAs).

Independent price verification requires that the prices for trading positions be verified monthly by Risk Management units that are independent from the units that assume the risk exposure.This verification calls for comparing and adjusting the daily price in line with valuations obtained from independent market participants.

For instruments not quoted in active markets, the above verification process uses prices contributed by information providers as a reference, and assigns a greater weighting to those prices that are considered representative of the instrument being valued.

This valuation includes the “executability” of the transaction at the price observed, the number of contributors, the degree of similarity of the financial instruments, the consistency of prices from different sources, and the process followed by the information provider to obtain the information.

Independent price verification is supplemented by the calculation of further regulatory fair-value adjustments, which are also recognised for accounting purposes, to take into account risks mainly associated with both the limited liquidity of the positions, the valuation models used and counterparty risk.

A.7.2 – Fair value hierarchyIFRS 13 calls for classifying instruments being measured at fair value as a function of the ability to observe the inputs used for pricing.

To be specific, three levels are specified:• Level1:thefairvalueofinstrumentsclassifiedinthislevelisdeterminedbasedonquotationpricesobservedinactivemarkets;• Level2:thefairvalueofinstrumentsclassifiedinthislevelisdeterminedbasedonvaluationmodelsthatuseinputsthatcanbeobservedinactivemarkets;

• Level3:thefairvalueofinstrumentsclassifiedinthislevelisdeterminedbasedonvaluationmodelsthatprimarilyuseinputsthatcannotbeobserved in active markets.

The following tables show a breakdown of financial assets and liabilities designated at fair value according to the above-mentioned levels, as well as the annual changes of Level 3 assets or liabilities.

Accounting portfolios – Breakdown by fair value levels (€ million)

fiNaNcial assets/liabilities measured at fair value 31 dec. 2013 31 dec. 2012

level 1 level 2 level 3 level 1 level 2 level 3

Financial assets held for trading 306 2,115 13 284 2,496 76Financial assets at fair value through profit or loss 21 236 86 75 224 127Available-for-sale financial assets 13,996 6,165 1,341 9,914 8,913 2,236Hedging derivative assets – 2,911 2 – 4,125 –Property, plant and equipment (measured at fair value) – – 41 – – 78tOtal 14,323 11,426 1,483 10,273 15,758 2,517Financial liabilities held for trading 31 1,586 7 42 2,152 2Financial liabilities at fair value through profit or loss – 788 – – 1,152 –Hedging derivative liabilities – 2,272 1 – 2,988 1tOtal 31 4,646 8 42 6,291 4



1), 3) Increases/decreases in financial assets are recognised in the income statement in the following items:•Gainsandlossesonfinancialassetsheldfortrading;•Fairvalueadjustmentsinhedgeaccounting;•Gainsandlossesonfinancialassetsatfairvaluethroughprofitorloss.

2), 4) Gains or losses arising out of changes in fair value are recognised in the equity item “Revaluation reserves” – except losses due to impairment and exchange rate gains or losses on monetary items (debt instruments) which are recognised under “Impairment losses on available-for-sale financial assets” and “Gains and losses on financial assets and liabilities held for trading”, respectively – until the financial asset is sold, at which time cumulative gains and losses presented in revaluation reserves are recognised in profit or loss in “Gains (losses) on disposal or repurchase of available-for-sale financial assets”.

Annual changes in financial assets at fair value level 3 (€ million)

2012fiNaNcial assets

held fOr tradiNg

at fair value thrOugh

prOfit Or lOss available fOr sale hedgiNg derivatives

Opening balances 90 143 2,158 –increases 80 7 962 –

Purchases 32 – 685 –Profits recognised in:

Income statement 33 7 18 –of which unrealised gains 1) 4 4 11 –Equity 2) X X 226 –

Transfers from other levels 10 – 2 –Other increases 5 – 30 –

decreases – 94 –23 –884 –Sales –42 – –319 –Redemptions –35 –20 –193 –Losses recognised in:

Income statement –5 –2 –70 –of which unrealised losses 3) –1 –2 –25 –Equity 4) X X –243 –

Transfers to other levels –1 – –36 –Other decreases –10 –1 –22 –

closing balances 76 127 2,236 –2013

fiNaNcial assets

held fOr tradiNg


prOfit Or lOss available fOr sale hedgiNg derivatives

Opening balances 76 127 2,236 –increases 744 6 928 2

Purchases 721 – 495 2Profits recognised in:

Income statement 15 5 138 –of which unrealised gains1) 2 5 – –Equity 2) X X 69 –

Transfers from other levels 1 – 139 –Other increases 6 1 87 –

decreases –806 –47 –1,824 –Sales –735 – –637 –Redemptions –23 –16 –15 –Losses recognised in:

Income statement –4 –29 –34 –of which unrealised losses3) – –29 – –Equity 4) X X –138 –

Transfers to other levels – – –840 –Other decreases –45 –2 –159 –

closing balances 13 86 1,341 2



1), 2) Increases/decreases in financial liabilities are recognised in the income statement in the following items:•Gainsandlossesonfinancialliabilitiesheldfortrading;•Fairvalueadjustmentsinhedgeaccounting;•Gainsandlossesonfinancialliabilitiesatfairvaluethroughprofitorloss.

Annual changes in financial liabilities at fair value level 3 (€ million)

2012fiNaNcial liabilities

held fOr tradiNg


prOfit Or lOss hedgiNg derivatives

Opening balances 10 – –increases 38 – 1

Issuance – – –Losses recognised in:

Income statement 37 – –of which unrealised losses 1) 2 – –Equity X X –

Transfers from other levels – – –Other increases 1 – 1

decreases –46 – –Redemptions –41 – –Purchases – – –Profits recognised in:

Income statement –1 – –of which unrealised gains –1 – –Equity X X –

Transfers to other levels – – –Other decreases –4 – –

closing balances 2 – 12013

fiNaNcial liabilities

held fOr tradiNg


prOfit Or lOss hedgiNg derivatives

Opening balances 2 – 1increases 21 – 1

Issuance – – 1Losses recognised in:

Income statement 21 – –of which unrealised losses 6 – –Equity X X –

Transfers from other levels – – –Other increases – – –

decreases –17 – –1Redemptions –16 – –Purchases – – –Profits recognised in:

Income statement –1 – –of which unrealised gains 2) – – –Equity X X –

Transfers to other levels – – –Other decreases – – –1

closing balances 7 – 1



The level migrations for fixed income securities are due to alignment with fair value hierarchy levels provided by the UCG group-wide bond IPV process. Since the global IPV process has access to more markets in combination with a more accurate methodology this constitutes an improvement of the classification on average.

A.7.3 – Day One Profit /LossThe value at which financial instruments are recognised is equal to their fair value on the same date.The fair value of financial instruments, other than those designated at fair value through profit or loss, at their recognition date is usually assumed to be equal to the amount collected or paid.

For financial instruments held for trading (see Part A.5.3.2 above) and instruments designated at fair value (see Part A.5.3.2 above), any difference from the amount collected or paid is posted under the appropriate items of the income statement.The use of conservative valuation models, the processes described above for revising the models used and related parameters and value adjustments to reflect model risk ensure that the amount recognised in the income statement is not derived from the use of valuation parameters that cannot be observed.

More specifically, the calculation of fair value adjustments to reflect model risk ensures that the fair value portion of these instruments relating to the use of subjective parameters is not recognised in the profit and loss account, but changes the balance sheet value of these instruments.Recognition of this portion in the profit and loss account is then made only when objective parameters are applied and therefore the adjustments are derecognised.

The balance of value adjustments to reflect model risk was €69 million at 31 December 2013.

Accounting portfolios measured at fair value: transfers between Levels of the fair value hierarchy (Level 1 and Level 2) (€ million)

31 december 2013level 1 level 2

financial assetsFinancial assets held for trading

Transfer from Level 1 X –4Transfer from Level 2 –28 X

Financial assets at fair value through profit or lossTransfer from Level 1 X –Transfer from Level 2 –4 X

Available-for-sale financial assetsTransfer from Level 1 X –49Transfer from Level 2 –1,228 X

Hedging derivatives assetsTransfer from Level 1 X –Transfer from Level 2 – X

financial liabilitiesFinancial liabilities held for trading

Transfer from Level 1 X –Transfer from Level 2 – X

Financial liabilities at fair value through profit or lossTransfer from Level 1 X –Transfer from Level 2 – X

Hedging derivatives liabilitiesTransfer from Level 1 X –Transfer from Level 2 – X



A.7.4 – Additional information on fair valueWe hereby provide information required under IFRS 13 about accounting portfolios measured at fair value on a recurring basis.

Fixed income securitiesFixed income securities are priced in a two-tier process depending on the liquidity in the respective market. Liquid instruments in active markets are marked to market and consequently positions in these instruments are disclosed in reference to the fair value hierarchy under Level 1. Instruments not traded in active markets are marked to model based on implied credit spread curves derived from the former Level 1 instruments. The model maximises the use of observable input and minimises the use of unobservable inputs. In this respect, depending on the proximity of thecreditspreadcurveapplied,thebondsaredisclosedasLevel2orLevel3,respectively;Level3isappliedincasecomparablecreditspreadcurves are not available (and unobservable credit spreads are used), or in the case of complex bonds. Under fair value accounting, fair value adjustments for liquidity and model deficiencies compensate for the lack of market observables for the Level 2 and Level 3 positions.

In the global bond Independent Price Verification (IPV) process, market prices of Level 1 bonds and pricing models for illiquid bonds are regularly verified for accuracy. The global IPV process is already established in UniCredit Bank Austria AG and is subject to rollout to the CEE subsidiaries in 2014;currentlytheCEEsubsidiariesperformalocalIPVprocessincompliancewiththeGrouppolicy.

Structured financial productsThe company determines the fair value of structured financial products using the appropriate derivative valuation methodology given the nature of the embedded derivative. Such instruments are classified as Level 2 or Level 3 depending on the observability of significant inputs to the model.

Asset-backed securitiesUniCredit’s “Structured Credit Bonds Valuation Group Policy” is centred on:• extensionandimplementationacrossalltheGroup’slegalentitiesofthenewIndependentPriceVerification(IPV)processsuitedtothechangedmarketconditionsforstructuredcreditbonds;

• integrationofthecurrentFairValueAdjustmentsPolicy.According to the IPV process the quality of a price is assessed based upon the availability of quotes of independent market players for identical assets. The process relies in the first instance on Markit as reliable collector of market quotes.As a second step “fallback” prices are assessed by benchmarking each security to a pool of similar securities with available market quotes.

OTC derivativesFair value of derivatives not traded in an active market is determined using a valuation technique. In such cases, where active markets exist for its component parts, then fair value is determined on the basis of the relevant market prices for the component parts.Valuation techniques that are based on inputs that are observable are referred to as Level 2 valuations. Valuation techniques that use significant unobservable inputs are referred to as Level 3 valuations.

Equity instrumentsEquity instruments are assigned to Level 1 when a quoted price is available on an active market and to Level 3 when no quotations are available or quotations have been suspended indefinitely (equity instruments are disclosed as Level 2 only if the market where the equity is quoted is not considered to be sufficiently active and therefore an adjustment to the quoted prices appears to be required.

Investment fundsBank Austria group holds investments in certain investment funds that calculate the net asset value (NAV) per share, including mutual funds, private equity funds, and real estate funds. The company’s investments include co-investments in funds that are managed by the company and investments in funds that are managed by third parties.



Private equity fundsPrivate equity funds are disclosed as Level 3 since reliable NAV prices are usually not available.When reliable information for fair value measurements is not available, private equity funds are valued at cost and classified as available for sale (“fixed assets”) under IAS 39. An increase in value of the private equity asset does not lead to an increase in book value, while a value increase is only shown at exit via capital gains. A decline of value might give reason for an impairment if certain criteria are met. Objectiveevidence is given when an adverse effect on the expected future cash flows can be presumed, and quantified reliably, and is significant or prolonged.

Other fundsBank Austria group holds investments also in mutual funds and real estate funds.Mutual funds are usually assigned to Level 1 or Level 2 due to the high level of transparency and traceability of their market and observable inputs.

Real estate funds disclosure as level 2 or level 3 is mainly related to the characteristics of their underlying asset. Regardless of the typology, investment funds are evaluated through an adequate adjustment of the NAV based on the specific features of each fund.

Fair value adjustmentsThe base fair value assessments have to be adjusted for factors not included in the base NPV that a market participant would consider in order to arrive at the derivative instrument’s fair value. Such adjustments, within the Bank Austria Group, include:• Creditanddebitvaluationadjustment(CVA/DVA)• Modelrisk• Close-outrisk• Otheradjustments

Credit and debit valuation adjustment (CVA/DVA)Credit valuation adjustments (CVAs) and debit valuation adjustments (DVAs) are incorporated into derivative valuations to reflect the impact on fair value of counterparty credit risk and UniCredit Bank Austria AG’s own credit quality, respectively.

UniCredit CVA/DVA methodology is based on the following input:• Expectedexposureprofilesderivedbysimulationtechniques.• SimulatedexposuresalsotakeintoaccountSpecificWrongWayRisk(e.g.EQoptions,repos)isconsidered.

Depending on the counterparty segment a mixed approach is applied: 1) unilateral CVA calculation based on historical PDs and LGDs (for non-financial counterparts and counterparts with no single-name CDS), 2) bilateral CVA calculation based on market-implied PDs and LGDs (CDS).

For customers with PD=1 (i. e. defaulted customers), an additional CVA/DVA is not calculated in order to avoid double counting with a general or specific loan loss provision.

OIS Discounting AdjustmentThe group has applied the following approximation centrally by means of an adjustment as of 31 December 2013 in order to reflect the effect of OIS (overnight index swap) discounting for collateralised exposures: The EUR discount curve is replaced with OIS curve and the impact on profit and loss is evaluated via a full revaluation. In order to cover the OIS effect from non-EUR currencies, an additional OIS-model reserve was booked. Both adjustments were booked as changes in accounting estimates and booked for the first time in 2013.

Model riskFinancial models are used for the valuation of the financial instruments if direct market quotes are not readily available. In general the model risk is represented by the possibility that a financial instrument’s evaluation is actually sensitive to the choice of model. It is possible to value the same financial instrument by using alternative models which could provide different results in terms of pricing. The model risk adjustments refer to the risk that the actual fair value of the instrument differs from the value produced by the model. The reserve with regard to structured own issues (own credit spread) is covered under the model risk reserve.



Close-out riskThe close-out adjustment accounts for the costs of closing an (aggregated) position measured at fair value. The position could be closed by a sale (or purchase in the case of a short position), or by entering into a new transaction (or several transactions) that offsets (hedges) the open position. The close-out costs are typically derived from the bid /ask spreads observed on the market. It accounts for the fact that a position is valued at mid but can only be closed at bid or ask. Therefore the bid /ask spread determines the adjustment. Moreover a close-out adjustment of the NAV is required when there are some penalties related to position write-off in an investment fund.

Other adjustmentsOther fair value adjustments, which are not included in the previous categories, could be taken into consideration to align the evaluation to the current exit price, e. g. adjustments of equity prices whose quotation on the market is not representative of the effective exit price or adjustments of less liquid securities.

Description of the valuation processes used by the entity for fair value measurements categorised within Level 3 of the fair value hierarchyUniCredit ensures that the value applied to each trading book position appropriately reflects the current fair value. Fair value measurements of assets and liabilities are determined using various techniques, including, but not limited to, discounted cash flows and internal models.Based on the observability of inputs used, all the financial instruments are classified as Level 1, Level 2 or Level 3 of the fair value hierarchy. When a position involves one or more significant inputs that are not directly observable, additional price verification procedures are applied. These procedures may include reviewing relevant historical data, analysing profit and loss, valuing each component of a structured tradeindividually, and benchmarking, among others. This approach involves estimation and expert judgment and, therefore, might require valuation adjustments which take into account bid-ask spreads, liquidity and counterparty risk, besides the employed pricing model.

According to Group Market Risk Governance Guidelines, in order to ensure the adequate separation between functions in charge of development activities and functions in charge of validation, all pricing models developed by legal entities’ front-office functions are centrally and indepen-dently tested and validated by the Holding Company Market Risk functions. The purpose of this independent control framework is to assess model risk arising from models’ theoretical soundness, calibration techniques where needed, and the appropriateness of the model for a specific product in a defined market.

In addition to daily marking to market or marking to model, Independent Price Verification (IPV) shall be performed. The Global Bond IPV Project is aimed at supplying a market risk-independent fair value (FV) for any illiquid instrument.

The sensitivity analysis for Level 3 positions with respect to the unobservable model input is based on the following categories of model inputs:credit spreads (sp): For instruments exposed to issuer risk the unobservable input is mainly the issuer credit spread.interest rates (ir): In the absence of liquid interest rate swap markets the term structure of the yield curve is proxied.equity (eq): In the absence of active markets equity prices are proxied.

The reasonable alternative estimate for the model input is disclosed in the column “Variation Range”.ThesensitivityanalysisfortheBankAustriaGrouprevealsthattheLevel3positionresidesintheregulatorybankingbook(BB);fromafinancialreporting perspective the fixed income securities are predominantly booked as available for sale (AfS) and derivatives in the BB are mainly used for hedge accounting. As the portfolio in the Bank Austria Group is rather plain by nature, there are materially no more complex unobservable model inputs applied (e. g. volatilities).



Description of the valuation technique used to measure the fair value of items categorised in Level 2 or Level 3Valuation techniques are used to value positions for which a market price is not available from market sources. UniCredit Group uses well known valuation techniques for determining fair values of financial and non-financial instruments that are not actively traded and quoted. The valuation techniques used for Level 2 and Level 3 assets and liabilities are described as follows.

Option pricing modelOption model valuation techniques are generally used for instruments in which the holder has a contingent right or obligation based on the occurrence of a future event, such as the price of a referenced asset going above or below a predetermined strike price. Option models estimate the likelihood of the specified event occurring by incorporating assumptions such as volatility estimates, price of the underlying instrument andexpected rate of return.

Discounted cash flowDiscounted cash flow valuation techniques generally consist of developing an estimate of future cash flows that are expected to occur over the life of an instrument. The model requires the estimation of the cash flow and the adoption of market parameters for the discounting: the discount rate or discount margin reflects the credit and/or funding spreads required by the market for instruments with similar risk and liquidity profilesto produce a “present value”. The fair value of the contract is given by the sum of the present values of future cash flows.

(€ million)

baNkiNg bOOk tradiNg bOOk variatiON raNge

fixe

d in

com

e se

curit

ies

cred

it sp

read

abs/mbs –0.10 0.00 40bp –480bp

services – finance –15.51 –3.27aaa 0.00 0.00 10bp

aa –0.03 –0.04 25bpa –12.55 –0.02 50bp

bbb –2.92 –3.20 100bp

corporates & indices –2.95 –0.48 10bp –300bp

treas/muni /supr –5.09 –0.01aaa 1.57 0.00 15bp

aa –0.12 0.00 10bpa –0.04 0.00 30bp

<= bbb –6.50 –0.01 70bp –250bp

total sp –23.66 –3.76

deriv

ativ

es, m

oney

mar

ket,

sft,

equi

ties

inte

rest

rat

e hrk –0.25 0.14 100 bpuah –0.58 0.00 100 bpxau 0.00 0.90 100 bp

total ir –0.83 1.03

equity total eq 0.54 –0.73 15%

grand total –23.95 –3.45



Hazard Rate ModelUnlike bonds, the gain or loss from a CDS position cannot be computed simply by taking the difference between current market quoted price plus the coupons received and the purchase price. To value a CDS we need to use a term structure of default swap spreads, a recovery rate assumption and a model.

Market approachA valuation technique that uses prices generated by market transactions involving identical or comparable (i. e. similar) assets, liabilities or a group of assets and liabilities, such as a business.

Adjusted NAVNet asset value is the total value of a fund’s assets less liabilities. An increase in net asset value would result in an increase in a fair value measurement.

Description of the unobservable inputs used to measure the fair value of items categorised in Level 3 and of the sensitivity of the fair value measurement to changes in those inputsThe directional sensitivity of the company’s Level 3 fair value measurements to changes in significant unobservable inputs is provided below. For fair value measurement where significant unobservable inputs are used (Level 3) sensitivity analysis is performed in order to generate a range of reasonably possible alternative valuations. The Group considers that the impact of an unobservable input on the Level 3 fair value measure-ments depends on the correlation between various inputs used in the valuation process. Furthermore, the effect of a change in an unobservable input impacts the amount and the direction of the fair value measurement depending also on the nature of the instrument and on whether the instrument is held as an asset or as a liability.

VolatilityVolatility is a measure for variation of price of a financial instrument over time. In particular, volatility measures the speed and severity of market price changes for an instrument, parameter or market index given how much the particular instrument, parameter or index changes in value over time, expressed as a percentage of relative change in price. The higher the volatility of the underlying, the riskier the instrument. In general, long option positions (assets) benefit from increases in volatility, whereas short option positions (liabilities) will suffer losses.There are different types of volatility: volatility of interest rate, inflation volatility, volatility of foreign exchange and volatility of equity stocks, equity or other indices.

CorrelationCorrelation is a measure of the relationship between the movements of two variables. When parameters are positively correlated, an increase in correlation results in a higher fair value measurement. On the contrary, given a short correlation position, an increase in correlation, in isolation, would generally result in a decrease in a fair value measurement. Therefore changes in correlation levels can have a major impact, favourable orunfavourable, on the fair value of an instrument, depending on the type of correlation.

Correlation is a pricing input for a derivative product where the payoff is driven by multiple underlying risks. The level of correlation used in the valuation of derivatives with multiple underlying risks depends on a number of factors including the nature of those risks.

DividendsThe derivation of a forward price for an individual stock or index is important both for measuring fair value for forward or swap contracts and for measuring fair value using option pricing models. The relationship between the current stock price and the forward price is based on a combina-tion of expected future dividend levels and payment timings and, to a lesser extent, the relevant funding rates applicable to the stock in question. The dividend yield and timing represents the most significant parameter in determining fair value for instruments that are sensitive to an equity forward price.

Interest rate curveLess liquid currencies’ interest curve refers to the rates in currencies for which a market liquidity in terms of tightness, depth and resiliency does not exist. The illiquidity of these input data directly impacts the valuation of bonds or derivatives expressed in illiquid currencies.

Credit spreadsDifferent valuation models, especially for credit derivatives, require an input for the credit spread which reflects the credit quality of the associated credit name. The credit spread of a particular security is quoted in relation to the yield on a benchmark security or reference rate, typically either U. S. Treasury or LIBOR, and is generally expressed in terms of basis points. The ranges for credit spreads cover a variety of underlyings (index and single names), regions, sectors, maturities and credit qualities (high-yield and investment-grade). The broad range of this population gives rise to the width of the ranges of unobservable inputs.



Loss Given Default (LGD)/recovery rateLGD, also known as loss severity (the inverse concept is the recovery rate), represents the percentage of contractual cash flows lost in the event of a default, expressed as the net amount of loss relative to the outstanding balance. An increase in the loss severity, in isolation, would result in a decrease in a fair value measurement. Loss Given Default is facility-specific because such losses are generally understood to be influenced by key transaction characteristics such as the presence of collateral and the degree of subordination.

PriceWhere market prices are not observable, comparison via proxy is used to measure a fair value.

Prepayment rate (PR)The PR is the estimated rate at which forecast prepayments of principal of the related debt instrument are expected to occur. Voluntary unscheduled payments (prepayments) change the future cash flows for the investor and thereby change the fair value of the security.In general, as prepayment speeds change, the weighted average life of the security changes, which impacts the valuation either positively or negatively, depending upon the nature of the security and the direction of the change in the weighted average life.

Probability of Default (PD)The probability of default is an estimate of the likelihood of not collecting contractual amounts. It provides an estimate of the likelihood that a client of a financial institution will be unable to meet its debt obligations over a particular time horizon. The PD of an obligor not only depends on the risk characteristics of that particular obligor but also on the economic environment and the degree to which it affects the obligor.

Financial instruments not carried at fair value (FV), including “Loans and receivables with customers and banks” and “Deposits from customers and banks”, are not managed on a fair value basis.

For these instruments, fair values are calculated solely in order to comply with disclosure requirements and do not impact the balance sheet nor profit or loss. Additionally, since the instruments generally are not traded, FV measurement is based on internal parameters considered not observa-ble inputs according to IFRS 13.

When comparing fair value disclosures as of 31 December 2013 with prior-year disclosures as of 31 December 2012 one must take into account that the methodological approach of fair value calculation of loans and deposits was materially improved during 2013, taking into account more precise and consistent credit risk information in the discounting routines. In general the trend of decreasing spreads and interest rate levels in 2013 should entail soaring fair value results.

Loans and receivablesThe fair value of loans and receivables with customers and banks measured at amortised cost is mainly determined using a risk-adjusted net present value approach. For some portfolios simplified approaches are applied, taking into consideration their financial features.

Cash flows include capital repayments, interest payments and any other charges and depend on contractual conditions and market conditions (i. e. interest rates).

The risk-free rate represents the amount of interest the market asks for investments with no risk for a specific maturity.

Credit Spread (CS) represents the excess return a market participant asks for a risky investment. CS for non-quoted products, like commercial instruments,cannotbederivedfromobservablemarketprices;thebankhasthereforeestimatedtheCSbasedoncounterpart / transactionspecificfactors (i. e. recovery-rate assumptions and probability of default).

For the purpose of defining the level of the fair value hierarchy (Level 2 or Level 3), the bank estimates whether the estimated credit spread has a material effect on the fair value. If the fair value calculated on the basis of a discount rate including the estimated credit spread does not differ materially from a risk-free present value, the loans and receivables are classified as Level 2.



LiabilitiesThe fair value of liabilities, recorded at amortised cost, is determined using the Discounted Cash Flow model as previously described for loans and receivables. The bank’s own credit spread is determined using Bank Austria’s subordinated and non-subordinated risk curves.

The classification into the levels of the fair value hierarchy is made according to the same methodology as for loans and receivables.

Held-to-maturity investmentsConsidering that held-to-maturity investments are mainly composed of securities, fair value for this asset class is determined according to what was previously explained in the section “Additional information on fair value – fixed income securities”.

Cash and cash balancesCash and cash balances are not carried at fair value on the consolidated balance sheet, but they are carried at amounts that approximate fair value, due to their short-term nature and generally negligible credit risk.

Debt securities in issueThe fair value of debt securities in issue, recorded at amortised cost, is determined using the Discounted Cash Flow model.

A.7.5 – Transfer between portfoliosIn 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 had reclassified asset-backed securities (ABSs/specific securitised assets) from financial assets held for trading into loans and receivables with customers with effect from 1 July 2008 at the fair values determined at that date.

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

The following table shows the effects of this reclassification by item in the statement of financial position and by income statement item as at 31 December 2013:

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

accOuNtiNg pOrtfOliO befOre reclassificatiON

accOuNtiNg pOrtfOliO after reclassificatiON

carryiNg amOuNt

as at 31 dec.

2013

fair value as at

31 dec. 2013

iNcOme/expeNses abseNt reclassificatiON

(befOre taxes)

iNcOme/expeNses recOg-Nised duriNg the periOd

(befOre taxes)

types Of iNstrumeNtsfrOm

measuremeNt OtherfrOm

measuremeNt Other

debt securities –3,599 –3,621 106 72 –5 89HFT AFS –10 –10 – – – –HFT HTM –18 –19 –2 2 – 1HFT Loans to banks – – – – – –HFT Loans to customers –625 –597 60 21 –6 18AFS Loans to banks –2,946 –2,994 48 49 – 69

tOtal –3,599 –3,621 106 72 –5 89



A.8 – Impairment testIn compliance with IFRS 3 and in conjunction with IAS 36 and IAS 38, goodwill and intangible assets with indefinite useful lives allocated to cash-gen-erating units (CGUs) were tested for impairment as at 31 December 2013.

Goodwill per Cash Generating Unit: annual changes (€ million)

31 dec. 2012chaNges due tO

curreNcy mOvemeNtsOther

chaNges*)impairmeNt

2013 31 dec. 2013

Turkey 350 –71 – –279 –

Russia 795 –86 – –708 –

Czech Republic 311 –11 88 –388 –

Croatia 50 – – –50 –

Bulgaria 159 – – –159 –

Romania 134 –1 – –133 –

Hungary 118 – – –118 –

Bosnia 39 – – –39 –

Serbia 19 – – –19 –

Slovakia 88 – –88 – –

Other 63 – – –63 –

tOtal 2,127 –170 – –1,957 –

*) transfer of goodwill due to merger

Definition of cash-generating units (CGu)Estimating the value in use for the purposes of goodwill impairment testing requires that goodwill is first attributed to autonomous operating units (from the points of view of independent cash flows generated and of internal planning and reporting). These units are defined as cash-generating units (CGU).

According to IAS 36 a CGU is the smallest identifiable group of assets that generates cash flows that are largely independent of cash flows of other groups of assets or other CGUs. The cash-generating unit is defined as the lowest level within the Group at which goodwill is allocated for manage-ment purposes. Goodwill recognised is an intangible asset representing the future economic benefits arising from those assets acquired in a business combination which are not individually identified.

Calculation of value in useThe impairment test is carried out by comparing the carrying value of each CGU with its recoverable amount. When the latter proves to be less than the carrying amount, an impairment must be recorded in the financial statements. The recoverable amount of the CGU is the higher of its fair value (net of sales costs) and the related value in use.

The value in use is determined on the basis of future cash flows expected from each CGU to which goodwill has been allocated. These cash flows are estimated based on:• currentmacroeconomicscenarios• thebudgetfor2014• the5-yearplanfortheperiod2015–2018

Projections of future results were extended to 2023 by extrapolation in order to obtain an assessment of the earning capability of the Group and its ability to create value over time. The expected cash flow for 2023 is the basis for calculating the Terminal Value, which represents the ability of the CGUs to generate future cash flows beyond that year. Based on the adopted methodology, Terminal Value is calculated as a perpetual income esti-mated on the basis of a normalised, economically sustainable cash flow, consistent with a constant long-term growth rate, as required by the IAS/ IFRS accounting standards.

The value in use is determined by discounting the financial flows at a rate that takes into account present market rates and the specific risks of the asset. Taking into consideration the different risk levels of their respective operating environments, we used different risk premiums for each CGU including a component related to country risk.

The corresponding carrying amount of a cash-generating unit for purposes of testing impairment of the related goodwill is determined on the basis of pro-rata equity and the carrying amount of goodwill allocated to that unit.



Discounted Cash Flow ModelFor the fair value calculation the Standard UniCredit Group Discounted Cash Flow Valuation Model (3-phase model) was employed throughout the Group, as in the previous year, using the following assumptions: The cash flows were determined by subtracting the annual capital requirement, generated by risk-weighted assets, from net profit (net of minority interests). This capital requirement is defined as the level of capitalisation that the Group aspires to achieve in the long term, also in light of the minimum regulatory capital requirements.

The Discounted Cash Flow model used by the Group is based on three stages:• Phase1–planningperiod(2014–2018):the2014budgetfiguresfornetprofitandrisk-weightedassetswereusedfor2014andmulti-yearplan

figures were used for subsequent years.• Phase2(2019–2023)–inthisphasethegrowthratesofnetincomeandrisk-weightedassetsconvergetowards2%.Thediscountrateinthe

form of cost of equity (Ke) declines to the corresponding terminal value level (for details see the following section on “Calculation of cost of equity”).• Phase3–perpetualannuity:calculationofthepresentvalueofaperpetualannuityontheassumptionofalong-termgrowthratewhichtakesthe

sustained long-term economic growth expected by Bank Austria for the euro area into account (2%).

Phase 1 is the result of a detailed planning process which does not exceed the 5-year horizon in accordance with IAS 36. The purpose of phase 2 is to illustrate the expected long-term convergence of growth rates in these markets to those in Europe.

As required by IAS 36.33(c), the nominal growth rates applied to the model both in the intermediate period and in the TV are much lower than the average long-term growth rate of the sector or of the countries in which the Group is present.



Calculation of cost of equityThe expected cash flows are discounted at the country-specific rate of cost of capital, which is determined on the basis of the long-term risk-free interest rate of the local currency, the debt risk premium and the UniCredit equity risk premium. The discount rate is a nominal rate, net of taxes.• risk-free rate: Calculation is based on the historical average (6 years) of the 5-year swap rate in local currency. If no swap rate is available, the

most liquid and comparable interbank rate (with a 3-month tenor) is used.• risk premium for debt: This is the country risk premium calculated as the historical average (6 years) of the 5-year credit default swap paid by the

country (given the lack of time series in certain countries we considered a shorter time period or the asset swap spread of a benchmark government bond).

• risk premium for equity: This is calculated using the option pricing model and is based on the historical volatility of the UniCredit share price over the last six years.

• terminal value cost of equity: The cost of capital used in discounting cash flows converges to a specific value for each CGU. This value is deter-mined taking into account the market‘s risk perception concerning the ability of the banking sector to generate returns in the long-term and the level of capitalisation that the Group hopes to achieve in the long term. The terminal value cost of capital used differs depending on whether the CGU is located in the euro area (10%), in an Eastern European country that would in the medium term enter the euro zone (10.35%) or in another country (11.85%).

The relevant parameters were as follows:

iNitial discOuNt rate – ke fiNal discOuNt rate ke target value

NOmiNal grOWth rate cagr target value*)subsidiary 2013 2012

Croatia 17.13% 16.43% 11.85% 2%Bosnia 14.67% 14.20% 11.85% 2%Bulgaria 14.70% 15.35% 10.35% 2%Czech Republic & Slovakia 12.17% 12.23% 10.35% 2%Hungary 18.71% 18.27% 10.35% 2%Romania 19.41% 19.04% 11.85% 2%Russia 18.73% 17.90% 11.85% 2%Slovenia 12.56% 12.55% 10.00% 2%

Serbia & Montenegro 25.30% 24.69% 11.85% 2%Turkey 22.49% 23.76% 11.85% 2%

*) 2013 unchanged compared with 2012.

The full impairment of goodwill in all cases implies that the value in use for each CGU is equal to the net equity. Since the value in use calculation only reflects a best estimate assumption of a possible range of outcomes (including a sensitivity analysis based on the applied discount rates /Ke), manage-ment decided to impair the full goodwill also for those CGUs where the value in use differs slightly from net equity.

It should also be noted that the parameters and the information used to test goodwill impairment are significantly influenced by the macroeconomic environment and market conditions, which can be subject to rapid unforeseeable changes, possibly leading to very different results as compared to those used for the 2013 consolidated financial statements.

Due to the full impairment of the total goodwill, a sensitivity analysis is not applicable.




A.9 – Group of consolidated companies and changes in the group of consolidated companies of the Bank Austria Group in 2013

Consolidated companiesdOmicile iNterest iN % vOtiNg rights

cOmpaNy city cOuNtrydirect

OWNershipiNdirect

OWNership tOtal tOtal

unicredit bank austria ag vienna austriaAI Beteiligungs GmbH Vienna Austria 100.00 0.00 100.00 100.00Alpine Cayman Islands Ltd. George Town Cayman Islands 100.00 0.00 100.00 100.00Ambassador Parc Dedinje d. o. o. Belgrade Serbia 0.00 100.00 100.00 100.00Arany Penzügyi Lizing Zrt. Budapest Hungary 0.00 100.00 100.00 100.00Artist Marketing Entertainment GmbH Vienna Austria 0.00 100.00 100.00 100.00AS UniCredit Bank Latvia Riga Latvia 100.00 0.00 100.00 100.00AWT Handels Gesellschaft m. b.H. Vienna Austria 0.00 100.00 100.00 100.00AWT International Trade GmbH Vienna Austria 100.00 0.00 100.00 100.00BA Alpine Holdings Inc. Wilmington USA 100.00 0.00 100.00 100.00BA Betriebsobjekte GmbH Vienna Austria 100.00 0.00 100.00 100.00BA Betriebsobjekte GmbH & Co Beta Vermietungs OG Vienna Austria 0.00 100.00 100.00 100.00BA Betriebsobjekte Praha, spol. s. r. o. Prague Czech Republic 0.00 100.00 100.00 100.00BA Creditanstalt Bulus EOOD Sofia Bulgaria 0.00 99.45 99.45 99.45BA Gebäudevermietungs GmbH Vienna Austria 0.00 70.00 70.00 70.00BA GVG-Holding GmbH Vienna Austria 100.00 0.00 100.00 100.00BA Immo-Gewinnscheinfonds1 Vienna Austria 99.00 0.00 99.00 99.00BA Private Equity GmbH Vienna Austria 100.00 0.00 100.00 100.00BA-CA Finance II Limited George Town Cayman Islands 0.00 100.00 100.00 100.00BA-CA Finance Limited George Town Cayman Islands 0.00 100.00 100.00 100.00BA-CA Infrastructure Finance Advisory GmbH Vienna Austria 0.00 100.00 100.00 100.00BA-CA Markets & Investment Beteiligung Ges. m. b.H. Vienna Austria 100.00 0.00 100.00 100.00BA-CA Wien Mitte Holding GmbH Vienna Austria 100.00 0.00 100.00 100.00Bank Austria Finanzservice GmbH Vienna Austria 100.00 0.00 100.00 100.00Bank Austria Real Invest Client Investment GmbH Vienna Austria 0.00 94.95 94.95 94.95Bank Austria Real Invest Immobilien-Kapitalanlage GmbH Vienna Austria 0.00 94.95 94.95 94.95Bank Austria Real Invest Immobilien-Management GmbH Vienna Austria 94.95 0.00 94.95 94.95Bank Austria Wohnbaubank AG Vienna Austria 100.00 0.00 100.00 100.00Buchstein Immobilienverwaltung GmbH und Co OG Vienna Austria 100.00 0.00 100.00 100.00Bulbank Leasing EAD Sofia Bulgaria 0.00 99.45 99.45 99.45CABET-Holding GmbH Vienna Austria 100.00 0.00 100.00 100.00CABO Beteiligungsgesellschaft m. b.H. Vienna Austria 0.00 100.00 100.00 100.00Cafu Vermögensverwaltung GmbH & Co OG Vienna Austria 0.00 100.00 100.00 100.00card complete Service Bank AG Vienna Austria 50.10 0.00 50.10 50.10Cards & Systems EDV-Dienstleistungs GmbH Vienna Austria 52.00 3.50 55.50 55.50CEAKSCH Verwaltungs G. m. b.H. Vienna Austria 0.00 100.00 100.00 100.00Centar Kaptol doo Zagreb Croatia 0.00 84.47 84.47 84.47Center Heinrich-Collin Straße1 Verm. GmbH u Co KG Vienna Austria 0.00 79.34 79.34 83.56Christoph Reisegger Gesellschaft m. b.H. Vienna Austria 0.00 99.00 99.00 100.00DBC Sp. z. o. o. Warsaw Poland 0.00 100.00 100.00 100.00DC Bank AG Vienna Austria 99.94 0.00 99.94 99.94DC Elektronische Zahlungssysteme GmbH Vienna Austria 0.00 50.10 50.10 50.10Diners Club CS s. r. o. Bratislava Slovakia 0.00 99.94 99.94 99.94Diners Club Polska Sp. z. o. o. Warsaw Poland 0.00 99.94 99.94 99.94DiRana Liegenschaftsverwertungsgesellschaft m. b.H. Vienna Austria 0.00 100.00 100.00 100.00Domus Clean Reinigungs GmbH Vienna Austria 100.00 0.00 100.00 100.00DV Alpha GmbH Vienna Austria 0.00 100.00 100.00 100.00DV Beteiligungsverwaltungs GmbH Vienna Austria 0.00 100.00 100.00 100.00Europe Real-Estate Investment Fund Budapest Hungary 0.00 100.00 100.00 100.00Europa Investment Fund Management Ltd. Budapest Hungary 0.00 100.00 100.00 100.00


dOmicile iNterest iN % vOtiNg rights


OWNershipiNdirect


Euroventures-Austria-CA-Management GesmbH Vienna Austria 0.00 100.00 100.00 100.00FactorBank Aktiengesellschaft Vienna Austria 100.00 0.00 100.00 100.00General Logistic Solutions LLC Moscow Russian Federation 0.00 100.00 100.00 100.00GUS Consulting GmbH Vienna Austria 100.00 0.00 100.00 100.00Human Resources Service and Development GmbH Vienna Austria 100.00 0.00 100.00 100.00HVB Auto Leasing EOOD Sofia Bulgaria 0.00 99.45 99.45 99.45HVB Leasing EOOD Sofia Bulgaria 0.00 99.45 99.45 99.45HypoVereins Immobilien EOOD Sofia Bulgaria 0.00 96.53 96.53 96.53Immobilien Rating GmbH Vienna Austria 19.00 63.91 82.91 82.91ISB Universale Bau GmbH Brandenburg Germany 0.00 100.00 100.00 100.00ISTRA D.M.C. d. o. o. Umag Croatia 0.00 60.65 60.65 60.65ISTRATURIST UMAG, hotelijerstvo, turizam i turisticka agencija d. d. Umag Croatia 0.00 60.65 60.65 60.65IVONA Beteiligungsverwaltung GmbH Vienna Austria 0.00 94.95 94.95 94.95JOHA Gebäude-Errichtungs- und Vermietungsges. m. b.H. Leonding Austria 0.00 94.03 94.03 94.03Kaiserwasser Bau- und Errichtungs GmbH und Co OG Vienna Austria 99.80 0.00 99.80 100.00KLEA ZS-Immobilienvermietung G. m. b.H. Vienna Austria 99.80 0.00 99.80 100.00KLEA ZS-Liegenschaftsvermietung G. m. b.H. Vienna Austria 99.80 0.00 99.80 100.00KSG Karten-Verrechnungs- und Servicegesellschaft m. b.H. Vienna Austria 0.00 50.10 50.10 50.10Lassallestraße Bau-, Planungs-, Erricht.- u. Verw. ges. m. b.H. Vienna Austria 99.00 0.00 99.00 100.00LLC “BDK-Consulting” Lutsk Ukraine 0.00 98.56 98.56 98.58LLC Ukrsotsbud Kiev Ukraine 0.00 97.32 97.32 97.34LTD SI&C AMC Ukrsots real estate Kiev Ukraine 0.00 98.30 98.30 98.33M. A. I. L Beteiligungsmanagement Ges. m. b.H. & Co. MCL Theta KG Vienna Austria 0.00 100.00 100.00 100.00M. A. I. L Finanzberatung Gesellschaft m. b.H. Vienna Austria 0.00 94.95 94.95 94.95MC Marketing GmbH Vienna Austria 100.00 0.00 100.00 100.00MC Retail GmbH Vienna Austria 0.00 100.00 100.00 100.00Mezzanin Finanzierungs AG Vienna Austria 56.67 5.45 62.12 62.18MY Beteiligungs GmbH Vienna Austria 100.00 0.00 100.00 100.00Nordbahnhof Baufeld Acht Projektentwicklung GmbH Vienna Austria 0.00 93.00 93.00 93.00Nordbahnhof Baufeld Fünf Projektentwicklung GmbH Vienna Austria 0.00 93.00 93.00 93.00Nordbahnhof Baufeld Sieben Projektentwicklung GmbH Vienna Austria 0.00 93.00 93.00 93.00Nordbahnhof Projekte Holding GmbH Vienna Austria 93.00 0.00 93.00 93.00Palais Rothschild Vermietungs GmbH Co OG Vienna Austria 0.00 100.00 100.00 100.00PIRTA Verwaltungs GmbH Vienna Austria 100.00 0.00 100.00 100.00POLLUX Immobilien GmbH Vienna Austria 99.80 0.00 99.80 99.80Pominvest dd Split Croatia 0.00 74.89 74.89 75.14Privat JSC Ferrotrade International Kiev Ukraine 100.00 0.00 100.00 100.00Prva Stambena Stedionica dd Zagreb Zagreb Croatia 0.00 84.47 84.47 84.47Public Joint Stock Company Ukrsotsbank1) Kiev Ukraine 50.17 48.40 98.57 98.58RAMSES Immobilien Gesellschaft m. b.H. & Co OG Vienna Austria 99.30 0.20 99.50 99.50RANA-Liegenschaftsverwertung GmbH Vienna Austria 0.00 99.90 99.90 99.90Real Invest Immobilien GmbH Vienna Austria 0.00 94.95 94.95 94.95RIGEL Immobilien GmbH Vienna Austria 99.80 0.00 99.80 99.80Sas-Real Ingatlanüzemelteto es Kezelo Kft. Budapest Hungary 0.00 100.00 100.00 100.00Schoellerbank Aktiengesellschaft Vienna Austria 100.00 0.00 100.00 100.00Schoellerbank Invest AG Salzburg Austria 0.00 100.00 100.00 100.00Schottengasse 6–8 Immobilien GmbH Vienna Austria 100.00 0.00 100.00 100.00Schottengasse 6–8 Immobilien GmbH und Co OG Vienna Austria 100.00 0.00 100.00 100.00SIA “UniCredit Leasing” Riga Latvia 100.00 0.00 100.00 100.00SIA UniCredit Insurance Broker Riga Latvia 0.00 100.00 100.00 100.00SIRIUS Immobilien GmbH Vienna Austria 99.80 0.00 99.80 99.80Suvremene poslovne komunikacije d. o. o. Zagreb Croatia 0.00 84.47 84.47 84.47SVIF Ukrsotsbud Kiev Ukraine 0.00 100.00 100.00 100.00

1) The percentage of 98.57% indicated for the shareholding interest is based on the legal situation on 31 December 2013 because following the acquisition of the assets and liabilities of UniCredit Bank Ukraine, the new shares had not yet been issued by that date. For consolidation purposes and for determining the non-controlling interests, the economic shareholding interest of 72.46% was used.



dOmicile iNterest iN % vOtiNg rights


OWNershipiNdirect


Treuconsult Beteiligungsgesellschaft m. b.H. Vienna Austria 0.00 94.95 94.95 94.95Uctam Baltics SIA Riga Latvia 0.00 100.00 100.00 100.00UCTAM Bulgaria EOOD Sofia Bulgaria 0.00 100.00 100.00 100.00UCTAM Czech Republic s. r. o. Prague Czech Republic 0.00 100.00 100.00 100.00UCTAM d. o. o. Beograd Belgrade Serbia 0.00 100.00 100.00 100.00UCTAM RK Limited Liability Company Almaty Kazakhstan 0.00 100.00 100.00 100.00UCTAM RO S.R. L. Bucharest Romania 0.00 100.00 100.00 100.00UCTAM RU Limited Liability Company Moscow Russian Federation 0.00 100.00 100.00 100.00UCTAM Ukraine LLC. Kiev Ukraine 0.00 99.99 99.99 99.99Uctam upravljanje d. o. o. Ljubljana Slovenia 0.00 100.00 100.00 100.00UniCredit Auto Leasing EOOD Sofia Bulgaria 0.00 99.45 99.45 99.45UniCredit Bank a. d. Banja Luka Banja Luka Bosnia and Herzegovina 98.37 0.00 98.37 98.37UniCredit Bank Czech Republic and Slovakia a. s. Prague Czech Republic 99.94 0.00 99.94 99.94UniCredit Bank d. d. Mostar Bosnia and Herzegovina 24.40 55.40 79.80 79.78UniCredit Bank Hungary Zrt. Budapest Hungary 100.00 0.00 100.00 100.00UniCredit Bank Serbia J. S.C. Belgrade Serbia 100.00 0.00 100.00 100.00UniCredit Banka Slovenija d. d. Ljubljana Slovenia 99.99 0.00 99.99 99.99UniCredit Bulbank AD Sofia Bulgaria 99.45 0.00 99.45 99.45UniCredit CAIB Poland S. A. Warsaw Poland 100.00 0.00 100.00 100.00UniCredit CA IB Romania SRL Bucharest Romania 100.00 0.00 100.00 100.00UniCredit CAIB Securities Romania SA Bucharest Romania 0.00 90.13 90.13 90.13UniCredit Center am Kaiserwasser GmbH Vienna Austria 100.00 0.00 100.00 100.00UniCredit Consumer Financing EAD Sofia Bulgaria 0.00 99.45 99.45 99.45UniCredit Consumer Financing IFN S. A.2) Bucharest Romania 0.00 25.34 25.34 25.34UniCredit Factoring EAD Sofia Bulgaria 0.00 99.45 99.45 99.45UniCredit Insurance Broker OOD Sofia Bulgaria 0.00 99.45 99.45 99.45UniCredit Jelzalogbank Zrt. Budapest Hungary 0.00 100.00 100.00 100.00UniCredit Leasing EAD Sofia Bulgaria 0.00 99.45 99.45 99.45UniCredit Tiriac Bank S. A.2) Bucharest Romania 50.56 0.03 50.59 50.59UniCredit Turn-Around Management CEE GmbH Vienna Austria 0.00 100.00 100.00 100.00UniCredit Turn-Around Management GmbH Vienna Austria 100.00 0.00 100.00 100.00UNIVERSALE International Realitäten GmbH Vienna Austria 100.00 0.00 100.00 100.00VIENNA DC Bauträger GmbH Vienna Austria 0.00 71.37 71.37 71.37VIENNA DC Tower 1 Liegenschaftsbesitz GmbH Vienna Austria 0.00 71.37 71.37 71.37VIENNA DC Tower 2 Liegenschaftsbesitz GmbH Vienna Austria 0.00 71.37 71.37 71.37WED Donau-City Gesellschaft m. b.H. Vienna Austria 0.00 71.37 71.37 71.37WED Holding Gesellschaft m. b.H. Vienna Austria 53.83 0.00 53.83 53.83WED Wiener Entwicklungsgesellschaft für den Donauraum AG Vienna Austria 38.00 33.37 71.37 71.37ZABA Partner d. o. o. za posredovanje u osiguranju i reosiguranju Zagreb Croatia 0.00 84.47 84.47 84.47Zagreb Nekretnine doo Zagreb Croatia 0.00 84.47 84.47 84.47Zagrebacka banka dd Zagreb Croatia 84.47 0.00 84.47 84.47Zane BH doo Sarajevo Bosnia and Herzegovina 0.00 84.47 84.47 84.47ZAO UniCredit Bank Moscow Russian Federation 100.00 0.00 100.00 100.00Zapadni Trgovacki Centar d. o. o. Rijeka Croatia 0.00 100.00 100.00 100.00ZB Invest d. o. o. Zagreb Croatia 0.00 84.47 84.47 84.47ZETA Fünf Handels GmbH Vienna Austria 100.00 0.00 100.00 100.00

2) For consolidation purposes, in view of combined put /call options, the non-controlling interests in UniCredit Tiriac Bank S. A. are determined on the basis of an economic shareholding interest of 95.52%. This gives a shareholding interest of 50.1% for UniCredit Consumer Financing EAD.



Investments in companies accounted for under the proportionate consolidation method (in %)

dOmicile iNterest


OWNershipiNdirect

OWNership tOtal

Koc Finansal Hizmetler AS Istanbul Turkey 50.00 0.00 50.00Stichting Custody Services YKB Amsterdam Netherlands 0.00 40.90 40.90UniCredit Menkul Degerler AS Istanbul Turkey 0.00 50.00 50.00Tasfiye Halinde Yapi Kredi B Tipi Yatirim Ortakligi AS Istanbul Turkey 0.00 39.00 39.00Yapi Kredi Bank Azerbaijan Closed Joint Stock Company Baku Azerbaijan 0.00 40.90 40.90Yapi Kredi Bank Moscow Moscow Russian Federation 0.00 40.90 40.90Yapi Kredi Bank Nederland N.V. Amsterdam Netherlands 0.00 40.90 40.90Yapi Kredi Faktoring AS Istanbul Turkey 0.00 40.88 40.88YAPI Kredi Finansal Kiralama AO Istanbul Turkey 0.00 40.89 40.89Yapi Kredi Diversified Payment Rights Finance George Town Cayman Islands 0.00 40.90 40.90Yapi Kredi Holding BV Amsterdam Netherlands 0.00 40.90 40.90Yapi Kredi Invest Limited Liability Company Baku Azerbaijan 0.00 40.90 40.90Yapi Kredi Portföy Yönetimi AS Istanbul Turkey 0.00 40.88 40.88Yapi Kredi Yatirim Menkul Degerler AS Istanbul Turkey 0.00 40.89 40.89Yapi ve Kredi Bankasi AS Istanbul Turkey 0.00 40.90 40.90




Investments in associated companies accounted for under the equity method (€ thousand)

dOmiciletOtal

assetsOperatiNg

iNcOme

prOfit/lOss after

taxequity

capitalcarryiNg

valueName Of cOmpaNy city cOuNtry %

Allianz Yasam ve Emeklilik A. S. Istanbul Turkey 8.18 310,591 34,223 23,277 80,112 26,673Allianz ZB D.O.O. Drustvo za Upravljanje Dobrovoljnim Zagreb Croatia 49.00 5,065 3,199 1,390 3,375 1,654Allianz ZB D.O.O. Drustvo za Upravljanjie Obveznim Zagreb Croatia 49.00 20,013 14,588 8,007 18,595 9,111Bank fur Tirol und Vorarlberg Aktiengesellschaft Innsbruck Austria 47.38 9,304,189 167,848 65,716 874,527 435,675Banque de Commerce et de Placements SA Geneva Switzerland 12.54 1,754,797 61,447 12,780 282,591 35,448BARN B.V. Amsterdam Netherlands 40.00 164,648 498 –4,383 162,936 65,174BKS Bank AG Klagenfurt Austria 36.03 6,812,920 142,593 40,569 706,119 254,443CA Immobilien Anlagen Aktiengesellschaft Vienna Austria 18.16 5,491,468 176,752 6,848 1,468,524 266,684Cash Service company AD Sofia Bulgaria 19.89 6,770 3,221 250 6,551 1,310CBD International Sp. zo. o. Warsaw Poland 49.75 23,791 52 –795 5,704 6,566Marina City Entwicklungs GmbH Vienna Austria 25.00 11,860 8 –305 313 99Marina Tower Holding GmbH Vienna Austria 25.00 1,508 – –3 1,473 406Megapark OOD Sofia Bulgaria 43.50 70,565 –2,883 –2,876 –25,395 –11,047Multiplus Card D.O.O za Promidzbu I Usluge Zagreb Croatia 25.00 2,285 –188 –132 –1,270 –317Notartreuhandbank AG Vienna Austria 25.00 1,466,920 11,976 7,182 25,302 6,326Oberbank AG Linz Austria 33.33 17,388,900 344,200 116,811 1,399,099 466,362Oesterreichische Kontrollbank Aktiengesellschaft Vienna Austria 49.15 30,531,299 106,222 46,461 665,032 340,606OOO UniCredit Leasing Moscow Russian Federation 40.00 238,735 14,631 2,617 51,503 17,112ÖsterreichischeHotel-undTourismusbankGes. m. b. h. Vienna Austria 50.00 1,052,985 6,352 1,852 26,288 13,144ÖsterreichischeWertpapierdatenServiceGmbH Vienna Austria 29.30 1,958 3,437 6 53 16PSA Payment Service Austria GmbH Vienna Austria 23.87 130,973 17,304 4,704 31,746 7,576SP Projektentwicklung Schönefeld GmbH & Co KG Schönefeld Germany 50.00 19,168 3,943 2,603 17,744 8,872UNI Gebäudemanagement GmbH Linz Austria 50.00 2,007 240 38 –152 –76UniCredit Leasing SPA Milan Italy 31.01 26,743,711 278,264 –151,636 1,813,839 200,000Wien Mitte Immobilien GmbH Vienna Austria 50.00 463,874 16,653 –24,703 106,568 53,284WKBG Wiener Kreditbürgschafts- und Beteiligungsbank AG Vienna Austria 22.73 30,831 2,178 –344 28,674 7,415Yapi Kredi Koray Gayrimenkul Yatirim Ortakligi AS Istanbul Turkey 12.45 37,705 –3,586 –12,788 9,777 1,218

CA Immobilien Anlagen Aktiengesellschaft is the only associated company accounted for under the equity method for which liquid market prices are available. As at 31 December 2013, the fair value of the equity interest in CA Immobilien Anlagen Aktiengesellschaft was €201,989 thousand (31 December 2012: €134,657 thousand).

Investments in other controlled and associated companiesAggregate total assets of unconsolidated companies which are controlled by UniCredit Bank Austria AG amounted to €6.0 million (2012: €6.1 million). Aggregate total assets of associated companies in which Bank Austria holds investments which were not accounted for under the equity method were €18.4 million (2012: €16.8 million).

Aggregate equity capital amounted to €850 thousand (2012: €1.4 million) for controlled companies and €7.3 million (2012: €8.6 million) for associated companies.

Controlled companies generated a combined net loss of €917 thousand (2012: a net loss of €773 thousand) and associated companies reported a combined net profit of € 1.0 million (2012: €451 thousand).


Consolidated companies and changes in consolidated companies of the Bank Austria Group in 2013

cONsOlidated cOmpaNies

cOmpaNies accOuNted fOr uNder the prOpOrtiONate

cONsOlidatiON methOdcOmpaNies accOuNted fOr uNder the equity methOd tOtal

Opening balance 144 17 29 190additions 22 – 3 25

Newly established companies 5 – 1 6Acquired companies 4 – 1 5Other changes 13 – 1 14

disposals –17 –2 –5 –24Companies sold or liquidated –13 –2 –5 –20Mergers –3 – – –3Other changes –1 – – –1

clOsiNg balaNce 149 15 27 191

Additions (€ million)

Name Of cOmpaNy mOa1) dOmicile additiON as at purchase price

UniCredit Consumer Financing AD C Sofia 01 Jan. 2013 –UniCredit Consumer Financing IFN S. A. C Bucharest 01 Jan. 2013 –CBD International Sp. z. o. o. E Warsaw 15 March 2013 –UniCredit Center am Kaiserwasser GmbH C Vienna 31 March 2013 –Ambassador Parc Dedinje d. o. o. Beograd C Belgrade 03 April 2013 –SIA UniCredit Insurance Broker C Riga 01 June 2013 –SIA UniCredit Leasing C Riga 01 June 2013 –Buchstein Immobilienverwaltung GmbH und Co OG C Vienna 01 July 2013 –Yapi Kredi Emeklilik AS E Istanbul 12 July 2013 74.3ZABA Partner d. o. o. C Zagreb 30 Sept. 2013 –BARN B.V. E Amsterdam 30 Sept. 2013 –Schottengasse 6–8 Immobilien GmbH C Vienna 12 Nov. 2013 –Schottengasse 6–8 Immobilien GmbH und Co OG C Vienna 19 Nov. 2013 –LLC BDK Consulting C Lutsk 02 Dec. 2013 –UniCredit Leasing AD C Sofia 04 Dec. 2013 –HVB Leasing OOD C Sofia 04 Dec. 2013 –Bulbank Leasing EAD C Sofia 04 Dec. 2013 –UniCredit Auto Leasing E.O.O.D. C Sofia 04 Dec. 2013 –UniCredit Insurance Broker EOOD C Sofia 04 Dec. 2013 –BA Creditanstalt Bulus EOOD C Sofia 04 Dec. 2013 –HVB Auto Leasing EOOD C Sofia 04 Dec. 2013 –Nordbahnhof Projekte Holding GmbH C Vienna 18 Dec. 2013 28.0Nordbahnhof Baufeld Fünf Projektentwicklungs GmbH C Vienna 18 Dec. 2013 2)

Nordbahnhof Baufeld Sieben Projektentwicklungs GmbH C Vienna 18 Dec. 2013 2)

Nordbahnhof Baufeld Acht Projektentwicklungs GmbH C Vienna 18 Dec. 2013 2)

1) Method of accounting:C = consolidatedP = accounted for using proportionate consolidationE = accounted for using the equity method2) Included in the purchase price for Nordbahnhof Projekte Holding GmbH.

In accordance with IFRS 3. B64, the purchase price is presented only for those additions which were acquired by external third parties outside UniCredit Group.




Disposals (€ million)

Name Of cOmpaNy mOa*) dOmicile dispOsal as atsales/liquidatiON

prOceeds

Lowes Limited in Liquidation C Nicosia 01 Feb. 2013 –CBD International Sp. z. o. o. C Warsaw 15 March 2013 –EK Mittelstandsfinanzierungs AG C Vienna 11 April 2013 28.0Anger Machining GmbH E Traun 11 April 2013 1)

Forstinger International GmbH E Vienna 11 April 2013 1)

V. A. Holding GmbH E Vienna 11 April 2013 1)

Papcel a. s. E Litovel 11 April 2013 1)

ATF Finance JSC C Almaty 02 May 2013 2)

ATF Inkassatsiya Ltd C Almaty 02 May 2013 2)

JSC ATF Bank C Almaty 02 May 2013 299.7UniCredit Bank OJSC C Bishkek 02 May 2013 2)

ATF Capital B.V. C Rotterdam 02 May 2013 2)

Limited Liability Company “AI Line” C Moscow 27 May 2013 –Yapı Kredi Sigorta AS P Istanbul 12 July 2013 283.1Yapı Kredi Emeklilik AS P Istanbul 12 July 2013 3)

CJSC Bank Sibir C Omsk 29 Aug. 2013 –Pay Life Bank GmbH E Vienna 19 Sept. 2013 13.9UniCredit CA IB Serbia Ltd. C Belgrad 27 Sept. 2013 0.1UniCredit Securities International Limited in Liquidation C Nicosia 16 Dec. 2013 –Closed Joint Stock Company UniCredit Securities C Moscow 17 Dec. 2013 –UniCredit CA IB Hungary Ltd. C Budapest 31 Dec. 2013 –

Sales proceeds are presented only for disposals of companies which were sold to buyers outside UniCredit Group.

1) Included in the sales proceeds of EK Mittelstandsfinanzierungs AG.2) Included in the sales proceeds of JSC ATF Bank. 3) Included in the sales proceeds of Yapı Kredi Sigorta AS Bank.

MergersName Of merged cOmpaNy mOa*) dOmicile Name Of absOrbed cOmpaNy dOmicile merger as at

UniCredit CA IB Slovakia a. s. C Bratislava UniCredit Bank Slovakia a. s. Bratislava 14 June 2013

UniCredit Bank Slovakia a. s. C BratislavaUniCredit Bank Czech Republic and Slovakia a. s. Bratislava 01 Dec. 2013

UniCredit CA IB Slovenija d. o. o. C Ljubljana UniCredit Bank Slovenija d. o. o. Ljubljana 17 Dec. 2013

*) Method of accounting:C = consolidatedP = accounted for using proportionate consolidationE = accounted for using the equity method


Sale of ATF BankAs of 30 April 2013 UniCredit Bank Austria AG completed the disposal of 99.75% held in Kazakh JSC ATF Bank to KazNitrogenGaz LLP, a company wholly owned by Mr Galimzhan Yessenov.

In connection with the sale of ATF Bank a loss guarantee agreement with UniCredit Bank Austria AG was maintained in an amended form for a period of 2 years after closing to protect the interests of Bank Austria relating to recoveries. The main amendments were the reduction of the size of the guaranteed amount by UniCredit Bank Austria to US$631 million and a reduction of the guaranteed premium payable by ATF Bank to 2%. A cash collateral in the size of the guaranteed amount was posted to ATF Bank by Bank Austria at the closing of the transaction.

In connection with the sale, an indemnity was also provided to the buyer in an escrow account in the overall amount of US$150 million for purchase price adjustments and for additional credit losses in the special loan portfolio exceeding the amount covered by the amended guarantee. This amount was reduced in 2013 through a purchase price adjustment of US$29 million to US$121 million (€89.5 million). Of this remaining amount, US$75.7 million (€56 million) have been provided for by Bank Austria based on the economic situation of the underlying credit exposures covered by this indemnity. The final amount of the credit losses will only be calculated by ATF Bank in April 2015, i. e. two years after the sale of ATF Bank.

The purchase price of the 99.75% interest based on the consolidated net equity as of the closing date was €299.7 million.

Sale of Yapı Credi SigortaAs of 12 July 2013, the sale of Yapı Kredi Group’s (Yapı Kredi) 93.95% stake in the non-life insurance subsidiary Yapı Kredi Sigorta (YKS) including the life insurance/pension subsidiary Yapı Kredi Emeklilik (YKE) to Allianz SE was finalised following obtainment of all regulatory approvals.

In a second step a 19.93% stake in YKE was bought back from Allianz by Yapı Kredi through its subsidiary Yapı Kredi Leasing.

As the third pillar of the transaction, Yapı Kredi entered into a 15-year exclusive Strategic Distribution Agreement with Allianz for the distribution of insurance and pension products in Turkey through its network.

Merger of the banking subsidiaries in the Czech Republic and in Slovakia The legal integration of the two banking subsidiaries was completed on 1 December 2013 and the Czech subsidiary bank was renamed “UniCredit Czech Republic and Slovakia a. s.”. In the merged subsidiary synergies can be realised in IT systems and back-office operations. UniCredit Bank Czech Republic and Slovakia operates a joint network with a total of about 170 branches. In addition, there are 46 franchise locations in the Czech Republic. About 3,100 employees serve 530,000 customers in the two countries.

Restructuring of the banking subsidiary in Latvia Based on a strategic decision by the Management Board, Bank Austria restructured its operations in the Baltic countries (Estonia, Latvia and Lithuania) in 2013. The banking operations of AS UniCredit Bank were stopped in all Baltic countries, the liquidation of the branches in Estonia and Lithuania started in August 2013. In October 2013 an agreement was signed with Swedbank for the sale of the banking licence related products to its subsidiaries in Latvia, Lithuania and Estonia.

In December 2013 the Financial and Capital Market Commission of Latvia approved the annulment of AS UniCredit Bank’s banking licence by 1 January2014;afterwardsthenameofthecompanywaschangedtoASUniCreditFinance.

After the merger of AS UniCredit Finance with SIA UniCredit Leasing, scheduled for the second half of 2014, UniCredit Group will only be active in the leasing business in the Baltics. The main presence of these leasing activities will be in Latvia (SIA UniCredit Leasing in Riga), with 2 branches in Estonia (Tallinn) and Lithuania (Vilnius).



Effects of changes in the group of consolidated companies in 2013The following table shows the aggregate total assets and aggregate total liabilities and equity of additions and disposals reflected in the consolidated financial statements.

Assets (€ million)

31 dec. 2013 Of Which:

additiONs iN 2013 31 dec. 2012Of Which:

dispOsals iN 2013

Cash and cash balances 2,663 3 2,754 1Financial assets held for trading 2,434 – 2,855 8Financial assets at fair value through profit or loss 343 – 426 –Available-for-sale financial assets 21,502 – 21,063 97Held-to-maturity investments 1,586 – 1,895 –Loans and receivables with banks 24,967 294 28,112 162Loans and receivables with customers 129,121 1,237 132,424 71Hedging derivatives 2,913 – 4,125 –Changes in fair value of portfolio hedged items (+/–) 33 1 54 –Investments in associates and joint ventures 2,032 34 2,348 23Insurance reserves attributable to reinsurers – – 1 1Property, plant and equipment 2,208 67 2,509 5Intangible assets 219 1 2,459 3

of which goodwill – – 2,127 –Tax assets 1,061 2 1,336 2

a) current tax assets 73 – 52 –b) deferred tax assets 988 2 1,284 2

Non-current assets and disposal groups classified as held for sale 3,714 86 3,788 4,411Other assets 1,414 21 1,446 18tOtal assets 196,210 1,747 207,596 4,801

Liabilities and equity (€ million)

31 dec. 2013 Of Which:

additiONs iN 2013 31 dec. 2012Of Which:

dispOsals iN 2013

Deposits from banks 27,020 1,235 31,061 12Deposits from customers 108,935 118 110,563 11Debt securities in issue 29,049 – 28,063 –Financial liabilities held for trading 1,625 – 2,196 –Financial liabilities at fair value through profit or loss 788 – 1,152 –Hedging derivatives 2,273 1 2,989 –Changes in fair value of portfolio hedged items (+/–) – – – –Tax liabilities 590 7 856 2

a) current tax liabilities 25 1 88 1b) deferred tax liabilities 565 5 768 1

Liabilities included in disposal groups classified as held for sale 2,242 – 3,506 4,000Other liabilities 3,481 28 3,428 48Provisions for risks and charges 5,155 3 5,389 4

a) post-retirement benefit obligations 4,647 – 4,600 2b) other provisions 507 3 789 3

Insurance reserves – – 201 201Equity 15,052 355 18,192 523

of which non-controlling interests (+/–) 485 – 530 –tOtal liabilities aNd equity 196,210 1,747 207,596 4,801



B – Notes to the income statement

B.1 – Interest income/Interest expense 122

B.2 – Fee and commission income/ Fee and commission expense 123

B.3 – Dividend income and similar revenue 124

B.4 – Gains and losses on financial assets and liabilities held for trading 124

B.5 – Fair value adjustments in hedge accounting 124

B.6 – Gains and losses on disposals/repurchases 125

B.7 – Net change in financial assets and liabilities at fair value through profit or loss 125

B.8 – Impairment losses 126

B.9 – Premium earned (net) – breakdown 126

B.10 – Other income (net) from insurance business 126

B.11 – Payroll 127

B.12 – Other administrative expenses 127

B.13 – Net provisions for risks and charges 128

B.14 – Impairment on property, plant and equipment 128

B.15 – Impairment on intangible assets 128

B.16 – Other net operating income 129

B.17 – Profit (Loss) of associates 129

B.18 – Gains and losses on disposal of investments 129

B.19 – Tax expense (income) related to profit or loss from continuing operations 130

B.20 – Total profit or loss after tax from discontinued operations 130

B.21 – Earnings per share 131

B.22 – Appropriation of profits 131



B – Notes to the income statement (CONTINUED)

B.1 – Interest income/ Interest expense

Interest expense and similar charges (€ million)

2013 2012

Deposits securitiesother

transactions total total

Deposits from central banks –72 X – –72 –77Deposits from banks –428 X – –428 –661Deposits from customers –1,859 X – –1,859 –2,387Debt securities in issue X –836 – –836 – 904Financial liabilities held for trading –1 – –79 –79 –82Financial liabilities at fair value through profit or loss – – 9 – – 9 –13Other liabilities X X –3 –3 –3Hedging derivatives X X – 90 – 90 –79total –2,359 –845 –172 –3,376 –4,206

Interest income and similar revenues (€ million)

2013 2012

Debt securities loansother

transactions total total

Financial assets held for trading 18 – 77 94 111Financial assets at fair value through profit or loss 4 – – 4 6Available-for-sale financial assets 745 – – 745 704Held-to-maturity investments 91 – – 91 201Loans and receivables with banks 64 192 – 256 482Loans and receivables with customers 19 5,854 – 5,873 6,257Hedging derivatives X X 440 440 550Other assets X X 6 6 5total 940 6,046 522 7,508 8,316

Within this item, total interest income from financial assets that are not at fair value through profit or loss was €6,971 million (2012: €8,061 million).

The total amount of interest income from impaired financial assets was €209 million (2012: €376 million). Of this total amount, €171 million (2012: €341 million) is included in interest income and similar revenues from loans which relate to interest actually paid. Interest income from the release of provisions as a result of the passage of time is presented in B.8.

Within this item, total interest expense for liabilities that are not at fair value through profit or loss was €3,198 million (2012: €4,187 million).


Fee and commission income (€ million)

2013 2012

Guarantees given 227 209Management, brokerage and consultancy services: 542 500

securities trading 15 28currency trading 31 42portfolio management 197 173custody and administration of securities 75 78custodian bank 38 41placement of securities 18 15reception and transmission of orders 28 7advisory services 37 35distribution of third party services 103 81

collection and payment services 917 855securitisation servicing – –Factoring 7 9Management of current accounts 210 226other services 258 233total 2,161 2,033

Fee and commission expense (€ million)

2013 2012

Guarantees received –37 –72credit derivatives –14 –18Management, brokerage and consultancy services: –82 –100

trading in financial instruments –4 –6currency trading –1 –1portfolio management –14 –15custody and administration of securities –39 –39placement of financial instruments –1 –1off-site distribution of financial instruments, products and services –22 –37

collection and payment services –276 –266other services –55 –42total –463 –497

B.2 – Fee and commission income/Fee and commission expense




B.4 – Gains and losses on financial assets and liabilities held for trading (€ million)

2013 2012unrealiseD

proFitsrealiseD

proFitsunrealiseD

lossesrealiseD

losses net proFit net proFit

Financial assets held for trading 4 102 –4 –63 38 –17Debt securities 3 50 –3 –33 17 29Equity instruments – 20 –1 –23 –4 4Other 1 32 – –7 26 –51

Financial liabilities held for trading – – – –1 –1 1other financial assets and liabilities: exchange differences X X X X 4 365Derivatives 710 537 –522 –466 523 191

Financial derivatives 653 537 –454 –466 534 233on debt securities and interest rates 506 498 –424 –427 153 –1on equity securities and share indices 140 8 –22 –10 116 142on currency and gold X X X X 265 92other 8 31 – 9 –30 1 –

Credit derivatives 57 – –68 – –11 –43total 714 638 –527 –531 565 539

B.5 – Fair value adjustments in hedge accounting (€ million)

2013 2012

Gains on:Fair value hedging instruments 28 29Hedged asset items (in fair value hedge relationship) 27 18Hedged liability items (in fair value hedge relationship) 6 –Cash-flow hedging derivatives (ineffectiveness) 9 –total gains on hedging activities 69 47losses on:Fair value hedging instruments –45 –46Hedged asset items (in fair value hedge relationship) –12 –Hedged liability items (in fair value hedge relationship) – –3Cash-flow hedging derivatives (ineffectiveness) – –5total losses on hedging activities –57 –54net heDGinG result 12 –8

(€ million)

2013 2012

DiviDenDs

incoMe FroM units in

investMent FunDs total DiviDenDs

incoMe FroM units in

investMent FunDs total

Financial assets held for trading – – – – – –Available-for-sale financial assets 16 1 18 20 3 23Financial assets at fair value through profit or loss – – – – – –Investments 7 X 7 7 X 7total 24 1 25 27 3 30

B.3 – Dividend income and similar revenue


(€ million)

2013 2012

Gains losses net proFit Gains losses net proFit

Financial assetsLoans and receivables with banks – – – – – –Loans and receivables with customers 10 – 9 1 31 –36 –5Available-for-sale financial assets 340 –35 305 125 –34 90

Debt securities 182 –34 148 44 –34 10Equity instruments 155 –1 154 79 –1 78Units in investment funds 3 – 3 2 – 2Loans – – – – – –

Held-to-maturity investments 3 – 3 36 –10 25total assets 354 –44 310 192 –81 111

Financial liabilitiesDeposits with banks – – – – – –Deposits with customers – – – – – –Debt securities in issue 11 – 11 126 – 126total liabilities 11 – 11 126 – 126

total 365 –44 321 318 –81 237

B.6 – Gains and losses on disposals / repurchases

B.7 – Net change in financial assets and liabilities at fair value through profit or loss (€ million)

2013 2012

unrealiseD proFits

realiseD proFits

unrealiseD losses

realiseD losses net proFit net proFit

Financial assets 5 58 –24 –28 11 10Debt securities – 28 –1 –28 – 2Equity instruments – – – – – –Units in investment funds 5 29 –24 – 11 8Loans – – – – – –

Financial liabilities 13 – –51 – –39 –177Debt securities 13 – –51 – –39 –177Deposits from banks – – – – – –Deposits from customers – – – – – –

credit and financial derivatives 65 – – – 65 161total 83 58 –75 –28 37 –5

In 2013 changes in fair values resulting from changes in our own credit rating were – €50.1 million (2012: – €134.4 million).



B.10 – Other income (net) from insurance businessThe decline in the balance of other income and expenses relating to insurance business from – €123 million in the previous year to – €65 million in 2013 is due to the sale of Yapı Kredi Sigorta AS on 3 July 2013.

B.8 – Impairment losses


(€ million)

2013 2012

Direct business

inDirect business total total

Life business 16 – 16 31Non-life business – 67 67 130total net preMiuMs 16 67 83 161

B.9 – Premium earned (net) – breakdown

(€ million)

2013 2012

Write-DoWns Write-bacKs

speciFic

Write-oFFs other portFolio speciFic portFolio total total

impairment losses on loans and receivables –70 –1,981 –121 625 131 –1,416 – 976Loans and receivables with banks – –1 – 3 – 2 1Loans and receivables with customers –70 –1,980 –121 622 131 –1,418 – 978

impairment losses on available-for-sale financial assets –6 –50 X – X –56 –63

Debt securities – – X – X – 5Equity instruments –6 –47 X X X –53 –67

Units in investment funds – –3 X – X –3 –impairment losses on held-to-maturity investments – – – – – – –16

Debt securities – – – – – – –16impairment losses on other financial transactions – –79 – 9 50 10 –28 14

Guarantees given – –74 –6 42 9 –29 14Credit derivatives – – – – – – –Commitments to disburse funds – –4 –4 4 – –3 –1Other transactions – –1 – 4 1 4 1

total –76 –2,110 –131 675 141 –1,500 –1,041

The column “Specific” under “Write-backs” also includes the time-value interest component of impaired loans in the amount of €38 million (2012: €35 million). Details of impairment losses on loans and receivables with customers are given in the risk report.


(€ million)

2013 2012

employees –1,926 –1,851Wages and salaries –1,328 –1,342Social charges –282 –277Provision for retirement payments and similar provisions –253 –253

Defined contribution –2 –2Defined benefit –251 –251

Payments to external pension funds –23 –27Defined contribution –22 –26Defined benefit –1 –1

Costs related to share-based payments –2 –6Other employee benefits –195 –102Recovery of compensation 158 156

others –65 –63total –1,992 –1,914

B.11 – Payroll

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

2013 2012

pension and similar funds allowances – with defined benefitsCurrent service cost –74 –55Settlement gains / losses –6 –4Net actuarial gain / loss recognised in the year – –5Past service cost –3 –Interest cost on the DBO –168 –186Interest income on plan assets – –eXpenses recoGniseD in proFit or loss –251 –251

Other employee benefits (€ million)

2013 2012

Seniority premiums –7 –19Leaving incentives –111 – 9Other –78 –74total –195 –102

Further information on other employee benefits is given in C.25.

(€ million)

2013 2012

indirect taxes and duties –244 –164Miscellaneous costs and expenses –1,461 –1,435

Advertising, marketing and communication –128 –123Expenses related to credit risk –16 –26Expenses related to personnel –62 –63Information and communication technology expenses –416 –383Consulting and professional services –79 – 91Real estate expenses –316 –307Other functioning costs –444 –442

total –1,705 –1,599

B.12 – Other administrative expenses

The item “Indirect taxes and duties” includes the bank levy in Austria (€97 million; 2012: €97 million) and the bank levies in Slovenia (€3 million), Slovakia (€14 million; 2012: €14 million), Romania (€2 million) and Hungary (€93 million; 2012: €29 million).



(€ million)

2013 2012

aMortisationiMpairMent

losses Write-bacKs net proFit

intangible assetsowned – 96 –15 – –112 – 98

generated internally by the company –7 – – –7 –5other –89 –15 – –104 – 93

Finance leases – – – – –non-current assets and disposal groups classified as held for sale X – – – –total – 96 –15 – –112 – 98

B.15 – Impairment on intangible assets

(€ million)

2013 2012

provisionsreallocation

surplus total total

Legal disputes – 91 5 –86 –80Staff costs – – – –Other –110 140 30 –252total –201 145 –56 –332

B.13 – Net provisions for risks and charges

(€ million)

2013 2012

DepreciationiMpairMent

losses Write-bacKs net proFit

property, plant and equipmentowned –164 –47 1 –210 –173

used in the business –150 –6 1 –156 –156held for investment –14 –40 – –54 –18

Finance lease –5 – – –5 –1used in the business –5 – – –5 –1held for investment – – – – –

non-current assets and disposal groups classified as held for sale X – – – –

used in the business X – – – –held for investment X – – – –

total –169 –47 1 –215 –175

B.14 – Impairment on property, plant and equipment


Expenses for legal disputes in 2013 primarily include costs related to the conclusion of the legal disputes in Switzerland. The line “Other” includes provisions for risks in connection with the sale of JSC ATF Bank.


Other operating expenses (€ million)

2013 2012

Non-deductible tax and other fiscal charges –1 –2Write-downs on improvements of goods owned by third parties –5 –5Costs related to tourism business –19 –18Other –85 –63total other operatinG eXpenses –109 –87

B.16 – Other net operating income

Other operating income (€ million)

2013 2012

recovery of costs 1 1other income 201 195

Revenue from administrative services 42 46Revenues from rentals of investment property (net of operating direct costs) 13 18Revenues from operating leases 12 4Recovery of miscellaneous costs paid in previous years 3 2Revenues from tourism business 58 56Others 73 68

total other operatinG incoMe 203 196

other net operatinG incoMe 94 109

(€ million)

2013 2012

propertyGains on disposal 12 19Losses on disposal –1 –2other assetsGains on disposal 204 3Losses on disposal –148 –1total 66 19

B.18 – Gains and losses on disposal of investments

(€ million)

2013 2012

companies subject to significant influenceincome 133 111

Profits of associates 122 111Gains on disposal 11 –

expense –267 –296Losses of associates –64 –291Impairment losses –202 –5Losses on disposal –1 –

net profit –135 –185total –135 –185

B.17 – Profit (Loss) of associates

The gains from sales of investments primarily consist of the sale of the insurance business of Yapı Kredi Group.The losses from sales of investments contain the effect of the recycling of the foreign currency translation reserve relating to the foreign operation in Cayman, which was finally discontinued in 2013.



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

2013 2012

total profit or loss before tax from continuing operations –704 1,111Applicable tax rate 25% 25%theoretical tax 176 –278Different tax rates 107 115Non-taxable income 79 25Non-deductible expenses –107 –124Prior years and changes in tax rates –101 78

a) effects on current tax –5 29b) effects on deferred tax – 96 48

Valuation adjustments and non-recognition of deferred taxes –167 –59Amortisation of goodwill –486 –61Non-taxable foreign income – –Other differences –33 –22recoGniseD taXes on incoMe –534 –326Effective tax rate – 29.4%

(€ million)

2013 2012

ukraineNet interest 169 202Dividends and income from equity investments – –Net fee and commission income 61 59Net trading income –12 12Net other operating income/expenses 5 –3operating income 223 270operating costs –141 –138operating profit 82 132Net write-downs of loans –208 –136net operating profit –126 –4Provisions for risks and charges –1 –Net income from investments 4 –profit before tax –123 –4Income tax 16 –24profit after tax/ukraine –107 –28Impairment Ukraine –200 –165Consolidation effects 30 54profit after tax/ukraine –277 –139Kazakhstanprofit after tax/Kazakhstan –115 –301

total proFit or loss aFter taX FroM DiscontinueD operations –392 –440

B.20 – Total profit or loss after tax from discontinued operations

(€ million)

2013 2012

Current tax (–) –276 –379Adjustment to current tax of prior years (+/–) –3 17Reduction of current tax for the year (+) 2 13Changes to deferred tax assets (+/–) –246 –Changes to deferred tax liabilities (+/–) –11 24taX eXpense For the year (–) –534 –326

B.19 – Tax expense (income) related to profit or loss from continuing operations



B.21 – Earnings per shareDuring the reporting period, no financial instruments with a dilutive effect on the bearer shares were outstanding. Therefore basic earnings per share in accordance with IAS 33 equal diluted earnings per share in accordance with IAS 33. Earnings per share are calculated on the basis of the average number of shares outstanding (2013: 231.2 million shares; 2012: 231.2 million shares).

B.22 – Appropriation of profitsAfter movements in reserves in UniCredit Bank Austria AG amounting to €1,630,384,591.99 the loss for the financial year beginning on 1 January 2013 and ending on 31 December 2013 was €2,514,165.47. After addition of the profit brought forward from the previous year, which amounted to €2,514,165.47, there is no accumulated profit which may be distributed.


C – Notes to the statement of financial position

Assets

C.1 – Cash and cash balances 134

C.2 – Financial assets held for trading 134

C.3 – Financial assets at fair value through profit or loss 134

C.4 – Available-for-sale financial assets 135

C.5 – Held-to-maturity investments 136

C.6 – Loans and receivables with banks 136

C.7 – Loans and receivables with customers 137

C.8 – Hedging derivatives 137

C.9 – Changes in fair value of portfolio hedged items 137

C.10 – Investments in associates and joint ventures 138

C.11 – Property, plant and equipment 138

C.12 – Intangible assets 141

C.13 – Deferred tax assets 142

C.14 – Non-current assets and disposal groups classified as held for sale 143

C.15 – Other assets 144

Liabilities and equity

C.16 – Deposits from banks 144

C.17 – Deposits from customers 145

C.18 – Debt securities in issue 145

C.19 – Financial liabilities held for trading 145

C.20 – Financial liabilities at fair value through profit or loss 145

C.21 – Hedging derivatives 146

C.22 – Deferred tax liabilities 146

C.23 – Liabilities included in disposal groups classified as held for sale 146

C.24 – Other liabilities 147

C.25 – Provisions for risks and charges 147

C.26 – Equity 149



C.1 – Cash and cash balances

C.2 – Financial assets held for trading

(€ million)

31 Dec. 2013 31 Dec. 2012

Cash 1,315 1,588Demand deposits with central banks 1,348 1,166total 2,663 2,754

C – Notes to the statement of financial position (CONTINUED)

C.3 – Financial assets at fair value through profit or loss

This item shows assets in respect of which Bank Austria used the option to designate financial instruments as at fair value through profit or loss in order to avoid inconsistencies in the valuation of assets and liabilities which are connected with each other. Most of these assets are complex structures with embedded derivatives.

(€ million)

31 Dec. 2013 31 Dec. 2012

Fair value level 1

Fair value level 2

Fair value level 3 total

Fair value level 1

Fair value level 2


Financial assets (non-derivatives) 305 239 10 554 283 146 71 500Debt securities 285 238 10 534 252 145 71 469

Structured securities 5 3 – 8 10 – 10 20Other debt securities 281 235 10 526 243 145 61 449

Equity instruments 13 – – 13 24 – – 24Units in investment funds 7 – – 7 7 1 – 7

Derivative instruments 1 1,876 3 1,880 1 2,350 5 2,355Financial derivatives 1 1,873 2 1,876 1 2,344 5 2,350Credit derivatives – 3 1 4 – 6 – 6

total 306 2,115 13 2,434 284 2,496 76 2,855

(€ million)

31 Dec. 2013 31 Dec. 2012

Fair value level 1

Fair value level 2


Fair value level 1

Fair value level 2


Debt securities 4 236 31 271 61 224 32 317Equity instruments – – – – – – – –Units in investment funds 17 – 55 72 14 – 95 109Loans – – – – – – – –total 21 236 86 343 75 224 127 426cost 20 236 86 342 73 224 127 424

The fair values are equal to the carrying amounts.


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

2012

Debt securitieseQuity

instruMents

units in investMent

FunDs total

opening balance 92 – 122 214increases 243 – 17 260

Purchases 161 – 12 173Positive changes in fair value 21 – 5 26Other increases 60 – – 60

Decreases –18 – –30 –48Sales –3 – –14 –17Redemptions –10 – –15 –24Negative changes in fair value –4 – – –4Other decreases –2 – –1 –3

closinG balance 317 – 109 4262013

Debt securitieseQuity

instruMents

units in investMent

FunDs total

opening balance 317 – 109 426increases 256 – 20 276

Purchases 255 – 14 270Positive changes in fair value 1 – 5 6Other increases – – – –

Decreases –303 – –57 –360Sales –48 – –12 –61Redemptions –232 – –20 –252Negative changes in fair value – – –24 –24Other decreases –22 – –1 –24

closinG balance 271 – 72 343

C.4 – Available-for-sale financial assets (€ million)

31 Dec. 2013 31 Dec. 2012

Fair value level 1

Fair value level 2


Fair value level 1

Fair value level 2


Debt securities 13,959 6,059 689 20,708 9,845 8,824 1,368 20,037Structured securities – – 19 19 12 147 19 178Other 13,959 6,059 671 20,689 9,833 8,677 1,349 19,859

Equity instruments 25 4 593 622 37 – 800 837Measured at fair value 25 4 531 560 37 – 356 393Carried at cost – – 62 62 – – 444 444

Units in investment funds 12 101 59 172 31 89 68 189Loans – – – – – – – –total 13,996 6,165 1,341 21,502 9,914 8,913 2,236 21,063




C.5 – Held-to-maturity investments (€ million)

31 Dec. 2013 31 Dec. 2012

booK value Fair value

Fair value level 1

Fair value level 2

Fair value level 3

booK value Fair value

Fair value level 1

Fair value level 2

Fair value level 3

Debt securities 1,586 1,593 1,115 308 170 1,895 1,967 1,184 601 182Loans – – – – – – – – – –total 1,586 1,593 1,115 308 170 1,895 1,967 1,184 601 182

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

2013 2012

opening balance 1,895 3,498increases 479 345

Purchases 354 235Write-backs – 1Transfers from other portfolios 21 –Other changes and positive exchange differences 103 110

Decreases –788 –1,949Sales –4 –197Redemptions –558 –585Write-downs – –16Transfers to other portfolios – –1,040Other changes and negative exchange differences –226 –109

closinG balance 1,586 1,895

C.6 – Loans and receivables with banks (€ million)

31 Dec. 2013 31 Dec. 2012

loans to central banks 8,863 7,996Time deposits 1,361 1,308Compulsory reserves 6,673 6,246Reverse repos 825 425Other 3 18

loans to banks 16,104 20,116Current accounts and demand deposits 4,386 5,214Time deposits 5,012 7,489Other loans 3,260 2,984

Reverse repos 998 601Other 2,263 2,383

Debt securities 3,446 4,429total (carryinG aMount) 24,967 28,112total (Fair value) 25,044 28,148Fair value – Level 1 – –Fair value – Level 2 17,395 16,560Fair value – Level 3 7,649 11,588Loan loss provisions deducted from loans and receivables 23 46


C.7 – Loans and receivables with customers

Finance leases: customers (€ million)

31 Dec. 2013 31 Dec. 2012

present value oF MiniMuM lease payMents

present value oF MiniMuM lease payMents

amounts receivable under finance leases:Up to 12 months 331 185From 1 to 5 years 697 299Over 5 years 101 50present value oF MiniMuM lease payMents receivable (net investMent in the lease) 1,129 535

C.8 – Hedging derivatives

(€ million)

31 Dec. 2013 31 Dec. 2012

perForMinG iMpaireD total perForMinG iMpaireD total

loans 123,240 5,127 128,367 124,775 6,686 131,462Current accounts 11,187 405 11,592 12,344 533 12,877Reverse repos 1,394 – 1,394 587 – 587Mortgages 25,463 1,957 27,419 25,669 2,519 28,188Credit cards and personal loans, including wage assignment loans 7,678 80 7,758 8,338 125 8,463Finance leases 1,053 76 1,129 515 19 535Factoring 1,413 20 1,433 1,264 13 1,277Other loans 75,052 2,590 77,641 76,058 3,478 79,535Debt securities 733 21 754 939 24 963total (carryinG aMount) 123,973 5,148 129,121 125,715 6,710 132,424total (Fair value) 125,530 5,389 130,919 125,816 6,661 132,477Fair value – Level 1 – –Fair value – Level 2 73,460 79,564Fair value – Level 3 57,460 52,913Loan loss provisions deducted from loans and receivables 717 6,262 6,979 739 6,092 6,831

(€ million)

31 Dec. 2013 31 Dec. 2012

Fair value level 1

Fair value level 2


Fair value level 1

Fair value level 2


Financial derivatives – 2,911 2 2,913 – 4,125 – 4,125Fair value hedge – 603 2 605 – 877 – 877Cash flow hedge – 2,308 – 2,308 – 3,248 – 3,248

credit derivatives – – – – – – – –total – 2,911 2 2,913 – 4,125 – 4,125

C.9 – Changes in fair value of portfolio hedged items Market changes in portfolio-hedged items related to positive changes in loans and receivables in the amount of €33 million (2012: €54 million).




C.10 – Investments in associates and joint ventures (€ million)

2013 2012

opening balance 2,348 2,562increases 324 436

Purchases 127 35Write–backs – –Profit / loss for the year 122 111Other changes 75 289

Decreases –640 –649Sales –42 –31Write–downs –202 –2Profit / loss for the year –64 –291Other changes –331 –325

closinG balance 2,032 2,348

C.11 – Property, plant and equipment (€ million)

31 Dec. 2013 31 Dec. 2012

assets for operational use 1,437 1,727owned 1,382 1,667

Land 92 96Buildings 948 1,165Office furniture and fittings 140 149Electronic systems 125 152Others 76 105

leased 55 60Land 14 14Buildings 40 46Office furniture and fittings – –Electronic systems – –Others 1 1

held-for-investment assets 772 782owned 772 782

Land 234 264Buildings 538 518

leased – –total 2,208 2,509

Property, plant and equipment held for investment (€ million)

31 Dec. 2013 31 Dec. 2012

booK valueFair value

level 1Fair value

level 2Fair value

level 3 booK valueFair value

level 1Fair value

level 2Fair value

level 3

assets carried at cost 731 – 37 747 704 – 35 677owned 731 – 37 747 704 – 35 677

Land 234 – 1 233 245 – 1 243Buildings 498 – 36 514 459 – 34 433

leased – – – – – – – –assets measured at Fv 41 – – 41 78 – – 78

owned 41 – – 41 78 – – 78Land – – – – 19 – – 19Buildings 40 – – 40 58 – – 58

leased – – – – – – – –total 772 – 37 788 782 – 35 755


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

2012

lanD builDinGs

oFFice Furniture

anD FittinGselectronic

systeMs other total

Gross opening balance 161 2,003 491 583 373 3,610Total net reduction in value – –703 –344 –442 –266 –1,756net opening balance 161 1,300 147 141 107 1,855increases 12 131 37 79 52 311

Purchases 6 84 36 73 50 249Capitalised expenditure on improvements – 9 – – – 9Write-backs – 2 – – – 2Positive exchange differences 2 15 1 2 1 21Transfer from property, plant and equipment held for investment – – – – – –Other changes 4 21 – 3 2 30

reductions –63 –219 –35 –67 –54 –438Disposals –2 –21 – – –3 –28Depreciation – –58 –29 –52 –28 –168Impairment losses – –1 – – – –2Negative exchange differences – –6 –1 –1 –1 –8Transfers –60 –112 –3 –10 –4 –189

property, plant and equipment held for investment –1 –5 – – – –5assets held for sale –60 –107 –3 –10 –4 –184

Other changes – –21 –2 –3 –18 –44net Final balance 110 1,211 149 152 105 1,727

Total net reduction in value – –688 –353 –456 –269 –1,766Gross closinG balance 110 1,899 502 608 374 3,493

2013

lanD builDinGs

oFFice Furniture

anD FittinGselectronic

systeMs other total

Gross opening balance 110 1,899 502 608 374 3,493Total net reduction in value – –688 –353 –456 –269 –1,766net opening balance 110 1,211 149 152 105 1,727increases 49 123 30 68 38 309

Purchases 1 53 27 57 29 167Capitalised expenditure on improvements – 1 – – – 1Write-backs – 1 – – – 1Positive exchange differences – 4 1 – – 5Transfer from property, plant and equipment held for investment 1 8 – – – 10Other changes 47 55 3 11 9 125

reductions –53 –346 –39 – 95 –66 –599Disposals – –13 –1 –1 –6 –22Depreciation – –53 –29 –51 –23 –156Impairment losses – –6 –1 – – –6Negative exchange differences –4 –52 –1 –12 –5 –74Transfers –2 –171 –4 –25 –15 –216

property, plant and equipment held for investment – –18 – – – –18assets held for sale –1 –153 –3 –10 –4 –172

Other changes –47 –50 –4 –7 –18 –126net Final balance 106 988 140 125 77 1,437

Total net reduction in value – –622 –346 –360 –234 –1,563Gross closinG balance 106 1,610 486 486 312 2,999




Tangible assets held for investment: annual changes (€ million)

2012

lanD builDinGs total

opening balances 289 432 721increases 5 153 158

Purchases 3 126 130Capitalised expenditure on improvements – – –Write-backs – – –Positive exchange differences 2 20 21Transfer from property, plant and equipment used in the business 1 5 5Other changes – 2 2

reductions –31 –67 – 98Disposals –1 –15 –17Depreciation – –7 –7Reductions in fair value – – –Impairment losses –1 –4 –5Negative exchange differences –14 –1 –16Transfers to –12 –37 –49

properties used in the business – – –non-current assets classified as held for sale –12 –37 –49

Other changes –1 –3 –4closinG balances 264 518 782MeasureD at Fair value 245 466 711

2013

lanD builDinGs total

opening balances 264 518 782increases 47 245 292

Purchases 33 85 117Capitalised expenditure on improvements – – –Write-backs – – –Positive exchange differences – 1 1Transfer from property, plant and equipment used in the business – 18 18Other changes 15 141 156

reductions –78 –224 –302Disposals –3 –14 –17Depreciation – –14 –14Reductions in fair value – –1 –1Impairment losses –20 –20 –40Negative exchange differences –2 –7 – 9Transfers to –7 –152 –159

properties used in the business –1 –8 –10non-current assets classified as held for sale –5 –144 –149

Other changes –46 –17 –63closinG balances 234 538 772MeasureD at Fair value 234 591 825


C.12 – Intangible assets (€ million)

31 Dec. 2013 31 Dec. 2012

Goodwill – 2,127other intangible assets 219 331

Assets carried at cost 219 331Intangible assets generated internally 26 29Other assets 193 303

Assets valued at fair value – –total 219 2,459

Intangible assets – annual changes (€ million)

2012

other intanGible assets

GooDWill GenerateD internally other total

Gross opening balance 5,210 76 1,266 6,552Net reductions –2,813 –33 –840 –3,686net opening balance 2,397 43 426 2,866increases 66 18 126 210

Purchases 24 14 80 118Increases in intangible assets generated internally X – 7 7Write-backs X – – –Positive exchange differences 42 1 11 54Other changes – 3 27 31

reductions –336 –33 –249 –617Disposals – – –2 –2Write-downs –199 –5 –100 –304

Amortisation X –5 – 94 – 99Write-downs –199 – –6 –205

Transfers to non-current assets held for sale – –1 –7 –8Negative exchange differences –12 – –10 –23Other changes –125 –26 –129 –280

net closinG balance 2,127 29 303 2,459Total net write down –3,099 –37 – 967 –4,103

closinG balance 5,226 65 1,270 6,5622013

Gross opening balance 5,226 65 1,270 6,562Net reductions –3,099 –37 – 967 –4,103net opening balance 2,127 29 303 2,459increases – 12 118 131

Purchases – 9 66 76Increases in intangible assets generated internally X – – –Write-backs X – – –Positive exchange differences – – 10 10Other changes – 3 42 45

reductions –2,128 –16 –227 –2,371Disposals – – –5 –5Write-downs –1,957 –7 –104 –2,068

Amortisation X –7 –89 – 96Write-downs –1,957 – –15 –1,972

Transfers to non-current assets held for sale – –2 –65 –67Negative exchange differences –171 –1 –34 –206Other changes – –6 –19 –25

net closinG balance – 26 193 219Total net write down –2,805 –42 –851 –3,698

closinG balance 2,805 67 1,045 3,917




C.13 – Deferred tax assets (€ million)

31 Dec. 2013 31 Dec. 2012

Assets / liabilities held for trading 72 71Other financial instruments 90 120Property, plant and equipment / intangible assets 21 25Provisions 564 683Write-downs on loans 41 59Other assets / liabilities 109 120Loans and receivables with banks and customers 32 18Tax losses carried forward 52 177Other 6 12total 988 1,284

As actuarial gains and losses on pension and severance-payment obligations were not recognised in income in the reporting year, deferred tax assets of €7 million (2012: €228 million) 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 section A.9, 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 2013.

The assets include deferred tax assets arising from the carry-forward of unused tax losses in the amount of €52 million (2012: €177 million). Most of the tax losses carried forward can be used without time restriction.

In respect of tax losses carried forward in the amount of €2,151 million (2012: €918 million), no deferred tax assets were recognised because, from a current perspective, a tax benefit is unlikely to be realised within a reasonable period.


C.14 – Non-current assets and disposal groups classified as held for sale (€ million)

31 Dec. 2013 31 Dec. 2012

individual assetsFinancial assets 5 25Equity investments 200 27Tangible assets 101 179Intangible assets – –Non current – Other 1 –total 307 231of which at cost 102 179of which fair value level 1 – –of which fair value level 2 205 52of which fair value level 3 – –

asset groups Financial assets held for trading 38 –Financial assets designated at fair value – 1Available-for-sale financial assets 199 62Held-to-maturity investments – –Loans and receivables with banks 197 110Loans and receivables with customers 2,477 2,948Equity investments – –Tangible assets 316 95Intangible assets 67 8Other assets 113 332total 3,407 3,557of which at cost – –of which fair value level 1 – –of which fair value level 2 3,407 3,557of which fair value level 3 – –

assets 3,714 3,788

This item includes non-current assets and disposal groups whose sale is highly probable. They are recognised at the lower of their carrying amount and fair value less costs to sell and are stated separately in the consolidated financial statements.

ukrsotsbankUniCredit Group is considering a plan to streamline its activities in the region of Central and Eastern Europe. In this context all assets and liabilities of Public Joint Stock Company UniCredit Bank (“UniCredit Bank Ukraine” or “UCB”), a wholly-owned subsidiary of UniCredit S. p. A., were transferred to Public Joint Stock Company Ukrsotsbank (“Ukrsotsbank” oder “USB”), in which UniCredit Bank Austria AG had a shareholding interest of 98.56% until then. The transfer took place on 2 December 2013 after approval had been given by the national banking authority, resulting in a reduction of the shareholding interest to 72.46%.

In Q4 2013, the group started concrete negotiations with a potential buyer of Ukrsotsbank. Accordingly, it has become highly probable that a sale of Ukrsotsbank can be completed within one year, which is why Ukrsotsbank is classified as a disposal group held for sale as of 31 December 2013 and shown as a discontinued operation in the income statement. The reclassification to held for sale triggered an impairment of €200 million (of which €52 million is attributable to non-controlling interests).

It should be noted that UniCredit Bank Austria AG’s own share of the FX translation reserve (– €517 million as at 31 December 2013) will have to be recycled to profit or loss upon the final sale of Ukrsotsbank. Moreover, it should be noted that as a result of the difficult economic environment and the unclear political situation in Ukraine, the local currency (UAH) has weakened significantly against the euro and the US dollar since the beginning of 2014. Future developments are not yet foreseeable and it is therefore not possible to make any statement on the amount of the FX translation reserve which may be expected at the time of the sale.



C.16 – Deposits from banks (€ million)

31 Dec. 2013 31 Dec. 2012

Deposits from central banks 5,057 4,758Deposits from banks 21,962 26,303

Current accounts and demand deposits 2,236 3,449Time deposits 5,810 7,573Loans 13,807 15,111

Repos 970 1,470Other 12,837 13,641

Other liabilities 110 170total 27,020 31,061total Fair value 26,851 31,466Fair value – Level 1 – –Fair value – Level 2 20,606 22,938Fair value – Level 3 6,245 8,528

(€ million)

31 Dec. 2013 31 Dec. 2012

Margin with derivatives clearers (non-interest bearing) 4 7Gold, silver and precious metals 34 47Accrued income other than capitalised income 37 43Cash and other valuables held by cashier 1 1Interest and charges to be debited 8 10Items in transit between branches not yet allocated to destination accounts 50 –Items in processing 285 372Items deemed definitive but not attributable to other items 146 163Adjustments for unpaid bills and notes 8 8Other taxes 11 18Other items 831 776total 1,414 1,446

C.15 – Other assets


As at 31 December 2013, the total amount of assets which are attributable to the “loans and receivables” category was €158,165 million (2012: € 164,736 million).

sale of schottengasse propertybank austria sells its head office at schottengasse 6–8 to an equity investment company Bank Austria and the RPR private foundation of investor Ronny Pecik signed a purchase agreement for the sale of the Schottengasse property on 13 December 2013. The two parties have agreed not to disclose details of the purchase price and of the agreement. The closing took place on 19 February 2014.

Bank Austria will rent the Schottengasse property until construction of the bank’s new headquarters, the Austria Campus located close to Vienna’s Northern Railway Station, has been completed. After completion (scheduled for 2016/17), Bank Austria will concentrate all employees and the entire Management Board at its new headquarters.


C.18 – Debt securities in issue (€ million)

31 Dec. 2013 31 Dec. 2012

carryinG aMount Fair value

Fair value level 1

Fair value level 2

Fair value level 3

carryinG aMount Fair value

Fair value level 1

Fair value level 2

Fair value level 3

securitiesBonds 28,886 29,264 7,686 19,786 1,793 27,706 28,332 975 25,932 1,425

Structured 182 192 – 192 – 181 182 – 182 –Other 28,704 29,072 7,686 19,594 1,793 27,524 28,150 975 25,750 1,425

Other securities 164 164 – 164 – 357 357 – 333 24Structured – – – – – – – – – –Other 164 164 – 164 – 357 357 – 333 24

total 29,049 29,428 7,686 19,949 1,793 28,063 28,689 975 26,265 1,449

C.19 – Financial liabilities held for trading

C.20 – Financial liabilities at fair value through profit or lossThis item shows structured debt instruments in the amount of €788 million (2012: €1,152 million) 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. All instruments are classified as Fair Value Level 2.

Of the changes in fair values in 2013, an expense of €50 million (2012: an expense of €134 million) related to changes in our own credit risk. In the valuation as at 31 December 2013, the cumulative portion relating to changes in our own credit risk was cumulative income of €18 million (31 December 2012: cumulative income of €68 million). The repayable amount of liabilities as at 31 December 2013 was €750 million (31 December 2012: €1,163 million).

(€ million)

31 Dec. 2013 31 Dec. 2012

Fair value level 1

Fair value level 2


Fair value level 1

Fair value level 2


Financial liabilities 31 – – 31 42 19 – 61Deposits from banks – – – – – – – –Deposits from customers 31 – – 31 42 19 – 61

Derivative instruments – 1,586 7 1,593 – 2,133 2 2,135Financial derivatives – 1,566 7 1,573 – 2,063 2 2,066Credit derivatives – 20 – 20 – 70 – 70

total 31 1,586 7 1,625 42 2,152 2 2,196

C.17 – Deposits from customers (€ million)

31 Dec. 2013 31 Dec. 2012

Current accounts and demand deposits 56,179 55,767Time deposits 50,296 52,493Loans 1,286 929

Repos 1,155 800Other 131 129

Liabilities in respect of commitments to repurchase treasury shares 695 649Other liabilities 478 726total 108,935 110,563total Fair value 109,866 111,234Fair value – Level 1 – –Fair value – Level 2 70,162 64,607Fair value – Level 3 39,704 46,627



C.22 – Deferred tax liabilities (€ million)

31 Dec. 2013 31 Dec. 2012

Loans and receivables with banks and customers 42 79Assets / liabilities held for trading 107 51Other financial instruments 178 286Property, plant and equipment / intangible assets 45 36Other assets / liabilities 167 300Deposits from banks and customers – 1Other 26 16total 565 768

Pursuant to IAS 12.39, no deferred tax liabilities were recognised for temporary differences in connection with investments in domestic subsidiaries amounting to €911 million (2012: €628 million) because from a current perspective, they are not intended to be sold.


C.23 – Liabilities included in disposal groups classified as held for sale (€ million)

31 Dec. 2013 31 Dec. 2012

Deposits from banks 307 161Deposits from customers 1,907 2,681Debt securities in issue 4 620Financial liabilities held for trading 1 1Financial liabilities designated at fair value – –Reserve – –Other liabilities 23 44total 2,242 3,506of which at cost 2 –of which fair value level 1 – –of which fair value level 2 2,240 3,506of which fair value level 3 – –

See comments on C.14. All disposal groups presented above are measured at cost.

C.21 – Hedging derivatives (€ million)

31 Dec. 2013 31 Dec. 2012

Fair value level 1

Fair value level 2


Fair value level 1

Fair value level 2


Financial derivatives – 2,272 1 2,273 – 2,988 1 2,989Fair value hedge – 171 – 171 – 229 – 229Cash flow hedge – 2,101 1 2,102 – 2,759 1 2,760

credit derivatives – – – – – – – –total – 2,272 1 2,273 – 2,988 1 2,989


C.25 – Provisions for risks and charges (€ million)

31 Dec. 2013 31 Dec. 2012

pensions and other post-retirement benefit obligations 4,647 4,600other provisions for risks and charges 507 789

Legal disputes 113 301Staff expenses 135 16Other 260 472

total 5,155 5,389

C.24 – Other liabilities (€ million)

31 Dec. 2013 31 Dec. 2012

Liabilities in respect of financial guarantees issued – –Impairment of financial guarantees issued, of credit derivatives, of irrevocable commitments to distribute funds 698 214Accrued expenses other than those to be capitalised for the financial liabilities concerned 90 126Share-based payments classified as liabilities under IFRS 2 – –Other liabilities due to employees 338 377Other liabilities due to other staff 5 7Interest and amounts to be credited 49 51Items in transit between branches and not yet allocated to destination accounts – –Available amounts to be paid to others 48 59Items in processing 1,426 1,637Entries related to securities transactions 5 –Items deemed definitive but not attributable to other lines 241 371Tax items different from those included in tax liabilities 54 51Other entries 525 533total 3,481 3,428

As at 31 December 2013, the total amount of liabilities which are attributable to “deposits from banks/customers, debt securities in issue and other liabilities” was €168,485 million (2012: €173,115 million).




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

2012

pensions anD post-retireMent beneFit

obliGations other provisions total

opening balance 3,664 540 4,204increases 1,174 366 1,540

Provisions for the year – 349 349Current service costs 64 – 64Settlement gains / losses 3 – 3Past service costs – – –Interest costs 183 – 183Remeasurement losses recognised in other comprehensive income 921 – 921Other increases 3 17 21

Decreases –238 –118 –356Uses during the year –232 –115 –347Remeasurement gains recognised in other comprehensive income – – –Other decreases –6 –3 – 9

closinG balance 4,600 789 5,3892013

pensions anD post-retireMent beneFit

obliGations other provisions total

opening balance 4,600 789 5,389increases 299 191 490

Provisions for the year – 184 184Current service costs 76 – 76Settlement gains / losses 6 – 6Past service costs 3 – 3Interest costs 168 – 168Remeasurement losses recognised in other comprehensive income 27 – 27Other increases 19 7 26

Decreases –252 –472 –724Uses during the year –234 –416 –650Remeasurement gains recognised in other comprehensive income –4 – –4Other decreases –13 –57 –70

closinG balance 4,647 507 5,155

Restructuring provisions In December 2013, Bank Austria launched the bank austria 2020 initiative in response to changes in customer behaviour and market environment as well as rising costs. The goal of the initiative is to put Banak Austria’s business model on a more sustainable basis, to be optimally positioned in the forthcoming transformation of the Austrian banking industry.

While Bank Austria will adhere to the Group commercial banking strategy, the bank will differentiate more clearly between two directions:

The “basic services bank” will offer services such as deposits, consumer loans, cash deposits and withdrawals, as well as transfers, intensively using technology to provide these services at competitive prices.

The “advisory services bank” will offer consulting services with greater added value to its customers through the presence of experts and specialists.

The new business model will enable Bank Austria to make better use of opportunities to generate more revenues. However, in order to improve the profitability of its retail operations, a further streamlining of processes and additional measures for cost reductions are planned.

The necessary restructuring processes are planned to be implemented in Bank Austria and its subsidiaries in the years 2014 and 2015.


The following measures are planned to reduce expenses:• Staff-relatedmeasuresareplannedtobetakenprimarilyinback-officeunitsandinasociallycompatibleform,withafocusontwoareas:positions

which become vacant will not be filled, and part-time working models will be promoted. A total reduction of 686 FTEs (54% in 2014 and 46% in 2015) is planned in Bank Austria.

• Reductionofthenumberofbranches.• FundamentalreorganisationoftheITinfrastructureinlightoftheintroductionofmultichannelbanking.

The expected costs related to this planned restructuring in the amount of €104 million have been provided for in a restructuring provision.

C.26 – EquityFrom 1 January 2013 to 31 December 2013, the number of shares was 231,228,820, of which 10,115 were registered shares. The registered shares (10,000 registered shares are held by “Privatstiftung zur Verwaltung von Anteilsrechten”, a private foundation under Austrian law; 115 registered shares are held by “Betriebsratsfonds des Betriebsrats der Angestellten der UniCredit Bank Austria AG Region Wien”, the Employees’ Council Fund of theEmployees’ 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.


D – Segment reporting

D.1 – Reconciliation of reclassified accounts to mandatory reporting schedule 152

D.2 – Description of segment reporting 154

D.3 – Segment reporting 1–12 2013/1–12 2012 156

D.4 – Segment reporting Q1– Q4 2013/Q1– Q4 2012 158



D – Segment reporting (CONTINUED)

D.1 – Reconciliation of reclassified accounts to mandatory reporting schedule (€ million)

2013 2012

Net interest 4,132 4,110Dividends and other income from equity investments 83 –150

Dividend income and similar revenue 25 30minus: dividends from equity instruments held for trading 0 0

Profit (loss) of associates – of which: income (loss) from equity investments valued at net equity 58 –180Net fees and commissions 1,698 1,536Net trading, hedging and fair value income 934 768

Gains (losses) on financial assets and liabilities held for trading 565 539plus: dividends from equity instruments held for trading 0 0Fair value adjustments in hedge accounting 12 –8Gains (losses) on disposal and repurchase of available-for-sale financial assets 305 90Gains (losses) on disposal and repurchase of held-to-maturity investments 3 25Gains (losses) on disposal or repurchase of financial liabilities 11 126Gains (losses) on financial assets and liabilities designated at fair value through profit or loss 37 –5

Net other expenses/ income 113 142Gains (losses) on disposals / repurchases of loans and receivables – not impaired –2 –8Premiums earned (net) 83 161Other income (net) from insurance activities –65 –123Other net operating income 94 109

minus: other operating income – of which: recovery of expenses –1 –1plus: impairment on tangible assets – other operating leases 0 0minus: Other operating expenses – write-downs on improvements of goods owned by third parties 5 5

operatinG incoMe 6,960 6,405Payroll costs –1,886 –1,911

Administrative costs – staff expenses –1,992 –1,914minus: integration/ restructuring costs 106 3

Other administrative expenses –1,690 –1,601Administrative costs – other administrative expenses –1,705 –1,599

minus: integration/ restructuring costs 20 3plus: Other operating expenses – write-downs on improvements of goods owned by third parties –5 –5

Recovery of expenses = Other net operating income – of which: Other operating income – recovery of costs 1 1Amortisation, depreciation and impairment losses on intangible and tangible assets –281 –245

Impairment /Write-backs on property, plant and equipment –215 –175minus: impairment losses/write-backs on property owned for investment 40 11minus: impairment on tangible assets – other operating leases 0 0

Impairment /Write-backs on intangible assets –112 – 98minus: integration/ restructuring costs 5 1minus: Purchase Price Allocation effect 0 16

operatinG costs –3,856 –3,755operatinG proFit 3,104 2,650


2013 2012

Net write-downs of loans and provisions for guarantees and commitments –1,441 – 959Gains (losses) on disposal and repurchase of loans 3 3Impairment losses on loans –1,416 – 976Impairment losses on other financial assets –28 14

net operatinG proFit 1,663 1,691Provisions for risks and charges –177 –305

Net provisions for risks and charges –56 –332minus: release of a provision related to the disposal of a participation –122 0minus: integration/ restructuring costs 1 27

Integration/ restructuring costs –132 –33Net income from investments –223 –76

Impairment losses on available-for-sale financial assets –56 –63Impairment losses on held-to-maturity investments 0 –16

plus: impairment losses/write-backs on property owned for investment –40 –11Profit (loss) of associates –135 –185

minus: profit (loss) of associates – income (loss) from equity investments valued at net equity –58 180Gains and losses on tangible and intangible assets –1 0Gains (losses) on disposal of investments 66 19

proFit beFore taX 1,131 1,276Income tax for the period –534 –328

Tax expense (income) related to profit or loss from continuing operations –534 –326minus: taxes on Purchase Price Allocation effect 0 –2

Total profit or loss after tax from discontinued operations –270 –440Profit or loss after tax from discontinued operations –392 –440

plus: release of a provision related to the disposal of a participation 122 0proFit or loss For the perioD 327 508Non-controlling interests 27 –38net proFit attributable to the oWners oF the parent coMpany beFore ppa 354 470Purchase Price Allocation effect 0 –13Impairment of goodwill –1,957 –34net proFit or loss attributable to the oWners oF the parent coMpany –1,603 423



D.2 – Description of segment reportingThe segment reporting format is based on the internal reporting structure of business segments, which reflects management responsibilities in the Bank Austria Group in 2013. The business segments are presented as independent units with responsibility for their own results. The definition of business segments is primarily based on organisational responsibility for customers.

structural changes in segment reporting: As part of a UniCredit-wide initiative (Group Organisation Leaner Design = GOLD project), the Management Board responsibilities and the definitions of business segments were changed as of 2013. The new structure strengthens regional control, customer service teams can adjust more quickly to local market changes. The new Retail & Corporates Division was created by combining the customer segments of the previous Family & SME Banking (F&SME) business segment with the previous CIB customer segments Corporates II (corporate customers with an annual turnover of over €50 million), Real Estate and Public Sector. The new Division also includes Factoring, the business conducted by FactorBank AG. The Corporate & Investment Banking (CIB) business segment continues to operate within the network of the global CIB Division; following the transfer of the local corporate customer segments, CIB focuses on serving multinational companies and large institutional customers, which are provided with investment banking solutions and capital market services. The definition and tasks of the other customer business segments – i. e. Private Banking and Central Eastern Europe (CEE) – and also the Corporate Center are more or less unchanged.

Segment reporting covers the following business segments:

Retail & CorporatesThe Retail & Corporates business segment comprises business with private individuals (Retail), including the Mass Market and Affluent customer segments except Private Banking customers, and thus encompasses the entire multi-channel distribution network. Also included in this Division are subsidiaries active in credit card business and FactorBank. The Corporates subdivision covers the customer segments SMEs (small and medium-sized businesses) and corporate customers with an annual turnover of over €50 million, and Real Estate including various subsidiaries (e. g. Wohnbaubank, Bank Austria Real Invest Group) and the Public Sector customer segment.

Private BankingPrivate Banking has responsibility for private customers with investments exceeding €500,000. Schoellerbank AG and various other small subsidiaries are also included in the Private Banking business segment.

Corporate & Investment Banking (CIB)The Corporate & Investment Banking segment covers the customer segment of multinational companies and large international customers using capital market services and investment banking solutions. Corporate & Investment Banking also serves financial institutions including banks, asset managers, institutional customers and insurance companies. The product lines offered by CIB to these customers are Financing & Advisory (classic and structured lending business and capital market advisory services), Global Transaction Banking (including payment transactions, trade finance, cash management) and within Markets & Corporate Treasury Sales the services relating to customer-driven trading activities. The product specialists continue to support commercial banking activities of the bank’s other business segments.

Central Eastern Europe (CEE)The CEE business segment includes the commercial banking units of the Bank Austria Group in the region of Central and Eastern Europe (including Turkey). The equity interest in JSC ATF Bank and its subsidiaries in Kazakhstan and Kirgyzstan was classified as a discontinued operation already in 2012 and allocated to the Corporate Center. The equity interest in JSC ATF Bank and its subsidiaries was sold as at 30 April 2013.

On the basis of a strategic decision on risk reduction, the equity interest in Ukrsotsbank was classified as held for sale at the end of 2013. Profit or loss of Ukrsotsbank is now included in the CEE business segment in the income statement item “Total profit or loss after tax from discontinued operations”; figures for previous periods were adjusted accordingly.

Corporate CenterThe item “Total profit or loss after tax from discontinued operations” in the Corporate Center’s income statement includes the other effects resulting from the classification of Ukrsotsbank as a discontinued operation and the effects from the sale (including profit or loss until the sale) of JSC ATF Bank and its subsidiaries. In addition to current expenses relating to steering and administrative functions for the entire bank, the Corporate Center comprises all equity interests that are not assigned to a business segment, including the contribution from UniCredit Leasing, in which Bank Austria has a shareholding interest of 31.01% accounted for under the equity method. In the fourth quarter of 2013, the equity interest in UniCredit Leasing was classified as a disposal group held for sale.

Funding costs relating to consolidated subsidiaries are also assigned to the Corporate Center. Also included are inter-segment eliminations, other items which are not to be assigned to the business segments, and impairment losses on goodwill.



MethodsNet interest is split up according to the market interest rate method. Costs are allocated to the individual business segments from which they arise.

The result of each business segment is measured by the profit earned by the respective segment. The interest rate applied to investment of equity allocated to the business segments is determined for one year in advance as part of the budgeting process. Essentially, it is composed of the 1-month EURIBOR and a liquidity cost margin based on the average term of balance sheet volume.

Overhead costs are allocated to the business segments according to a key of distribution applied within the Group on a uniform basis (50% costs, 20% revenues, 20% FTEs and 10% proportionately).

Capital allocated to the business segments in UniCredit Bank Austria AG, based on the Tier 1 capital ratio, is 9% of risk-weighted assets.

Recasting:A number of structural changes took place within the business segments and in the group of consolidated companies. This means that results for 2013 are not fully comparable with those for 2012. For this reason, the segment results for 2012 have been adjusted to the new structure. The difference compared with Bank Austria’s overall results is presented in a separate column showing “Recasting differences”.

The main pro-forma adjustments are as follows:• Theprofit-or-losseffectresultingfromcustomertransfersandthereallocationofsubsidiaries(GroupOrganisationLeanerDesign=GOLDproject)

was also taken into account in previous periods.• Startingwith2013,theAustrianbanklevywasallocatedtothebusinesssegmentsessentiallyonthebasisoftotalassets

(UniCredit Bank Austria AG) of the respective business segments. Figures for previous periods were adjusted accordingly.• DOMUSFacilityManagementGmbHwassoldtoUniCreditGlobalInformationServicesinSeptember2012.DOMUSFacilityManagementGmbH

is therefore no longer included in the recast figures for 2012.• UniCreditConsumerFinancingAD(Bulgaria)andUniCreditConsumerFinancingIFNS.A.(Romania)wereacquiredinJanuary2013.

The two companies are therefore retrospectively included in the recast figures for 2012.• BankAustria’s31.01%equityinterestinUniCreditLeasingwasclassifiedasadisposalgroupheldforsale;thismeansthatprofitorloss

continues to be included in the item “Dividends and other income from equity investments” while valuation adjustments are now included in net income/ loss from investments. Figures for previous periods were adjusted accordingly.

• Otherminoradjustmentsweremadetoimprovedatacomparability.




D.3 – Segment reporting 1–12 2013/1–12 2012 (€ million)

retail & corporates

private banKinG

corporate & investMent

banKinG (cib)

central eastern

europe (cee)

corporate center

banK austria

Group (recast)

recastinG DiFFer-ences 1)

banK austria

Group(publisheD) 2)

Net interest 1–12 2013 936 52 346 3,091 –292 4,132 – 4,1321–12 2012 982 47 434 3,032 –352 4,143 –33 4,110

Dividends and other income 1–12 2013 23 – 5 13 42 83 – 83from equity investments 1–12 2012 38 – 1 16 31 86 –237 –150Net fees and commissions 1–12 2013 477 101 99 1,040 –19 1,698 – 1,698

1–12 2012 476 91 86 958 –68 1,543 –7 1,536Net trading, hedging and 1–12 2013 33 3 54 705 140 934 – 934fair value income/ loss 1–12 2012 26 2 –3 531 212 768 – 768Net other expenses/ income 1–12 2013 22 – 5 80 5 113 – 113

1–12 2012 22 – 2 93 25 141 1 142operatinG incoMe 1–12 2013 1,492 156 508 4,929 –125 6,960 – 6,960

1–12 2012 1,543 141 520 4,630 –152 6,681 –276 6,405operatinG costs 1–12 2013 –1,143 –109 –226 –2,162 –216 –3,856 – –3,856

1–12 2012 –1,117 –107 –237 –2,075 –250 –3,786 31 –3,755operatinG proFit 1–12 2013 349 46 282 2,767 –341 3,104 – 3,104

1–12 2012 425 34 283 2,555 –402 2,895 –245 2,650Net write-downs of loans and provisions 1–12 2013 –136 –1 –53 –1,222 –29 –1,441 – –1,441for guarantees and commitments 1–12 2012 –160 – –48 –761 –1 – 969 10 – 959net operatinG proFit 1–12 2013 213 46 229 1,545 –370 1,663 – 1,663

1–12 2012 265 34 235 1,794 –403 1,926 –235 1,691Provisions for risks and charges 1–12 2013 –5 –2 – –40 –129 –177 – –177

1–12 2012 –3 –1 –15 –63 –223 –305 – –305Integration/ restructuring costs 1–12 2013 – – 4 –32 –104 –132 – –132

1–12 2012 –27 –1 –4 –1 – –33 – –33Net income/loss from investments 1–12 2013 –33 – –2 169 –358 –223 – –223

1–12 2012 –24 – –5 –8 –280 –318 241 –76proFit beFore taX 1–12 2013 175 44 231 1,641 – 960 1,131 – 1,131

1–12 2012 211 33 211 1,722 – 907 1,269 7 1,276Income tax for the period 1–12 2013 –48 –12 –56 –254 –164 –534 – –534

1–12 2012 –44 – 9 –60 –323 110 –327 –2 –328Total profit or loss after tax from 1–12 2013 – – – –108 –162 –270 – –270discontinued operations 1–12 2012 – – – 1 –439 –438 –2 –440proFit or loss For the perioD 1–12 2013 127 32 175 1,280 –1,287 327 – 327

1–12 2012 167 24 150 1,400 –1,236 505 3 508Non-controlling interests 1–12 2013 –7 – – –26 59 27 – 27

1–12 2012 –7 – 1 –51 20 –38 – –38net proFit or loss attributable 1–12 2013 120 32 175 1,255 –1,228 354 – 354to the oWners oF the parent coMpany beFore ppa

1–12 2012 160 24 151 1,349 –1,217 467 3 470

Purchase Price Allocation effect 1–12 2013 – – – – – – – –1–12 2012 – – – – –13 –13 – –13

Goodwill impairment 1–12 2013 – – – – 9 –1,947 –1,957 – –1,9571–12 2012 – – – –22 –12 –34 – –34

net proFit or loss attributable 1–12 2013 120 32 175 1,245 –3,176 –1,603 – –1,603to the oWners oF the parent coMpany

1–12 2012 160 24 151 1,327 –1,242 419 3 423


retail & corporates

private banKinG


banKinG (cib)

central eastern

europe (cee)

corporate center

banK austria

Group (recast)

recastinG DiFFer-ences 1)

banK austria

Group(publisheD) 2)

risk-weighted assets (rWa) (avg.) 3) 1–12 2013 17,572 661 9,087 82,367 15,808 125,496 – 125,4961–12 2012 17,589 954 9,465 84,185 17,065 129,257 –173 129,083

loans to customers (end of period) 1–12 2013 39,901 644 13,581 69,170 5,824 129,121 – 129,1211–12 2012 41,762 599 13,285 68,051 6,476 130,173 2,251 132,424

primary funds (end of period) 4) 1–12 2013 40,300 7,686 9,191 63,615 17,192 137,984 – 137,9841–12 2012 43,601 7,716 8,390 62,486 14,630 136,824 1,802 138,626

Cost / income ratio excl. bank levy in % 1–12 2013 74.1 69.9 37.9 42.9 n.m. 53.4 n.m. 53.41–12 2012 70.0 75.4 39.2 44.0 n.m. 54.7 n.m. 56.6

Risk /earnings ratio in % 5) 1–12 2013 14.2 1.6 15.3 39.4 n.m. 34.2 n.m. 34.21–12 2012 15.7 0.6 11.0 25.0 n.m. 22.9 n.m. 24.2

1) The segment results have been recast. The difference compared to Bank Austria’s results is presented in a separate column showing “Recasting differences”, which for 2012 mainly relate to the sale of Domus Facility Management GmbH, the purchase of UniCredit Consumer Financing AD (Bulgaria) and UniCredit Consumer Financing IFN S. A. (Romania). “Recasting differences” for 2012 relating to loans to customers and primary funds are due to Public Joint Stock Company “Ukrsotsbank” and its subsidiaries.

2) The comparative figures for 2012 and 2013 reflect the accounting figures, restatements as described in the notes included accordingly.3) Corporate Center: including Kazakhstan (until disposal).4) Primary funds: deposits from customers and debt securities in issue.5) Risk /earnings ratio: net write-downs of loans and provisions for guarantees and commitments measured against net interest and dividends and other income from equity

investments.n. m. = not meaningful




(€ million)

retail & corporates

private banKinG


banKinG (cib)

central eastern

europe (cee)corporate

center

banK austria Group

(recast) 1)

Net interest Q4 2013 236 14 84 742 –73 1,003Q3 2013 236 13 82 756 –67 1,020Q2 2013 230 12 90 791 –74 1,048Q1 2013 235 12 91 802 –79 1,060Q4 2012 241 13 99 795 – 93 1,055Q3 2012 237 10 103 784 –82 1,051Q2 2012 254 12 115 739 –82 1,038Q1 2012 250 13 116 714 – 94 999

Dividends and other income Q4 2013 10 – 1 –2 –3 6from equity investments Q3 2013 3 – – 2 10 14

Q2 2013 4 – – 10 14 28Q1 2013 7 – 4 3 21 35Q4 2012 10 – 1 4 –4 10Q3 2012 8 – – 4 –18 –6Q2 2012 15 – – 4 33 52Q1 2012 5 – – 5 20 30

Net fees and commissions Q4 2013 127 27 30 275 –4 456Q3 2013 118 22 19 252 –6 404Q2 2013 118 26 26 265 – 434Q1 2013 114 26 24 248 – 9 403Q4 2012 125 28 24 264 –18 424Q3 2012 119 22 17 243 –17 384Q2 2012 117 20 23 234 –17 376Q1 2012 115 21 22 217 –16 359

Net trading, hedging and Q4 2013 1 1 15 304 45 366fair value income/ loss Q3 2013 7 1 11 125 48 193

Q2 2013 7 1 20 153 51 232Q1 2013 18 – 8 122 –4 144Q4 2012 7 – 9 154 18 189Q3 2012 9 1 – 174 64 249Q2 2012 7 – –5 103 –65 40

Q1 2012 3 1 –6 100 194 291Net other expenses/ income Q4 2013 8 – 1 1 9 20

Q3 2013 5 1 – 31 6 41Q2 2013 5 – 1 27 –19 14Q1 2013 5 – 3 21 9 38Q4 2012 7 – –1 44 –5 45Q3 2012 5 1 1 45 11 63Q2 2012 5 – – 20 10 35Q1 2012 4 –1 1 –16 9 –2

operatinG incoMe Q4 2013 383 42 130 1,320 –25 1,850Q3 2013 368 37 112 1,166 – 9 1,673Q2 2013 364 39 136 1,247 –29 1,757Q1 2013 378 38 130 1,197 –62 1,680Q4 2012 390 41 133 1,261 –102 1,723Q3 2012 378 33 121 1,250 –42 1,741Q2 2012 398 33 132 1,099 –121 1,541Q1 2012 376 34 134 1,020 113 1,677

operatinG costs Q4 2013 –298 –28 –58 –560 –56 –1,001Q3 2013 –271 –26 –55 –516 –52 – 920Q2 2013 –290 –28 –56 –535 –53 – 963Q1 2013 –283 –28 –56 –551 –55 – 973Q4 2012 –304 –28 –61 –534 –65 – 993Q3 2012 –275 –27 –59 –521 –61 – 943Q2 2012 –272 –26 –54 –522 –62 – 937Q1 2012 –267 –26 –62 –497 –62 – 914

1) Quarterly figures based on unaudited recast data only.

D.4 – Segment reporting Q1– Q4 2013/Q1– Q4 2012


retail & corporates

private banKinG


banKinG (cib)

central eastern


center

banK austria Group

(recast) 1)

operatinG proFit Q4 2013 85 14 72 760 –82 849Q3 2013 97 11 56 650 –61 753Q2 2013 73 11 80 712 –82 794Q1 2013 94 11 74 646 –117 708Q4 2012 86 13 72 727 –167 730Q3 2012 103 7 62 728 –102 798Q2 2012 126 7 78 577 –184 604Q1 2012 110 8 71 523 51 763

Net write-downs of loans and provisions Q4 2013 –2 – –15 –517 –30 –565for guarantees and commitments Q3 2013 –45 – –13 –231 – –289

Q2 2013 –45 – –12 –246 1 –301Q1 2013 –45 – –13 –228 – –286Q4 2012 –7 – –37 –233 –2 –279Q3 2012 –76 – –1 –181 – –257Q2 2012 –18 – –5 –193 1 –215Q1 2012 –59 – –6 –154 – –219

net operatinG proFit Q4 2013 83 14 57 242 –112 285Q3 2013 52 10 44 419 –61 464Q2 2013 28 11 67 466 –81 493Q1 2013 50 10 61 417 –117 421Q4 2012 79 13 34 494 –169 451Q3 2012 27 7 62 548 –102 541Q2 2012 108 7 73 384 –183 390Q1 2012 50 8 66 369 51 544

Provisions for risks and charges Q4 2013 –5 –1 – –7 –22 –35Q3 2013 – –1 – –5 –15 –22Q2 2013 – – – –16 –31 –46Q1 2013 – – – –12 –62 –74Q4 2012 –2 – –15 –37 –177 –231Q3 2012 –1 – – –7 – –7Q2 2012 – – – –10 –49 –59Q1 2012 – –1 – –10 3 –8

Integration/ restructuring costs Q4 2013 – – – –12 –104 –116Q3 2013 – – 4 –14 – –10Q2 2013 – – – –4 – –4Q1 2013 – – – –2 – –2Q4 2012 –27 –1 – –1 – –30Q3 2012 – – – – – –Q2 2012 – – –3 – – –3Q1 2012 – – – – – –

Net income/loss from investments Q4 2013 –43 – –2 –17 –356 –417Q3 2013 12 – –1 185 –2 194Q2 2013 –2 – 3 –1 1 1Q1 2013 – – –2 1 – –1Q4 2012 –19 – –2 –13 –239 –273Q3 2012 – – – –1 7 6Q2 2012 –6 – –4 1 –8 –16Q1 2012 – – – 5 –39 –34

proFit beFore taX Q4 2013 35 13 55 207 –594 –284Q3 2013 64 9 47 585 –78 627Q2 2013 27 11 71 446 –111 443Q1 2013 50 10 59 404 –178 344Q4 2012 32 12 17 442 –586 –83Q3 2012 27 7 62 540 – 95 539Q2 2012 102 7 66 376 –240 312Q1 2012 50 7 66 364 14 502





retail & corporates

private banKinG


banKinG (cib)

central eastern


center

banK austria Group

(recast) 1)

Income tax for the period Q4 2013 –25 –4 –14 –29 –187 –259Q3 2013 –10 –2 –11 –86 8 –100Q2 2013 –6 –3 –17 –61 –24 –111Q1 2013 –8 –3 –14 –77 38 –64Q4 2012 –8 –3 – 9 –83 23 –80Q3 2012 –2 –2 –15 –101 46 –73Q2 2012 –22 –3 –19 –70 44 –69Q1 2012 –12 –2 –18 –69 –3 –104

Total profit or loss after tax from Q4 2013 – – – –52 –198 –250discontinued operations Q3 2013 – – – 1 6 7

Q2 2013 – – – –58 13 –45Q1 2013 – – – 1 17 18Q4 2012 – – – –25 –462 –487Q3 2012 – – – 8 6 14Q2 2012 – – – 7 6 14Q1 2012 – – – 11 10 21

proFit (loss) For the perioD Q4 2013 10 9 41 125 – 979 –793Q3 2013 54 7 36 500 –63 534Q2 2013 21 8 53 327 –121 287Q1 2013 42 8 44 328 –124 299Q4 2012 23 9 9 335 –1,025 –650Q3 2012 25 5 47 447 –43 480Q2 2012 80 4 48 313 –190 256Q1 2012 39 6 47 305 22 419

Non-controlling interests Q4 2013 –1 – –1 17 38 53Q3 2013 –3 – – –10 1 –12Q2 2013 –1 – – –17 14 –4Q1 2013 –2 – 1 –16 6 –11Q4 2012 –2 – 1 –3 5 1Q3 2012 –4 – – –24 7 –21Q2 2012 –1 – – –14 6 –8Q1 2012 –2 – – –11 2 –10

net proFit or loss attributable Q4 2013 9 9 40 143 – 941 –740to the oWners oF the parent Q3 2013 52 7 36 490 –63 522coMpany beFore ppa Q2 2013 19 8 53 310 –107 284

Q1 2013 40 8 46 312 –118 288Q4 2012 22 9 9 332 –1,021 –649Q3 2012 21 5 46 423 –36 459Q2 2012 80 4 48 300 –184 248Q1 2012 37 6 47 294 24 408

Purchase Price Allocation effect Q4 2013 – – – – – –Q3 2013 – – – – – –Q2 2013 – – – – – –Q1 2013 – – – – – –Q4 2012 – – – – –7 –7Q3 2012 – – – – –2 –2Q2 2012 – – – – –2 –2Q1 2012 – – – – –2 –2

Goodwill impairment Q4 2013 – – – – 9 –1,940 –1,949Q3 2013 – – – – –3 –3Q2 2013 – – – – –3 –3Q1 2013 – – – – –3 –3Q4 2012 – – – –22 –3 –24Q3 2012 – – – – –3 –3Q2 2012 – – – – –3 –3Q1 2012 – – – – –4 –4



retail & corporates

private banKinG


banKinG (cib)

central eastern


center

banK austria Group

(recast) 1)

net proFit or loss attributable Q4 2013 9 9 40 134 –2,881 –2,689to the oWners oF the parent Q3 2013 52 7 36 490 –65 520coMpany Q2 2013 19 8 53 310 –109 281

Q1 2013 40 8 46 312 –121 285Q4 2012 22 9 9 310 –1,030 –680Q3 2012 21 5 46 423 –41 454Q2 2012 80 4 48 300 –189 243Q1 2012 37 6 47 294 17 402

risk-weighted assets (rWa) (avg.) 2) Q4 2013 17,274 600 8,603 78,891 14,263 119,631Q3 2013 17,417 597 8,522 81,687 14,751 122,974Q2 2013 17,624 615 9,285 84,506 16,364 128,395Q1 2013 17,974 833 9,940 84,385 17,855 130,986Q4 2012 17,745 1,039 9,749 84,782 17,477 130,792Q3 2012 17,598 1,020 9,234 86,012 17,795 131,658Q2 2012 17,557 910 9,034 84,126 17,337 128,964Q1 2012 17,455 846 9,845 81,818 15,650 125,614

loans to customers (end of period) Q4 2013 39,901 644 13,581 69,170 5,824 129,121Q3 2013 40,195 642 14,145 70,633 6,158 131,774Q2 2013 40,710 627 14,757 70,654 6,917 133,665Q1 2013 40,758 592 14,864 71,154 6,571 133,939Q4 2012 41,762 599 13,285 68,051 6,476 130,173Q3 2012 41,106 621 14,978 67,666 6,152 130,522Q2 2012 41,666 614 14,626 66,660 6,325 129,890Q1 2012 40,960 615 15,106 65,157 5,584 127,423

primary funds (end of period) 3) Q4 2013 40,300 7,686 9,191 63,615 17,192 137,984Q3 2013 39,213 7,969 8,872 60,116 16,478 132,647Q2 2013 41,201 7,821 9,186 60,205 16,314 134,727Q1 2013 42,442 7,761 9,776 60,860 16,001 136,840Q4 2012 43,601 7,716 8,390 62,486 14,630 136,824Q3 2012 43,607 7,737 8,376 58,873 14,747 133,340Q2 2012 42,555 7,448 7,995 57,452 14,922 130,373Q1 2012 42,078 7,647 8,438 55,371 16,550 130,084

Cost / income ratio excl. bank levy in % Q4 2013 75.4 66.2 38.2 42.1 n.m. 52.6Q3 2013 71.2 70.8 41.9 43.8 n.m. 53.3Q2 2013 77.3 71.1 35.2 42.5 n.m. 53.1Q1 2013 72.6 71.9 36.9 43.3 n.m. 54.5Q4 2012 75.5 68.8 39.9 41.1 n.m. 55.4Q3 2012 70.2 79.9 42.0 40.9 n.m. 52.2Q2 2012 65.9 79.2 34.4 46.6 n.m. 58.6Q1 2012 68.4 75.4 40.5 48.6 n.m. 53.0

Risk /earnings ratio in % 4) Q4 2013 0.8 1.8 18.0 69.9 n.m. 56.0Q3 2013 18.8 1.6 15.6 30.5 n.m. 27.9Q2 2013 19.2 1.2 13.8 30.6 n.m. 28.0Q1 2013 18.5 1.6 13.9 28.4 n.m. 26.2Q4 2012 2.7 2.3 37.0 29.2 n.m. 26.2Q3 2012 31.0 0.1 0.6 22.9 n.m. 24.6Q2 2012 6.8 3.1 4.2 26.0 n.m. 19.7Q1 2012 23.3 2.9 4.8 21.4 n.m. 21.3

1) Quarterly figures based on unaudited recast data only.2) Corporate Center: including Kazakhstan (until disposal). 3) Primary funds: deposits from customers and debt securities in issue. 4) Risk /earnings ratio: net write-downs of loans and provisions for guarantees and commitments measured against net interest and dividends and other income from equity investments. n. m. = not meaningful


E – Risk report

E.1 – Overall risk management 164

E.2 – Market risk 166

E.3 – Liquidity risk 174

E.4 – Counterparty risk 177

E.5 – Country risk and sovereign risk 178

E.6 – Credit risk 181

E.7 – Operational risk 199

E.8 – Reputational risk 200

E.9 – Business risk 200

E.10 – Financial investment risk and real estate risk 200

E.11 – Legal risks 201

E.12 – Report on key features of the internal control and risk management systems in relation to the financial reporting process 203

E.13 – Information on the squeeze-out pursuant to the Austrian Federal Act on the Squeeze-out of Minority Shareholders (Gesellschafterausschluss- gesetz) of the holders of bearer shares in UniCredit Bank Austria AG 204

E.14 – Financial derivatives 205



E – Risk report (CONTINUED)

E.1 – Overall risk management UniCredit Bank Austria AG identifies, measures, monitors and manages all risks of the Bank Austria Group. In performing these tasks, Bank Austria works closely with the risk control and risk management units of UniCredit. In this context, UniCredit Bank Austria AG supports UniCredit’s ongoing projects which are aimed at establishing uniform group-wide risk controlling procedures.

UniCredit Bank Austria AG divides the monitoring and controlling processes associated with risk management into the following categories: market risk, liquidity risk, counterparty risk, credit risk, operational risk, reputational risk, business risk, financial investment risk and real estate risk.

The Management Board determines the risk policy and approves the principles of risk management, the establishment of limits for all relevant risks, and the risk control procedures. A key element of this is the annual definition of the group’s Risk Appetite (RA), in terms of a verbal Statement (RAS) and a Framework (RAF) of key metrics (targets, triggers, limits). RA defines risk types and the level of risk that the group is prepared to accept in pursuit of its strategic objectives and business plan, taking into account the interest of its customers and shareholders as well as capital and other requirements. RA is integrated in the budgeting processin the context of defining and selecting the desired risk-return profile.

In performing these tasks, the Management Board is supported by specific committees and independent risk management units. All risk management activities of UniCredit Bank Austria AG are combined within a management function at Management Board level directed by the Chief Risk Officer (CRO); secondary lending decisions for corporate customers are made in the CIB Credit Operations, CEE Credit Operations and Market Risk depart-ments, and for private customers and business customers in the Risk Management Family & SME Banking (+PB) department. The Special Credit Austria and CEE Credit Operations departments deal with problem loans. These organisational units are supported by the Strategic Risk Management & Control department. Credit risk control of the CEE business units is performed by the Strategic Risk Management & Control and CEE Credit Operations departments. The unit for active credit portfolio management (Credit Treasury) reports to the Chief Financial Officer (CFO) indirectly via the Finance department.

Cross-divisional controlThe Risk Committee (RICO) is responsible for the management of balance-sheet structure positions, it deals with cross-divisional risk management issues arising between sales units and overall bank management, and provides an overview of credit portfolio model results while also preparing reports on economic capital (Pillar 2). Liquidity risk control is performed by a separate committee (Liquidity Committee – LICO) which meets once a week to deal with current liquidity-related topics. These include operational aspects of liquidity management including market monitoring; and compliance with the liquidity policy, with CEE banking subsidiaries also being covered in this context – Bank Austria acts as a regional liquidity centre of UniCredit Group. Control of market risk is ensured by the Market Risk Committee (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 & Corporate Treasury Sales and with limit adjustments, product approvals and positioning decisions in the area of market risk. Other topics discussed and decided include, for example, the replication portfolio and methods for funds transfer pricing. In addition, the general framework and limits for banking subsidiaries are defined by MACO. Credit risk is assessed by the Credit Committee. The Operational & Reputational Risk Committee (OpRRiCo) meets on a quarterly basis to deal with operational & reputational risk issues. Risk arising from derivative transactions is managed by the Derivative Committee (DECO). DECO deals with classic credit risk and counterparty risk issues and aspects of reputational risk in customer business.

The Management Board of UniCredit Bank Austria AG sets risk limits for market risk activities and liquidity positions of the entire Bank Austria Group at least once a year, in coordination with UniCredit Group. RICO performs analyses and makes decisions with regard to business activities closely connected with customer business (in particular, risk management issues arising between sales units and overall bank management, ICAAP). The decisions and results of these committees are reported directly to the bank’s full Management Board. Risk Management, which is separate from the business divisions up to Management Board level, is in charge of preparing analyses and monitoring compliance with limits.

Beyond compliance with the regulatory capital rules pursuant to Section 39 of the Austrian Banking Act, economic capital (Pillar 2) 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 99.93%. This means that the confidence level was reduced from 99.97 in 2012 to 99.93% in 2013. The reduction follows the adjustment of the longer-term target rating of UniCredit Group, which is to be seen in the general context of rating developments in the banking sector in the past years.

Value-at-risk methodologies are used in the Bank Austria Group for calculating or planning economic capital for various specified types of risk (credit risk, market risk, operational risk, business risk, financial investment risk and real estate risk). Under the risk-taking capacity concept, economic capital is compared with available financial resources and monitored on an ongoing basis. The Bank Austria Group is included in the risk monitoring and risk management system of the entire UniCredit Group. This ensures overall risk management across the Group.


Current status of the application of the internal ratings-based approach (IRB approach) to credit risk in the Bank Austria Group

UniCredit Bank Austria AG has applied the internal ratings-based approach since March 2008, using its own estimates of loss given default and of conversion factors for the major part of its loan portfolio (advanced IRB approach).

The bank is planning to further refine and develop local as well as Group-wide models while also introducing various other Group-wide models.

Banca d’Italia (the Bank of Italy), the home supervisor of UniCredit Group, is responsible for all approvals at Group level, while local supervisory authorities are responsible for local topics in the legal entities and for local on-site reviews. Regulatory issues are being dealt with in close cooperation between home and host regulators (college of supervisors).

Implementation of the advanced IRB approach has been established as a Group-wide programme. Therefore UniCredit is responsible for Group-wide decisions and guidelines as well as for the development of Group-wide models. For example, Group-wide homogeneous portfolios have been defined for which uniform rating models are used across the Group, such as those for countries, banks and multinational companies.

Group standards have for the most part already been prepared and adopted by the UniCredit Group holding company in cooperation with the major IRB legal entities, and are used as an instrument for uniform Group-wide implementation, with a view to complying with local legal requirements – some of which differ from country to country – and safeguarding Group interests. These Group standards will continue to be gradually extended and comple-mented.

The Group standards continue to be integrated step by step in the processes and organisational set-up of all business areas and Group units, with account being taken of local features and legal requirements in ensuring Basel 2 compliance.

Austrian subsidiariesAll Austrian subsidiaries of UniCredit Bank Austria AG use the standardised approach. From a current perspective, for reasons of materiality, it is not planned to switch to one of the IRB approaches.

CEE subsidiariesThe CEE subsidiaries started to use the standardised approach to credit risk at the beginning of 2008. Based on a detailed roll-out plan, there are plans to switch to the advanced IRB approach at most of the CEE banking subsidiaries in line with the Group’s decision to use the advanced IRB approach.

According to the detailed roll-out plan communicated to the supervisory authorities involved, the switch to the A-IRB approach takes place at the relevant CEE subsidiaries step by step. Most subsidiaries start with the Foundation IRB approach (F-IRB).

In the course of the cross-border approval process, supervisory IRB assessments took place in an initial group of CEE subsidiaries in 2010. For the CEE subsidiaries UniCredit Bulbank AD, UniCredit Bank Czech Republic, a.s., and UniCredit Bank Slovenija d.d., the application of the F-IRB approach was approved as at 1 January 2011. The application of the F-IRB approach at UniCredit Bank Hungary Zrt. was approved as at 1 July 2011. In 2012, further approvals for the application of the F-IRB approach at the CEE subsidiaries UniCredit Bank Slovakia a.s. and UniCredit Tiriac Bank S. A. were given as at 1 July 2012 and 31 July 2012, respectively. Further approvals for the application of the F-IRB approach at the CEE subsidiary ZAO UniCredit Bank and for the application of the A-IRB approach at the CEE subsidiary UniCredit Bank Czech Republic, a.s. are expected for 2014.

Current status of the application of the advanced measurement approach (AMA) for operational risk in the Bank Austria Group

UniCredit Bank Austria AG has used the AMA since the beginning of 2008.

Austrian subsidiariesSchoellerbank applies the AMA in the area of operational risk.

CEE subsidiariesIn the reporting period, approval for the use of the AMA in the area of operational risk was available for the banking subsidiaries in the Czech Republic, in Slovakia, Hungary, Slovenia, Croatia, Bulgaria and Romania. In the next few years, AMA preparations will concentrate on ZAO UniCredit Bank Russia, Yapı ve Kredi Bankasi AS and UniCredit Bank Serbia JSC.




Implementation of disclosure requirements pursuant to Sections 26 and 26a of the Austrian Banking Act(regular disclosure of information on the organisational structure, risk management and risk capital position pursuant to Sections 2 to 15 of the Austrian Disclosure Regulation)Within UniCredit Group, comprehensive disclosure (under the Pillar 3 disclosure requirements) is carried out by the parent company UniCredit on its website, based on the consolidated financial position in its function as EEA parent bank of Bank Austria. Bank Austria is a significant subsidiary pursuant to Section 26 (4) of the Austrian Banking Act and therefore discloses its supervisory capital structure (Section 4 of the Austrian Disclosure Regulation) and its capital adequacy requirement (Section 5 of the Austrian Disclosure Regulation); furthermore, the bank discloses information regarding the use of own estimates for volatility adjustments (comprehensive method) for credit risk mitigation techniques to take account of financial collateral pursuant to Section 17 of the Austrian Disclosure Regulation and in accordance with the approval by the Austrian Financial Market Authority (FMA).

The disclosure by Bank Austria is available at its website www.bankaustria.at / Investor Relations/Basel 2 Disclosure Pillar 3.

Current status of Basel 2.5/Basel 3 implementation in the Bank Austria GroupMarket risk in the trading book:For the entire year 2013, capital requirements for the Basel 2.5 concepts of “stressed value at risk” (SVaR) and “incremental risk charge” (IRC) for the Bank Austria Group were calculated and covered as part of market risk. A reporting procedure for all Basel 2.5 parameters was set up in MACO, which meets once a week. Moreover, separate IRC limits were introduced for the relevant risk-takers in the Bank Austria Group. At the global level, besides detailed VaR limits, an SVaR limit is also implemented for the regulatory trading book in addition to further granular market risk limits.

Counterparty risk:As the changes in the area of counterparty credit risk resulting from the publications of the Basel Committee (Basel 3) and the Capital Requirements Directive (CRD IV) have been finalised, Bank Austria has implemented the respective requirements. Originally conceived for UniCredit Bank Austria AG, the local project in Austria was integrated in a broader context at UniCredit Group level subject to joint management. The main changes in the area of counterparty credit risk include the calculation of a stressed counterparty exposure, comparable to the stressed VaR in market risk. Other new features are the capital backing for market risk in respect of credit valuation adjustments (CVA market risk) and stricter standards for collateral management and margining. There are also stricter requirements to be met in the area of stress testing and backtesting in respect of counterparty credit risk.

Liquidity:Basel 3 sets liquidity standards under stressed conditions in the short-term maturity range (liquidity coverage ratio ≥ 100%) and in the structural sec-tor (net stable funding ratio, NSFR ≥ 100%). Compliance with these rules will be mandatory from 2015 and 2018, respectively. In a separate Basel 3 project, Bank Austria established the technical infrastructure to meet all reporting requirements for all relevant entities in Bank Austria Group starting from 2014. Bank Austria participated in 2013 and will also continue to participate in the Quantitative Impact Studies of the European Banking Authority (EBA) in 2014. Adjustments to the business strategy like strengthening the liquid bond portfolio and incentivising longer customer deposit maturities have already been launched with a view to ensuring compliance with the new Basel 3 liquidity ratios at all times.

E.2 – Market riskMarket risk management encompasses all activities in connection with our Markets and Corporate Treasury Sales operations and management of the balance sheet structure in Vienna and at Bank Austria’s subsidiaries. Risk positions are aggregated at least daily, analysed by the independent risk 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. Most of the positions held in Bank Austria are attributable to the banking book. Market risk of the banking book is an important factor also in other Divisions (the CEE banking subsidiaries, in particular). UniCredit Bank Austria uses uniform risk man-agement 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 importance are stress-oriented sensitivity and position limits. Additional elements of the limit system are the loss-warning level (applied to accumulated results for a specific period), the stressed VaR (SVaR) limit (determined for the trading book with a separate observation period), incremental risk charge (IRC) limits, the stress test warning limit (limiting losses when a pre-defined stress event is applied) and granular market risk limits (GML).

As mentioned above, Bank Austria uses a standard measurement procedure which is also applied in UniCredit Group. The model, approved in 2011, is used for internal risk management and for reporting regulatory capital requirements for market risk. Bank Austria is embedded in the market risk governance framework of UniCredit Group and leverages on the group-wide risk management platform UGRM.


The internal model (IMOD) is based on historical simulation with a 500-day market data time window for scenario generation. It is applied by Market Risk and Risk Integration within Bank Austria and is being further developed in cooperation with the UniCredit holding company. Further develop-ment includes reviewing the model as part of back-testing procedures, integrating new products, implementing requirements specified by the Management Board and the Market Risk Committee, and executing the Model Maintenance Report on a quarterly basis.

Risk governanceA new product process (NPP) has been established for the introduction of new products in the area of market risk in which risk managers play a decisive role in approving products. When the Group-wide UniCredit market risk model was approved by the college of supervisors (Italy, Germany and Austria), a multiplier of 3.5 was set in respect of the Value-at-Risk figures and this was used unchanged in 2013 for calculating the capital requirement. The market risk model is used for UniCredit Bank Austria AG, as until now, and for the Bank Austria Group. The risk model covers all major risk categories: interest rate risk and equity risk (both general and specific), credit spread risk, currency risk and commodity position risk. The IMOD Is subject to an annual review by Group Internal Validation (GIV) and internal audit. The structure of the standard risk report presented at MACO’s weekly meetings covers (stress) sensitivities in addition to VaR figures, and utilisation levels in the areas of IRC and SVaR (both for the regulatory trading books). Regular and specific stress scenario calculations complement the information provided to MACO and the Management Board.

Stress testingBank Austria conducts a rigorous programme of stress testing and the results are reviewed and discussed in the MACO at least quarterly or on an ad hoc basis given unfavourable market developments. In addition to the prevailing market risk stress test Bank Austria introduced an IRC stress test in 2013. 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 movements are dependent on currency, region, liquidity and the credit rating, and are set by Market Risk on a discretionary basis after consultation with experts in other areas of the bank (e. g. research, trading, and Market Risk UniCredit holding company). Bank Austria contributes to the UniCredit Group-wide open market risk forums (OMRF), which is the platform for CRO units to discuss stress test results and agree on further common group-wide scenario defini-tions; the picot scenario “ICAAP Widespread Contagion” is used for stress test analysis, stress test warning level monitoring, ICAAP stress test and the regulatory stress report throughout UniCredit Group.

Fair value measurementIn addition to the IMOD results, the P/L is determined on a total return basis for both the trading and banking books and is communicated to senior management on a daily basis. In 2013 Bank Austria conducted a thorough review of its fair value measurement principles in order to ensure that measurement of fair values complies with the new IFRS 13 rules. Fair value adjustments (FVA) are appropriate to the extent that they are consistent with the objective of a fair value measurement. 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 daily P/L explanation is supported by the intranet application “ERCONIS”; results are available to UniCredit Bank Austria’s trading and risk management broken down by portfolio, income statement item and currency. The regulatory approach to prudent valuation in the trading book is implemented primarily by Market Risk and further developed on an ongoing basis through cooperation within UniCredit Group in the same way as “independent price verification” (IPV), which estab-lishes valuation processes and verification procedures on a harmonised Group-wide basis and is used in Bank Austria for fixed-income securities. In 2013, as part of a Group-wide initiative, Bank Austria assumed the responsibility of the “EEMEA” Center of Competence for generating the golden copy price for fixed income securities issued in the EEMEA region. Regarding OTC IPV Bank Austria has harmonised the end of day market data items according to the Group-wide official rate source document (ORSD) and participates in the asset class committees designed to address and resolve revaluation topics. The use of credit /debt valuation adjustments (CVA/DVA) for OTC derivatives in Bank Austria was further refined in 2013 and integrated in the presentation of results of market activities including Corporate Treasury Sales (CTS) on a quarterly basis.

In Austria and all CEE subsidiaries the intranet platform “MARCONIS” is established as the group-wide standard for market conformity surveillance to systematically review the market conformity of its trading transactions. The scope of application of this tool has been further extended to include all CEE banking subsidiaries with market risk activities. Since 2010 the MARCONIS system has been extended to include another module, and the tool is also used to address the topic of price transparency (determining minimum margins and maximum hedging costs for Corporate Treasury Sales).




Market risk metricsThe chart below shows the VaR time series for the trading book and the banking book in 2013, calculated on the basis of the internal market risk model (IMOD), which is also used for regulatory reporting of capital requirements for market risk.

By year-end 2013, the total (overnight) VaR for the trading book and the banking book of the Bank Austria Group (cf. crimson line) was about €71.1 million. The SVaR for the regulatory trading book (cf. light red line) was below €10.7 million at the end of 2013. The VaR for the trading book (cf. orange line) amounted to €2.3 million at the end of 2013. The regulatory trading book was further reduced in CEE and in UniCredit Bank Austria AG in the course of the year.

Credit spread risk and interest rate risk account for most of the total risk of the Bank Austria Group. Other risk categories are much less significant by comparison. Since January 2007, commodity risk has only been assumed in the Bank Austria Group on a back-to-back basis.

In addition to VaR, risk positions of the Bank Austria Group are limited through sensitivity-oriented limits. As part of daily risk reporting, detailed “Trader Reports” are prepared for a large number of portfolios, with updated and historical information made available to all risk-takers and the responsible senior management via the Intranet. These reports are now complemented by the UniCredit market risk platform, which enables trading and other units to perform analyses down to individual position level.

IMOD VaR and SVaR of the Bank Austria Group in 2013 (€ million)

–110–100–90–80–70–60–50–40–30–20–10

0

IMOD-SVar Trading Book IMOD-VaR Trading BookIMOD-VaR Total

Jan. 13 Feb. 13 Mar. 13 Apr. 13 May 13 June 13 July 13 Aug. 13 Sept. 13 Oct. 13 Nov. 13 Dec. 13


As of 31 December 2013, the entire interest rate position of the Bank Austria Group (trading and investment) for major currencies was composed as follows:

Basis point values of the Bank Austria Group 2013 (in €)

As At 31 December 2013AnnuAl AverAge 2013,

minimum/mAximum

0 to 3 months

3 months to 1 yeAr

1 yeAr to 3 yeArs

3 to 10yeArs

over 10 yeArs totAl mAximum minimum

AbsoluteAverAge

Europe EUR –213,267 –36,305 –60,494 –12,268 489,612 167,278 2,044,578 30,558 490,754CHF 90,789 40,756 – 9,201 –28,751 –23,490 70,103 416,229 –103,821 –8,520GBP 392 –21,582 1,430 2,321 82 –17,356 10,213 –28,395 –1,417NOK 605 627 189 683 – 2,104 3,441 –129 1,031

New EU countries BGN 9,311 –8,226 –15,723 –59,171 –845 –74,655 18,150 –126,334 –38,302CZK 13,431 –3,213 –15,302 108,431 –8,356 94,992 154,979 –68,772 34,731HUF 310 13,956 440 –53,610 –2,340 –41,244 70,592 –180,758 –33,530PLN –1,447 –113 –254 –262 –5 –2,080 1,610 –3,996 –1,218RON 4,214 1,849 –52,143 –48,152 –11,346 –105,578 26,416 –173,119 –35,038HRK 9 3,220 –37,303 17,226 –6,010 –22,858 –22,272 –174,361 –63,939

Central and Eastern AZN – 187 –3,314 –1,329 –36 –4,492 –313 –17,044 –4,044Europe incl. Turkey BAM –2,310 –835 –6,722 –12,272 41 –22,099 –13,349 –52,339 –22,864

LTL – – – – – – 714 –4,199 –627LVL – – – – – – 3,713 –6,973 –2,017RSD 461 4,708 – 9,134 683 – –3,282 8,378 –37,486 –7,323RUB 18,229 20,681 –77,236 –259,244 –57,700 –355,270 – 99,955 –1,528,266 –224,394TRY 2,788 –33,640 –28,556 –144,307 –89 –203,803 54,819 –1,051,485 –229,275UAH 3,343 –19,372 –16,145 –35,389 –12,431 –79,994 –65,537 –157,624 –81,812

Overseas – highly USD –12,394 –125,949 85,611 310,070 –307,092 –49,754 –35,587 –2,573,747 –520,659developed countries CAD 106 –1,558 1,520 42 – 109 3,270 –1,950 138

AUD –378 2,133 2,937 1,157 47 5,896 12,201 2,712 4,854NZD 1 141 – – – 142 282 12 93JPY 4,507 – 91 –1,780 –3,667 –160 –1,191 673 –13,888 –3,026

Other countries AED – – – – – – 33 –22 1XAU 3,727 775 – – – 4,502 8,163 1,804 4,430ZAR 16 7 – – – 23 152 1 75BPV<500 –190 9 27 49 – –107 1,189 –747 243

totAl –77,748 –161,835 –241,154 –217,760 59,883 –638,614 1,895,385



Basis point values of the Bank Austria Group 2012 (in €)

As At 31 December 2012AnnuAl AverAge 2012,

minimum/mAximum

0 to 3 months

3 months to 1 yeAr

1 yeAr to 3 yeArs

3 to 10yeArs

over 10 yeArs totAl mAximum minimum

AbsoluteAverAge

Europe EUR 37,569 –70,972 –154,269 2,278 547,612 362,218 797,111 –120,567 280,450CHF 76,358 79,797 –12,723 –37,910 –32,896 72,625 80,187 – 98,543 –23,661GBP 815 917 2,219 995 42 4,988 22,836 1,592 10,168NOK 18 1,031 150 33 1 1,233 1,449 530 895

New EU countries BGN 7,221 21,546 –16,125 –72,996 –511 –60,864 –26,239 –69,129 –40,290CZK – 9,154 –8,282 4,414 –8,444 200 –21,266 27,081 –77,635 –29,651HUF 1,933 –10,957 17,709 22,012 –871 29,826 73,578 –2,435 35,400PLN 1,195 –397 –29 –1 –4 763 2,649 –3,166 –1,149Ron –1,871 519 –4,674 –23,911 –2,325 –32,261 –23,005 –66,338 –45,695HRK 7,578 –12,030 –26,255 –51,038 –1,200 –82,945 –17,433 –108,248 –59,401

Central and Eastern AZN –59 –133 –3,268 – 958 –12 –4,430 –3,055 –4,926 –4,278Europe incl. Turkey BAM –1,253 –1,442 – 9,327 –14,326 58 –26,290 –8,994 –26,863 –17,689

KGS –160 60 –1,853 –504 – –2,457 –1,048 –3,088 –1,894KZT 204 15,588 56,067 –105,757 –29,189 –63,087 67,140 – 95,932 –11,373LTL –76 1,734 –1,878 –1,672 – –1,893 1,718 –2,492 –474LVL –272 –5,346 –196 – – –5,814 –2,408 –6,158 –4,264RSD –1,841 –3,556 –8,969 –4,611 – –18,977 9,494 –18,977 –8,659RUB –26,492 46,446 –111,266 –12,226 –50,937 –154,475 11,944 –306,783 –178,326TRY –7,631 –46,343 682 –241,286 21 –294,557 –10,470 –510,119 –247,289UAH 3,939 –25,953 –16,428 –26,235 –3,156 –67,833 –34,926 – 91,341 –67,751

Overseas – highly USD –28,684 –45,720 370,454 – 94,628 –1,079,099 –877,678 –611,478 –1,624,891 –1,277,016developed countries CAD –615 –454 402 – – –668 8,570 –1,190 1,516

AUD –208 1,144 1,011 626 – 2,573 8,243 2,573 4,973NZD 13 135 – – – 148 163 19 83JPY 4,758 –1,266 – 992 –4,870 –467 –2,837 14,745 –14,193 756

Other countries AED 1 –2 – – – –1 64 –37 1XAU 1,467 1,504 – – – 2,971 4,304 169 1,985ZAR –2 43 – – – 40 42 –438 –14BPV<500 73 76 3 17 – 170 1,127 –3 313

totAl 64,824 –62,316 84,858 –675,411 –652,734 –1,240,779 2,405,693

The bank continues to hold appropriate interest rate positions in local currencies, reflecting the size of its banking subsidiaries; most of the related interest rate sensitivity is in the banking book (not in the trading book). The USD position is also related to the banking book position of our banking subsidiaries.

By analogy to the detailed presentation of basis point positions in the interest rate sector, daily reporting presents details of credit spread by curve and maturity band.



Credit spread basis-point values (CPVs) of the Bank Austria Group (in €)

AnnuAl AverAge 2013, minimum/mAximum AnnuAl AverAge 2012, minimum/mAximum

cPvs in € sector mAximum minimumAbsolute

AverAge mAximum minimumAbsolute

AverAge

Main sectors Financial services –1,023,677 –1,779,082 1,362,028 –1,568,501 –1,900,321 1,713,347ABSs and MBSs –131,689 –331,168 195,351 –223,236 –415,315 321,002

Corporates Industrial –6,404 –49,740 16,110 –1,714 –12,671 3,626Automobiles –1 –8,678 5,587 86 –7,332 1,449Consumer goods –13,399 –47,478 21,917 –13,930 –25,619 19,420Merchandising –469 –841 622 –776 –1,056 924Pharmaceutical 130 –41,624 18,143 12,116 238 6,772Energy & utilities –27,031 –71,427 42,237 – 9,749 –45,378 13,970Other (e. g. indices) 27,431 –56,067 17,168 863 –50,937 5,870

Treasury-near Treasuries – EU & European industrial nations –2,694,898 –3,256,192 2,877,865 –1,238,116 –2,842,197 2,155,018Treasuries – new EU countries –1,401,469 –1,884,394 1,521,854 –1,000,755 –1,494,027 1,277,020Treasuries – CEE & emerging markets –1,598,620 –2,553,755 2,119,595 –2,141,810 –2,867,113 2,475,690Treasuries – developed countries overseas –144 –1,186 404 –214 –670 574Treasuries – agencies & supranationals –10,065 –146,258 130,509 –3,592 –46,501 26,343Municipals & German Jumbo –208 –140,251 125,332 –132,440 –170,608 147,988

totAl –7,053,404 – 9,099,782 8,446,272 –6,930,732 –8,981,722 8,154,871

Measured by the total basis-point value, the Bank Austria Group’s credit spread position in 2013 ranged between – €7.05 million and – €9.1 million. The increase was due to intra-group funding activities and to a higher sovereign position in CEE. Overall, Treasury-near instruments continue to account for the largest part of the credit spread positions, followed by financials, which include intra-group funding bond positions. The corporates exposure is very low by comparison. The positions of asset-backed securities (ABSs) and mortgage-backed securities (MBSs) were further reduced in 2013, primarily through redemptions. The average CPV also continued to decline in this sector. Overall, the ABS book developed very favourably in 2013 in terms of total return in the year. Measured by redemption behaviour, the entire ABS/MBS book is to be classified as performing in 2013.

BacktestingUniCredit Bank Austria performs a daily back testing of both the hypothetical and actual (i. e. clean economical P/L excluding fees, commissions, and net interest income) changes in the portfolio’s value in accordance with Art. 366 CRR. The number of back-testing overshootings (negative change in value larger than model result) in both P/L dimensions has been within the “green zone” permitted by law ever since IMOD was introduced, thus the addend for the VaR multiplier for the number of overshootings is zero. The backtesting results thus confirm the accuracy and reliability of the IMOD.

The chart below shows the hypothetical P/L backtesting time series for the Bank Austria Group’s regulatory trading book; the hypothetical P/L is based on hypothetical changes in the portfolio value assuming unchanged positions. In June and July 2013 three hypothetical backtesting overshootings occurred due to losses of the strategic FX hedges for CEE profits given a simultaneous appreciation of various CEE currencies against the EUR. The overshootings were notified to OeNB and FMA on time.



Backtesting time series for the regulatory trading book of the Bank Austria Group, 2013 (€ million)

–10

–

5

4

3

2

1

0

–1

–2

–3

–4

–5

10

new IMOD-VaRHyp P&LIMOD-VaR mirrored

Jan. 13 Feb. 13 Mar. 13 Apr. 13 May 13 June 13 July 13 Aug. 13 Sept. 13 Oct. 13 Nov. 13 Dec. 13


Capital requirements for market riskThe new model was used for the purposes of calculating capital requirements throughout 2013. The relevant parameters are a 10-day holding period, a confidence level of 99% and a multiplier of 3.5 set in respect of the Value-at-Risk figures which is used in determing the capital requirement for market risk.

As of 31 December 2013, the following capital requirements resulted for the Bank Austria Group in connection with value at risk (VaR), stressed VaR (SVaR) and incremental risk charge (IRC):• VaR: €17.9million• SVaR: €84.4million• IRC: €60.6million

Market risk management in CEEAt Bank Austria, market risk management covers the activities in Vienna and the positions at the subsidiaries, especially in Central and Eastern Europe. These subsidiaries have local risk management units with a reporting line to Risk Management in UniCredit Bank Austria AG. Uniform processes, methods, rules and limit systems ensure consistent Group-wide risk management adjusted to local market conditions.

The “IMOD” risk model has been implemented locally at major units (Czech Republic, Slovakia, Hungary, Croatia, Bulgaria, Russia, Turkey), and a daily risk report is made available to the other units; moreover all units also have technical access to the central market risk platform.

Analyses of position structure and balance sheet structure are available to all banks in the Group via “ALMRisk”, a Group-wide web tool. Liquidity monitoring is also based on this instrument.

The web application “ERCONIS” records the daily business results of treasury activities in CEE. In line with a total-return approach, measurements of the performance of subsidiaries include income generated by the subsidiaries and the valuation results of the banking book.

To avoid risk concentrations in the market risk position, especially in tight market conditions, Bank Austria has implemented at its banking subsidiaries Value-at-Risk limits and position limits for exchange rate risk, interest rate risk and equity risk, which are monitored daily. The monitoring of income trends at banking subsidiaries by means of stop-loss limits provides an early indication of any accumulation of position losses.

To meet higher capital requirements for trading positions pursuant to Basel 2.5, an RWA optimisation project was carried out to reduce trading activities as far as possible and lower existing trading limits.

The timely and continuous analysis of market risk and income is the basis for integrated risk-return management of treasury units at banking subsidiaries.


Value at Risk of banks in CEE (€ thousand)

var As At 31 Dec. 2013

AverAge usAge 2013usAge As Per 31 Dec. 2013 Fx risK interest rAte risK creDit sPreAD risK eQuity risK

Bulgaria 3,188 3,269 10 2,642 2,827 1Czech Republic 6,401 5,591 107 714 5,510 13Croatia 1,890 1,422 255 718 1,091 185Hungary 3,984 3,588 203 4,256 3,160 8Baltics 166 44 3 42 – –Romania 5,499 4,102 23 1,034 4,072 –Russia 8,966 11,595 516 6,783 4,719 –Serbia 1,907 2,964 136 2,061 2,102 –Slovenia 2,974 3,115 8 72 1,853 1,742Turkey 35,807 40,553 110 23,895 21,430 200Ukraine 3,227 2,488 115 2,704 1,159 397

totAl cee 54,391 53,546 558 25,449 35,951 1,791

At the end of 2013, value at risk of all CEE banks was approximately €54 million (limit: €95 million), with open interest rate positions in the banking books and credit-spread positions of securities still accounting for the largest risk contributions.

Management of balance sheet structureThe matched funds transfer pricing system applied throughout the Group and the principle of causation applied in attributing credit risk, market risk and liquidity risk enable the bank to determine contribution margins from customer transactions in the bank’s business divisions. The risk committees of the bank ensure that the bank’s overall liquidity and interest rate gap structure is optimised, with the results from interest maturity transformation being reflected in the Corporate & Investment Banking Division. Factors taken into account in this context include the costs of compensation for assuming interest rate risk, liquidity costs and country risk costs associated with foreign currency financing at CEE banking subsidiaries.

Products for which the material interest-rate and capital maturity is not defined, such as variable-rate sight and savings deposits, are modelled in respect of investment period and interest rate sensitivity by means of analyses of historical time series, and taken into account in the bank’s overall risk position.

To assess its balance-sheet and profit structure, the bank uses the Value-at-Risk approach, complemented by a scenario analysis concerning the simulation of future net interest income under different interest rate scenarios (“earnings perspective”).

The analyses performed at year-end 2013 show that a further interest rate decline in all currencies, from an already low level, would have the strongest impact on the bank’s net interest income. This is a typical feature of commercial banks, given the interest rate remanence on the liabilities side of banks’ balance sheets (sight deposits, equity).

The Basel 2 rules require the measurement at Group level of “interest rate risk in the banking book” in relation to the bank’s capital by comparing a change in the market value of the banking book after a 2% interest rate shock with the bank’s net capital resources. In the event that such an interest rate shock absorbs more than 20% of a bank’s net capital resources, the bank supervisory authority could require the bank to take measures to reduce risk.

A 2% interest rate shock would absorb 4.4% of the Group’s net capital resources; this calculation also includes the current investment of equity capital as an open risk position. This means that the figure for Bank Austria is far below the outlier level of 20%.




E.3 – Liquidity risk

Qualitative informationGeneral information, processes and management modelIn line with Group standards, the Bank Austria Group deals with liquidity risk as a central risk in banking business by introducing and monitoring short-term and long-term liquidity requirements. In this context the liquidity situation for the next few days and months and also for longer periods is analysed against a standard scenario and stress scenarios. Methods and procedures of liquidity analysis, analyses of the degree of liquidity of 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 UniCredit Bank Austria AG is an integral part of UniCredit Group liquidity management. In line with the Group-wide distribution of tasks, Bank Austria ensures the consolidation of liquidity flows and the funding for subsidiaries in Austria and CEE. The flow of funds is thereby optimised and external funding is reduced to the necessary extent.

Liquidity management methods and controlIn medium-term and long-term liquidity management, assets must be covered by liabilities to a minimum extent of 90%/85%/80% over a period of 1 /3/5 years. This limit must be observed at Group level and for each banking subsidiary. At individual currency level, absolute limits for cross-cur-rency funding arrangements have been defined for each bank of the Group; these limits are largely geared to the above-mentioned liquidity ratios. At Bank Austria Group level, the liquidity ratio as at year-end 2013 was 1.03 for > 1 year, 1.08 for > 3 years and 1.03 for > 5 years. This means that in effect, long-term assets are fully funded at Group level.

For the purpose of short-term liquidity management, volume limits have been implemented in the Bank Austria Group and in all banks for maturities up to three months, which limit all Treasury transactions and the securities portfolio of the respective bank. Volume limits are also established for open maturities in various currencies to keep down the risk of a need for follow-up funding in the event that foreign currency markets dry up.

These limits were essentially observed at all levels. Sluggish credit demand, a strong improvement in deposit volume towards year-end 2013 and the increase in the liquidity bond portfolio holdings result in a comfortable liquidity position of the Group.

Liquidity stress testBank Austria performs liquidity stress tests for the Group and for individual banks on a regular basis, using a standardised Group-wide instrument and standardised Group-wide scenarios. These scenarios describe the effects of market-driven or name-driven crisis signals on liquidity inflows and 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.

The worsening of the commercial deposit position during the summer months and a comparatively low bond position led to a decrease of the “time-to-wall horizon” for the Austrian entity to levels even below the defined minimum of 20 working days. The banks in CEE always had a sufficient liquidity buffer to be comfortably above this time horizon in the most severe liquidity stress scenario.

Successful issuance of senior and covered bonds as well as customer deposit attraction and increase of liquid bond holdings towards year-end improved the stress test results materially, leading to a comfortable buffer above the stress test limit for all banks within the group.


Quantitative informationTime breakdown by residual contractual maturity of financial assets and liabilities 2013 (€ million)

31 Dec. 2013

on DemAnD1 to 7 DAys

7 to 15 DAys

15 DAys to 1 month

1 to 3 months

3 to 6 months

6 months to 1 yeAr

1 to 5 yeArs

over 5 yeArs

Assets 21,890 3,381 3,700 4,790 15,652 7,803 12,930 54,312 56,806Government securities 58 – 85 100 691 755 782 7,307 4,744Other debt securities 158 26 1,008 17 523 143 403 6,653 4,077Units in investment funds – 7 – – 12 – – – –Loans 21,674 3,347 2,607 4,673 14,426 6,905 11,746 40,351 47,985

Banks 8,138 1,856 1,828 444 5,182 238 404 1,951 1,680Customers 13,537 1,491 779 4,229 9,243 6,667 11,341 38,400 46,306

liabilities 61,070 3,425 6,433 7,305 18,022 8,657 10,330 37,008 15,981Deposits and current accounts 59,930 2,784 5,047 6,371 16,187 6,492 8,092 10,413 1,515

Banks 2,468 443 253 407 275 213 531 2,901 715Customers 57,462 2,341 4,794 5,964 15,912 6,278 7,561 7,512 800

Debt securities – 48 – 35 274 1,353 1,697 18,297 8,251Other liabilities 1,139 593 1,385 899 1,561 813 541 8,299 6,215

off-balance sheet transactions 8,000 364 285 687 921 1,862 1,632 113,375 40,922Physically settled financial derivatives

long positions 1 1,239 1,110 1,863 3,019 1,974 2,815 5,810 685short positions 1 934 622 2,007 3,610 1,377 4,802 4,703 465

Cash settled financial derivativeslong positions 158 2,010 1,006 1,593 2,985 2,493 4,776 14,613 9,522short positions 128 2,009 933 1,599 2,975 2,370 4,745 14,708 9,563

Deposits to be receivedlong positions – – – – – – – – –short positions – – – – – – – – –

Irrevocable commitments to disburse fundslong positions 1,085 75 309 1,406 1,364 3,564 3,264 2,517 1,964short positions 2,670 21 595 596 1,946 2,533 3,373 2,730 1,082

Written guarantees 66 5 9 27 242 110 234 888 927Financial guarantees received 9,490 – – – 1 – 198 111,687 38,934Physically settled credit derivatives – – – – – – – – –

long positions – – – – 43 13 66 555 105short positions – – – – 43 13 66 555 105

The breakdown by maturity reflects items of companies within the group of banks which are subject to regulatory supervision.



Time breakdown by residual contractual maturity of financial assets and liabilities 2012 (€ million)

31 Dec. 2012

on DemAnD1 to 7 DAys

7 to 15 DAys

15 DAys to 1 month

1 to 3 months

3 to 6 months

6 months to 1 yeAr

1 to 5 yeArs

over 5 yeArs

Assets 18,411 5,399 4,975 6,887 15,831 10,230 13,967 49,725 59,583Government securities 68 2 158 257 1,115 950 1,248 5,450 4,126Other debt securities 1 360 212 175 461 1,160 168 7,023 5,136Units in investment funds 87 – – – 14 – – – –Loans 18,255 5,037 4,605 6,455 14,241 8,120 12,551 37,254 50,321

Banks 5,638 2,198 3,495 1,786 5,376 963 897 1,689 1,660Customers 12,617 2,838 1,110 4,669 8,866 7,158 11,655 35,562 48,662

liabilities 53,710 9,820 8,940 6,634 20,031 7,804 11,332 39,006 15,928Deposits and current accounts 52,687 9,069 7,838 4,837 16,478 6,331 7,678 12,826 1,790

Banks 3,139 922 783 993 621 183 337 2,861 1,128Customers 49,548 8,146 7,055 3,844 15,857 6,148 7,341 9,965 662

Debt securities – 74 161 118 1,418 964 2,513 17,518 7,156Other liabilities 1,023 677 942 1,679 2,135 510 1,141 8,662 6,982

off-balance sheet transactions 7,540 27 9 381 2,170 1,842 3,944 106,647 34,091Physically settled financial derivatives

long positions – 1,606 701 1,752 1,667 2,493 1,930 6,501 1,174short positions – 1,606 701 1,752 1,667 2,493 1,931 6,507 1,174

Cash settled financial derivativeslong positions 215 3,299 2,125 1,640 3,272 3,583 6,831 18,821 12,878short positions 189 3,303 2,126 1,640 3,270 3,581 6,799 18,872 12,864

Deposits to be receivedlong positions – – – – – – – – –short positions – – – – – – – – –

Irrevocable commitments to disburse fundslong positions 856 44 14 549 437 1,040 7,915 2,675 725short positions 2,387 33 12 400 492 460 7,890 1,856 725

Written guarantees 48 12 4 50 325 124 295 869 1,119Financial guarantees received 8,996 9 4 181 1,898 1,136 3,657 107,526 32,958Physically settled credit derivatives

long positions – – – – – – 32 1,255 –short positions – – – – – – 32 1,255 –

The breakdown by maturity reflects items of companies within the group of banks which are subject to regulatory supervision.

Funding plan and liquidity costs in pricingIn the Funding Plan 2013 and its execution Bank Austria focused particularly on the self-sufficiency principle of its subsidiaries in Central Eastern Europe and safely managed the liquidity risk for those markets which were characterised by some volatility. Future liquidity requirements stemming from Basel 3 (e. g. Liquidity Coverage Ratio) have also been targets for Bank Austria as demonstrated by initiatives taken also in the Austrian market in order to reshape commercial funding, rebalancing its weight towards more stable longer term funding sources.

Funding provided to commercial business units in the Group is priced taking into account relevant cost aspects like own liquidity cost, country risk premiums and insurance cost.



E.4 – Counterparty riskUniCredit Bank Austria AG has made further efforts, as part of the implementation of Basel 3 requirements, to refine the risk management model for derivatives, securities lending and repurchase agreements. For the purposes of portfolio management and risk limitation in the derivatives and security financing business with banks and customers, the bank uses an internal counterparty risk model (IMM) based on a Monte Carlo path simulation to estimate the potential future exposure at portfolio level for each counterparty.

The bank is taking account of the growing importance of counterparty risk by having a separate unit for this purpose within Market Risk & Risk Integration department since the beginning of 2010.

The counterparty risk model was approved by the Austrian supervisory authority in 2009, for UniCredit Bank Austria AG to base its regulatory capital requirements for counterparty credit risk on this model. In addition to UniCredit Bank Austria AG it also covers all relevant CEE countries for managerial risk management aspects; special mention should be made of the bank in Turkey because of its size. In this context the focus is on risk management and not yet on regulatory approval.

Moreover, with the creation of a Group-wide counterparty risk model in 2012, the relevant aspects of Basel 3 were implemented. The project also involved work on refining the risk model (e. g. use of 52 gridpoints instead of 20, or 3,000 scenarios instead of 1,000, in the simulation). Additionally, the group-wide methodology has foreseen a switch from the previously used 97.5% confidence level to expected shortfall 87.5% (equals 95% quantile), a harmonisation of the margin period of risk and the implementation of a default conditional metric. UniCredit Bank Austria AG implemented these changes during the financial year 2013.

In 2013, as part of the EuroMIB project, UniCredit Bank Austria AG started the implementation of Group-wide IT systems for counterparty credit calcu-lation. As of 31 December 2013 the revaluation for selected countries and the aggregation for the full perimeter are performed with the Group-wide IT systems (Full Revaluation Engine FRE and Aggregation Engine AGE) while the remaining calculations are performed with the ancillary IT systems (mainly NORISK CR).

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 calculations are based on market volatility, correlations between specific risk factors, future cash flows and stress considerations. Netting agreements and collateral agreements are also taken into account for simulation purposes. The bank applies a confidence interval of 95.0%.

At the end of the year, derivative transactions, repurchase agreements and securities lending transactions resulted in the following exposures:

Exposures (€ billion)

2013 2012

Austria 2.0 2.8CEE 4.2 3.8totAl 6.2 6.6

Separate reporting on counterparty risk is in place with a view to informing UniCredit Bank Austria AG’s Market Risk Committee (MACO) and Derivative Committee (DECO) of current exposure trends and providing additional information relevant to risk management. Moreover, backtesting is performed at regular intervals, at the level of individual counterparties and at overall bank level, in order to check the quality of the model on an ongoing basis.

Line utilisation for derivatives and security financing business of customers is available online in WSS (“Wallstreet”), the central treasury system, on a largely group-wide basis. In addition to determining the potential future exposure, the path simulation also enables the bank to calculate the average exposure and the modified average exposure pursuant to Basel 3 (exposure at default) and the effective maturity of the exposure as well as the “stressed EPE” pursuant to Basel 3 to each counterparty.

UniCredit Bank Austria AG additionally limits the credit risk arising from its derivatives business, repurchase agreements and securities lending business through strict use of master agreements, the definition and ongoing monitoring of documentation standards by legal experts, and through collateral agreements and break clauses. Management takes proper account of default risk, especially because the relevance of this risk category has increased and on the basis of experience gained in the international financial market crisis, despite the good average credit rating of our busi -ness partners.




E.5 – Country risk and sovereign riskRisk associated with cross-border transactions with all customer groups is reflected in country risk (“transfer and convertibility risk”; country risk includes, for example, loans to foreign corporate customers or banks). Risk associated with the state itself (e. g. the purchase of government bonds) is reflected in sovereign risk, irrespective of whether such risk is cross-border or local risk. Both risks are assessed via a group-wide credit process. Country limits and sovereign limits are assessed by the responsible risk management team, approved by the relevant body having approval authority, and assigned to UniCredit subsidiaries according to business needs. In general, cross-border business is not limited for countries which are presumed less risky, e. g. the US, Japan, core EU countries; for all other countries, cross-border business is limited via the assigned country limit. Sovereign risk is in each case limited via counterparty limits. The overall bond exposure is monitored via nominal credit risk limits and market risk limits. Impairment losses are recognised, if necessary, according to international standards.

SpainUniCredit Group responded to the crisis in the Spanish financial market with a strict watch list strategy. Business partners accepted by the Group are primarily internationally active tier 1 banks; business transactions with other Spanish banks are subject to a restrictive credit policy emphasising short-term customer-driven business.

ItalyThe Italian risk is also centrally monitored and has been adjusted via a watch list strategy, mainly focusing on UniCredit, tier 1 banks and the sovereign within assigned counterparty credit and market risk limits.

CyprusCyprus exposures were managed downwards beginning in FY 2012, and thus UniCredit Group’s exposure to Cypriot bank risk was negligible at the time of default.

Hungary, Slovenia and other countries in Central and Eastern EuropeIn view of the economic and political situation in Hungary and the difficult situation in Slovenia, UniCredit Group has taken prudent risk-mitigating measures. UniCredit is monitoring the situation and its portfolio and has also limited business via a watch list strategy.

Large sovereign exposures for other countries (e. g. Russia, Romania, Croatia) mainly result from excess liquidity management of Bank Austria banking subsidiaries or guarantees from the respective sovereign provided to support local (i. e. Bank Austria banking subsidiaries in e. g. Serbia, Croatia) corpo-rate business. Both are monitored and limited within the framework of credit risk management.


Breakdown of sovereign debt securities by country and portfolio (€ million)

31 Dec. 2013 31 Dec. 2012

country/PortFolio nominAl vAlue booK vAlue FAir vAlue nominAl vAlue booK vAlue FAir vAlue

Austria 6,128 6,882 6,892 4,516 5,280 5,293HFT financial assets / liabilities (net exposures) 1) – – – – – –Financial assets at FV through P&L – – – – – –Available for sale 6,001 6,755 6,755 4,373 5,136 5,136Loans and receivables – – – – – –Held-to-maturity investments 126 127 137 143 144 157

turkey 2) 2,246 2,465 2,503 2,906 3,438 3,104HFT financial assets / liabilities (net exposures) 1) 6 4 4 79 78 78Financial assets at FV through P&L – – – – – –Available for sale 1,470 1,564 1,564 1,967 2,367 2,367Loans and receivables – – – – – –Held-to-maturity investments 770 897 934 860 993 659

czech republic 1,837 1,967 1,967 2,105 2,240 2,240HFT financial assets / liabilities (net exposures) 1) 93 96 96 65 63 63Financial assets at FV through P&L 232 232 232 233 235 235Available for sale 1,512 1,638 1,638 1,805 1,942 1,942Loans and receivables – – – – – –Held-to-maturity investments – – – – – –

hungary 1,901 1,949 1,950 1,362 1,372 1,373HFT financial assets / liabilities (net exposures) 1) 74 74 74 11 12 12Financial assets at FV through P&L – – – – – –Available for sale 1,811 1,859 1,859 1,304 1,312 1,312Loans and receivables 7 7 7 28 29 29Held-to-maturity investments 8 9 9 19 20 20

romania 1,162 1,213 1,213 872 893 893HFT financial assets / liabilities (net exposures) 1) – – – – – –Financial assets at FV through P&L – – – – – –Available for sale 1,162 1,213 1,213 872 893 893Loans and receivables – – – – – –Held-to-maturity investments – – – – – –

croatia 758 826 826 888 889 889HFT financial assets / liabilities (net exposures) 1) 8 8 8 – – –Financial assets at FV through P&L – – – – – –Available for sale 750 818 818 884 885 885Loans and receivables – – – – – –Held-to-maturity investments – – – 3 3 3

russia 593 600 600 803 839 839HFT financial assets / liabilities (net exposures) 1) 83 82 82 58 62 62Financial assets at FV through P&L – – – – – –Available for sale 510 518 518 745 777 777Loans and receivables – – – – – –Held-to-maturity investments – – – – – –

italy 541 563 563 829 849 850HFT financial assets / liabilities (net exposures) 1) – – – – – –Financial assets at FV through P&L – – – – – –Available for sale 540 563 563 775 795 795Loans and receivables – – – – – –Held-to-maturity investments 1 1 1 54 55 55

1) Including exposures in credit derivatives.2) Amounts recognised using proportionate consolidation with reference to the ownership percentage for exposures held by joint ventures.




31 Dec. 2013 31 Dec. 2012

country/PortFolio nominAl vAlue booK vAlue FAir vAlue nominAl vAlue booK vAlue FAir vAlue

bulgaria 494 532 535 443 481 486

HFT financial assets / liabilities (net exposures) 1) 6 7 7 24 26 26Financial assets at FV through P&L 1 1 1 5 4 4Available for sale 421 455 455 290 317 317Loans and receivables 7 7 7 8 8 8Held-to-maturity investments 59 63 66 117 127 132

slovakia 492 516 516 466 499 500HFT financial assets / liabilities (net exposures) 1) 12 9 9 – – –Financial assets at FV through P&L – – – – – –Available for sale 473 499 499 438 470 470Loans and receivables – – – – – –Held-to-maturity investments 7 8 8 27 28 30

other countries 1,029 868 868 1,181 1,045 1,045HFT financial assets / liabilities (net exposures) 1) 195 35 35 201 44 44Financial assets at FV through P&L – – – – – –Available for sale 810 810 810 948 970 970Loans and receivables – – – – – –Held-to-maturity investments 25 23 23 33 31 31

totAl 17,180 18,383 18,434 16,370 17,826 17,512thereof:slovenia 179 188 189 206 212 212greece 161 2 2 156 1 1Portugal 30 30 30 30 29 29spain 8 6 6 8 6 6shown under held for sale: 2)

ukraine 227 214 214 205 210 210

1) Including exposures in credit derivatives.

Breakdown of sovereign debt securities by portfolio (€ million)

31 Dec. 2013

helD For trADing (net exPosures)

FinAnciAl Assets At FAir vAlue

AvAilAble-For-sAle FinAnciAl Assets loAns

helD-to-mAturity investments totAl

Book value of sovereign portfolio 316 233 16,692 14 1,128 18,383

Total portfolio of debt securities 503 271 20,708 754 1,586 23,820% Portfolio 62.86% 85.99% 80.61% 1.83% 71.12% 77.17%

31 Dec. 2012

helD For trADing (net exPosures)

FinAnciAl Assets At FAir vAlue

AvAilAble-For-sAle FinAnciAl Assets loAns

helD-to-mAturity investments totAl

Book value of sovereign portfolio 286 239 15,864 36 1,400 17,826Total portfolio of debt securities 484 317 20,437 5,392 1,895 28,524% Portfolio 59.07% 75.44% 77.62% 0.67% 73.92% 62.49%

Sovereign exposures are bonds issued by and loans granted to central banks, governments and other public sector entities. ABSs are not included.


Breakdown of sovereign loans by country (€ million)

31 Dec. 2013 31 Dec. 2012

country booK vAlue*) booK vAlue*)

Austria 4,888 5,623Croatia 2,567 2,270Indonesia 468 526Slovenia 228 258Bosnia and Herzegovina 216 175Hungary 187 216Bulgaria 167 23Serbia 137 185

Philippines 118 114Other 678 684totAl on-bAlAnce sheet exPosure 9,769 10,075shown under held for sale:Ukraine 33 45

*) amounts recognized using proportionate consolidation with reference to the ownership percentage for exposures held by joint ventures. Sovereign loans are loans granted to central and local governments and other public sector entities.

E.6 – Credit riskCredit riskIn the course of a restructuring of UniCredit Bank Austria AG’s business divisions in 2013, the new Retail & Corporates Division was created by combining the customer segments of the previous Family & SME Banking (F&SME) business segment with customer segments previously included in the Corporate & Investment Banking (CIB) Division.

In the Corporate & Investment Banking (CIB) segment, credit risk costs rose slightly, to €53.5 million (2012: €48.0 million).

Risk costs in the Retail & Corporates segment amounted to €136.0 million (2012: €160.3 million). The significant reduction was achieved despite the effects of the enhanced portfolio-based provisioning method.

The notable risk cost increase in the Corporate Center segment to €28.7 million was due to risk developments in two individual cases.

The favourable trend in net write-downs of loans and provisions for guarantees and commitments seen at the subsidiaries in Central and Eastern Europe in 2012 did not continue in 2013. The provisioning charge increased substantially, to about €1,222 million (2012: €761 million); the increase is explained by provisions for growing impaired loans and by the aim to increase the coverage ratio of impaired loans (i. e. loan loss provisions for impaired loans/gross impaired loans).

Developments in turkey in 2013 remained more or less unchanged in euro terms in comparison to 2012, despite the politically and economically difficult situation. Risk costs increased only slightly, from €147 million in 2012 to €156 million in 2013, being influenced by depreciation of the Turkish lira in 2013. In local currency terms, risk costs rose by about 17%. The main reason for this higher provisioning charge was the growing loan portfolio together with the still difficult situation of the retail loan portfolio. The cost of risk as a proportion of lending volume in Turkey is continuously at a satis-factory low level.

russia represents the second-largest bank in terms of loans to customers within the CEE network of UniCredit. The 2013 evolution of risk costs showed a slight increase to €77 million after €67 million in 2012, mainly driven by provisioning for corporate customers.

The newly formed bank in the czech republic and slovakia (legally merged as at 1 December 2013) ended the financial year with risk costs of about €99 million in 2013, which constitutes an increase compared to €75 million for the two separately organised banks in 2012. This increase took place both in the Corporate and Retail segments.

croatia recorded a substantial increase in the provisioning charge from €151 million in 2012 to €186 million in 2013, mainly driven by additional provisions for corporate customers.

The bank in bulgaria had to absorb a large increase in the provisioning charge in 2013, to a level of €117 million (2012: €81 million), with €1 million being due to the first-time reporting of the Leasing activities in the bank’s figures. The main reason for this significantly higher provisioning charge was significant volume growth and additional provisioning needs mainly in the corporate loan portfolio.



romania achieved considerable volume growth and substantially strengthened provisions for impaired loans to customers. As a result, the provisioning charge went up from about €92 million in 2012 to €174 million in 2013.

The situation in hungary was impacted by the difficult economic environment, requiring a proper reaction with additional loan loss provisions, which increased the risk costs in 2013 to €89 million after €35 million in 2012.

In slovenia, the economic situation continued to be unfavourable during 2013, which was reflected in additional needs for provisions and resulted in an increase in risk costs from €30 million in 2012 to €60 million in 2013.

In serbia, risk costs grew to €42 million (2012: €26 million) due to the aim of increasing provisions for impaired loans.

Risk costs at the two banks bosnia in 2013 were €15 million, a slight improvement over the figure of €16 million for 2012. In the baltic countries (bank and leasing company), risk costs rose slightly, from €4 million in 2012 to €5 million in 2013.

Additions to loan loss provisions for the CEE segment in UniCredit Bank Austria AG in 2013 totalled €201 million (2012: €37 million). These additions mainly related to already impaired loans to corporate customers in Romania, Bulgaria and Ukraine.

Breakdown of financial assets by portfolio and credit quality (carrying value) (€ million)

bAnKing grouP other comPAnies

PortFolio/QuAlity

non-PerForming

loAnsDoubtFul

AssetsrestructureD

exPosuresimPAireD PAst-Due

not imPAireD PAst-Due

other Assets imPAireD other totAl

Financial assets held for trading – – 1 – – 2,413 – – 2,414Available-for-sale financial assets 1 – – – – 20,697 – 10 20,708Held-to-maturity financial instruments – 1 5 – – 1,579 – – 1,586Loans and receivables with banks – 17 – – – 24,942 – 8 24,967Loans and receivables with customers 2,241 1,894 727 286 49 123,923 – 1 129,121Financial assets at fair value through profit or loss – – – – – 271 – – 271Financial instruments classified as held for sale 534 91 240 40 – 2,011 – – 2,916Hedging derivatives – – – – – 2,913 – – 2,913totAl 31 December 2013 2,776 2,003 973 326 49 178,749 – 19 184,895

bAnKing grouP other comPAnies

PortFolio/QuAlity

non-PerForming

loAnsDoubtFul

AssetsrestructureD

exPosuresimPAireDPAst-Due

other Assets imPAireD other totAl

Financial assets held for trading 1 – 6 – 2,816 – 1 2,824Available-for-sale financial assets – 1 – – 19,933 – 103 20,037Held-to-maturity financial instruments – 6 – – 1,889 – – 1,895Loans and receivables with banks 3 1 – – 28,032 – 76 28,112Loans and receivables with customers 2,223 2,846 1,074 566 125,644 – 71 132,425Financial assets at fair value through profit or loss – – – – 317 – – 317Financial instruments classified as held for sale 759 268 95 6 2,017 – – 3,145Hedging derivatives – – – – 4,125 – – 4,125totAl 31 December 2012 2,986 3,122 1,175 573 184,773 – 252 192,880

Impaired loans are divided into the following categories:•Non-performingloans–formallyimpairedloans,beingexposuretoinsolventborrowers,eveniftheinsolvencyhasnotbeenrecognisedinacourtoflaw,orborrowersinasimilar

situation. Measurement is on a loan-by-loan basis or portfolio basis.•Doubtfulloans–exposuretoborrowersexperiencingtemporarydifficulties,whichtheGroupbelievesmaybeovercomewithinareasonableperiodoftime.Doubtfulloansare

valued on a loan-by-loan basis or portfolio basis.•Restructuredloans–exposuretoborrowerswithwhomareschedulingagreementhasbeenenteredintoincludingrenegotiatedpricingatinterestratesbelowmarket,the

conversion of loans/ reduction of principal etc.; measurement is on a loan-by-loan basis or portfolio basis.•Past-dueloans–totalexposuretoanyborrowernotincludedintheothercategories,whoatthebalance-sheetdatehasexpiredfacilitiesorunauthorisedoverdraftsthataremore

than 90 days past due.

In contrast to the presentation in the consolidated statement of financial position, equity investments and units in investment funds are not included in the presentation of credit risk. For this reason, the following table shows slight differences compared with the consolidated statement of financial position in the items financial assets held for trading, financial assets at fair value through profit or loss and available-for-sale financial assets.



Breakdown of financial assets by portfolio and credit quality (gross and net values) (€ million)

imPAireD Assets PerForming

totAl (net exPosure) PortFolio/QuAlity

gross exPosure

sPeciFic write-Downs

net exPosure

gross exPosure

PortFolio ADjustments

net exPosure

Financial assets held for trading 1 – 1 2,413 X 2,413 2,414Available-for-sale financial assets 5 5 1 20,707 – 20,707 20,708Held-to-maturity financial instruments 9 2 6 1,580 – 1,579 1,586Loans and receivables with banks 40 23 17 24,950 – 24,950 24,967Loans and receivables with customers 11,409 6,262 5,148 124,690 717 123,973 129,121Financial assets at fair value through profit or loss – – – 271 X 271 271Financial instruments classified as held for sale 1,577 672 905 2,021 11 2,011 2,916Hedging derivatives – – – 2,913 X 2,913 2,913totAl 31 December 2013 13,042 6,964 6,078 179,545 728 178,817 184,895

imPAireD Assets PerForming

totAl (net exPosure) PortFolio/QuAlity

gross exPosure

sPeciFic write-Downs

net exPosure

gross exPosure

PortFolio ADjustments

net exPosure

Financial assets held for trading 6 – 6 X X 2,818 2,824Available-for-sale financial assets 8 7 1 20,037 – 20,037 20,037Held-to-maturity financial instruments 8 2 6 1,889 – 1,889 1,895Loans and receivables with banks 50 46 5 28,108 – 28,108 28,112Loans and receivables with customers 12,802 6,092 6,710 126,454 739 125,715 132,425Financial assets at fair value through profit or loss – – – X X 317 317Financial instruments classified as held for sale 2,511 1,383 1,128 2,029 12 2,017 3,145Hedging derivatives – – – X X 4,125 4,125totAl 31 December 2012 15,385 7,530 7,856 178,515 751 185,024 192,880

Banking group – On-balance sheet and off-balance sheet credit exposure by external rating class (book values) (€ million)

bAlAnce At 31 Dec. 2013

externAl rAting clAsses no externAl

rAting totAlclAss 1 clAss 2 clAss 3 clAss 4 clAss 5 clAss 6

on-balance sheet exposures 14,184 9,341 8,048 11,098 740 286 137,091 180,790Derivative contracts 25 302 140 128 35 – 4,085 4,715

Financial derivative contracts 25 302 140 128 35 – 4,081 4,711Credit derivative contracts – – – – – – 4 4

guarantees given 2 296 1,114 670 31 2 18,887 21,001other commitments to disburse funds 818 288 1,133 522 92 7 17,678 20,538totAl 15,028 10,227 10,435 12,418 897 296 177,742 227,044


externAl rAting clAsses no externAl

rAting totAlclAss 1 clAss 2 clAss 3 clAss 4 clAss 5 clAss 6

on-balance sheet exposures 11,148 11,849 15,229 9,340 1,477 8,001 129,762 186,806Derivative contracts 83 5,851 531 331 65 51 728 7,639

Financial derivative contracts 83 4,679 531 331 65 51 723 6,462Credit derivatives contracts – 1,172 – – – – 5 1,177

guarantees given 28 251 680 759 50 430 18,883 21,081other commitments to disburse funds 838 1,049 679 710 104 136 26,742 30,257totAl 12,097 19,000 17,119 11,140 1,696 8,618 176,114 245,784

Class 1 (AAA/AA–), 2 (A+/A–), 3 (BBB+/BBB–), 4 (BB+/BB–), 5 (B+/B–), 6 (impaired exposures are included in class 6)40% of rated counterparties were investment grade (from class 1 to 3), 43% of customers were not rated due to the considerable share of customers in the segment comprising private individuals and SMEs.



Banking group – On-balance sheet and off-balance sheet exposure by internal rating class (book values) 2013 (€ million)


internAl rAting clAsses

1 2 3 4 5 6

on-balance sheet exposures 299 14,398 31,351 39,751 33,179 19,602Derivative contracts 2 65 3,444 416 235 155

Financial derivative contracts 2 65 3,443 415 235 155Credit derivative contracts – – 1 1 – –

guarantees given 6 436 3,272 4,896 2,838 1,834other commitments to disburse funds 17 1,134 2,769 4,006 2,971 1,885totAl 324 16,033 40,836 49,068 39,223 23,477

internAl rAting clAsses imPAireDexPosures

no internAl rAting totAl7 8 9

on-balance sheet exposures 13,213 3,487 1,201 6,058 18,251 180,790Derivative contracts 68 25 – 3 302 4,715

Financial derivative contracts 68 25 – 3 300 4,711Credit derivative contracts – – – – 2 4

guarantees given 5,958 637 54 336 734 21,001other commitments to disburse funds 591 213 62 34 6,855 20,538totAl 19,829 4,362 1,318 6,431 26,143 227,044

Banking group – On-balance sheet and off-balance sheet exposure by internal rating class (book values) 2012 (€ million)


internAl rAting clAsses

1 2 3 4 5 6

on-balance sheet exposures 5,018 11,905 29,070 46,976 22,641 20,118Derivative contracts – 82 5,705 984 256 182

Financial derivative contracts – 82 4,533 984 256 182Credit derivatives contracts – – 1,172 – – –

guarantees given 1 291 2,777 5,567 2,468 2,104other commitments to disburse funds 804 109 2,561 3,042 2,177 1,814totAl 5,823 12,387 40,113 56,568 27,542 24,218


internAl rAting clAsses imPAireDexPosures

no internAlrAting totAl7 8 9

on-balance sheet exposures 18,742 4,630 952 7,851 18,904 186,806Derivative contracts 98 22 16 6 290 7,640

Financial derivative contracts 98 22 16 6 285 6,462Credit derivatives contracts – – – – 5 1,177

guarantees given 914 469 76 421 5,994 21,081other commitments to disburse funds 5,405 218 42 118 13,968 30,257totAl 25,159 5,338 1,085 8,395 39,155 245,784


The mapping to the internal rating masterscale considers the PD ranges mentioned below:

internAl rAting clAsses PD min PD mAx

1 0.0000% 0.0036%2 0.0036% 0.0208%3 0.0208% 0.1185%4 0.1185% 0.5824%5 0.5824% 1.3693%6 1.3693% 3.2198%7 3.2198% 7.5710%8 7.5710% 17.8023%9 17.8023% 99.9999%10 impaired


*) According to the ESMA document, “forbearance measures occur in situations in which the borrower is considered to be unable to meet the terms and conditions of the contract due to financial difficulties. Based on these difficulties, the issuer decides to modify the terms and conditions of the contract to allow the borrower sufficient ability to service the debt or refinance the contract, either totally or partially.”

Information on forborne exposuresIn accordance with the ESMA document no. 2012/853 of 20 December 2012 on disclosures about forborne exposures*) to be provided in the IFRS financial statements of financial institutions, it should be noted that with reference to the non-performing portfolio, the Group’s activities are mainly focused on the following:• promptaction.Withasolidandeffectivemonitoringandreportingprocess,theearlyidentificationofpossiblecreditqualitydeteriorationallows

the Group to promptly undertake any necessary forbearance practices as well as restrictive management measures aimed at risk reduction in the early phases prior to the potential default; all forbearance measures aim at the timely identification and proper management of exposures with increased risk at a stage where the Bank has not yet initiated expropriation or similar enforcement proceedings and the borrower is still able to service the debt;

• properassessmentoftheimpairedloans,inordertodefinethestrategies /actionstobetakenandtheapplicabledefaultclassification;• initiatingrecoveryproceduresonthebasisofthetypeandamountoftheexposureandthespecificborrowerinvolved;• appropriateprovisioningthroughprofitandlossinlinewiththerelevantrecoverystrategiesandplansaswellasthetypeofexposure.Provision-

ing is carried out in line with the principles of IAS 39 and Basel 2 rules;• accurateandregularreportinginordertomonitoraggregateportfolioriskovertime.

Each legal entity shall classify positions into the various default categories in compliance with Basel 2 and Bank of Italy regulations.

Exposures subject to modifications as a result of forbearance practices are classified as impaired loans when the conditions for their classification into the various impaired loans categories are met.

With specific reference to forbearance practices, a position is classified as a “restructured loan” according to the Bank of Italy’s classification when a rescheduling agreement has been entered into including renegotiated pricing at interest rates below market, the conversion of part of a loan into shares and/or reduction of principal. Measurement of restructured loans is on a loan-by-loan basis, including discounted cost due to renegotiation of the interest rate at a lower rate than the original contractual rate.Restructured exposures may be reclassified to “performing loans” when at least two years have elapsed from the closing of the restructuring agree-ment and a resolution has been passed by the competent corporate bodies stating that the borrower is again able to service the debt according to the restructuring agreement.

The accounting policies on assessment and credit risk provisioning of loans subject to modifications as a result of forbearance practices conform with the general rule, i. e. whether there is objective evidence that an impairment loss on loans or held-to-maturity investments (measured at amortised cost) has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred) discounted at the financial asset’s original effective interest rate. The amount of the loss is recognised in the income statement under “Impairment losses” and the carrying amount of the asset is reduced.

In more detail, if the terms of a loan, receivable or held-to-maturity investment are renegotiated or otherwise modified because of the borrower’s financial difficulties, this is considered to be objective evidence of impairment in accordance with IAS 39.




Forbearance exposures (€ million)

restructureD – imPAireD restructureD – PerForming restructureD – totAl

inFormAtion on Forborne exPosures

gross exPosures

sPeciFic write-Downs net

gross exPosures

PortFolio ADjustments net

gross exPosures

sPeciFic write-Downs net

forbearance measure by counterparty breakdown 1,368 –641 727 1,029 –27 1,002 2,397 –668 1,729

Debt securities – – – – – – – – –loans and advances 1,368 –641 727 1,029 –27 1,002 2,397 –668 1,729

General governments – – – – – – – – –Financial companies 32 –6 26 – – – 32 –6 26Non-financial companies 1,235 –604 631 666 –19 648 1,901 –623 1,278Households 102 –32 70 363 – 9 354 465 –40 424

Restructured impaired: This category comprises all loans and receivables for which the terms and conditions were modified in view of a deterioration in the borrowers financial position, and which were classified as impaired at the time of restructuring or in respect of which the bank incurred a cash loss as a result of restructuring. Restructured performing: This category includes all loans and receivables for which the terms and conditions were modified in view of a deterioration in the borrowers financial position, and which were not classified as impaired at the time of restructuring and in respect of which the bank did not incur a cash loss as a result of restructuring.

Realisation of mortgage collateralMortgages are the main type of collateral accepted by UniCredit Bank Austria AG for real estate finance. The impact of international financial market turbulence on real estate markets in CEE often leads to further losses being incurred by UniCredit Bank Austria AG when realising collateral.

UniCredit Bank Austria AG has therefore established subsidiaries in Vienna and in major CEE countries (the Czech Republic, Russia, Bulgaria, Romania, …) which concentrate on active workout management and optimum realisation of real estate. These companies act as potential buyers of real estate mortgaged to UniCredit Group when such real estate is sold at auction or on the basis of voluntary arrangements with borrowers.

A potential purchase of real estate mortgaged to UniCredit Group is preceded by intensive evaluation to ensure that the purchase of such real estate – as compared with immediate realisation – will lead to a significant reduction of the loss to the Group. Such transactions are considered especially for real estate which is run effectively or may be developed, and in respect of promising projects, which are to be liquidated because the owners are insolvent.

Via its subsidiaries established for this purpose, UniCredit Bank Austria AG can purchase and temporarily hold real estate or assume control of projects, complete or continue developing such projects if necessary, and subsequently sell the real estate through an orderly process.

Credit risk mitigation techniques UniCredit Bank Austria uses various credit risk mitigation techniques to reduce potential credit losses in case of obligor default.

With specific reference to credit risk mitigation, general guidelines issued by the parent company as well as UniCredit Bank Austria in its sub-holding function are in force, to lay down Group-wide rules and principles that should guide, govern and standardise credit risk mitigation management, in line with Group principles and best practice, as well as in accordance with the relevant regulatory requirements. Following the General Group and Subgroup Credit Risk Mitigation Guidelines all legal entities are developing internal regulations that specify processes, strategies and procedures for collateral management. In particular such internal regulations detail collateral eligibility, valuation and monitoring rules and ensure the soundness, legal enforce-ability and timely liquidation of valuable collateral according to each country’s local legal system.

Collateral management assessments and credit risk mitigation compliance verifications have been performed by the legal entities, specifically as part of internal rating system applications, in order to assess the presence of adequate documentation and procedures concerning the credit risk mitigation instruments used for supervisory capital.

According to the credit policies, collateral or guarantees can be accepted only to support loans and they cannot serve as a substitute for the borrower’s ability to meet obligations. For this reason, in addition to the overall analysis of the creditworthiness and of the repayment capacity of the borrower, they are subject to specific evaluation and analysis of the support role for the repayment of the exposure.

Collateral accepted in support of credit lines granted by the Group’s legal entities, primarily includes real estate, both residential and commercial and financial collateral (including cash deposits, debt securities, equities, and units of undertakings for collective investment in transferable securities (UCITS)). Further types of collateral comprise pledged goods, loans and insurance contracts as well as other types of funded protection. The Group also makes use of bilateral netting agreements for OTC derivatives (by means of ISDA and CSA agreements), repos and securities lending.


The management systems of credit risk mitigation techniques are targeted to be embedded in the credit approval process and in the credit risk monitoring process, and widely support the evaluation and data quality checks of collateral /guarantees and their appropriate linking to the categories defined for LGD estimation purposes. Controls and related responsibilities are duly formalised and documented in internal rules and job descriptions. Furthermore, processes are implemented to control that all the relevant information regarding the identification and evaluation of the credit protection is correctly registered in the system.

When accepting a credit risk mitigation technique, the Group and the sub-group emphasise the importance of processes and controls of the legal certainty requirements of the protection, as well as the assessment of the suitability of the collateral or guarantee. In case of personal guarantees, the protection provider (or the protection seller in case of credit default swap) has to be assessed in order to measure his /her solvency and risk profile.

In case of collateral, the process of valuation is based on precautionary principles, with reference to the use of “market values” and to the applica-tion of adequate haircuts to ensure that, in case of liquidation, there are no unexpected losses.

Monitoring processes of credit risk mitigation techniques ensure that general and specific requirements established by credit policies, internal and regulatory rules are met at all times.

Banking group – Secured credit exposures to banks (€ million)


net exPosures

totAl creDit risK mitigAtion

collAterAl guArAntees

mortgAges/PlAnts securities

other Assets

government AnD

centrAl bAnKs

other Public

entities bAnKsother

entities

secured on-balance sheet credit exposures:totally secured 2,185 4,045 2 1,025 1,568 1,056 – 393 1

of which impaired – – – – – – – – –of which performing 2,185 4,043 2 1,025 1,568 1,056 – 393 1

partially secured 6,410 808 – 159 223 388 – 13 24of which impaired 15 15 – – – 15 – – –of which performing 6,395 793 – 159 223 373 – 13 24

secured off-balance sheet credit exposures:totally secured 172 181 – – 12 – – 2 168

of which impaired – – – – – – – – –of which performing 172 181 – – 12 – – 2 168

partially secured 1,182 223 – – 215 – – 8 –of which impaired – – – – – – – – –of which performing 1,182 223 – – 215 – – 8 –



Banking group – Secured credit exposures to customers (€ million)


net exPosures

totAl creDit risK mitigAtion

collAterAl guArAntees

mortgAges/PlAnts securities

other Assets

government AnD

centrAl bAnKs

other Public

entities bAnKsother

entities

secured on-balance sheet credit exposures:totally secured 18,108 49,401 24,240 793 22,165 1,686 36 80 401

of which impaired 2,274 23,447 19,089 29 4,292 3 – 2 31of which performing 15,834 25,954 5,151 764 17,873 1,683 36 78 370

partially secured 71,465 37,059 23,891 1,698 5,348 4,705 – 710 705of which impaired 2,901 2,478 1,981 20 246 205 – 22 3of which performing 68,564 34,581 21,910 1,678 5,102 4,500 – 689 702

secured off-balance sheet credit exposures:totally secured 13,473 17,178 1,354 40 3,938 6 – 22 11,818

of which impaired 41 139 57 – 31 – – 14 36of which performing 13,432 17,039 1,296 40 3,907 6 – 7 11,782

partially secured 4,317 1,540 555 61 547 70 2 225 81of which impaired 211 40 24 – 12 4 – – –of which performing 4,106 1,500 531 61 536 66 2 225 81

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 fac-tors. Following the initial loan application, the bank’s loan exposures are reviewed at least once a year. If the borrower’s creditworthiness deterio-rates substantially, shorter review intervals are obligatory.

For internal credit assessment in Austria and by Bank Austria’s banking subsidiaries in CEE, the bank uses various rating and scoring models – for calculating the parameters PD (probability of default), LGD (loss given default) and EAD (exposure at default) – on the basis of models specifically developed for these purposes for the customer /business segments to be assessed, in line with the various asset classes pursuant to Section 22 b of the Austrian Banking Act, the Solvency Regulation and Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions. There are country-specific or region-specific models (e. g. for corporate customers, private and business customers) and Group-wide models (e. g. for sovereigns, banks, multinational corporates). The assessment of a loan exposure is based on data from the respective company’s financial statements and on qualitative business factors.

The various rating and scoring models provide the basis for efficient risk management of the Bank Austria Group and are embedded in all decision-making processes relating to risk management. They are also a key factor for capital required to be held against risk-weighted assets.

Great attention is given to consistency in the presentation for supervisory purposes and the requirements of internal control.

All internal rating and scoring systems are monitored on an ongoing basis. The systems are also subject to regular validation on an annual basis, including a review to verify if the rating/scoring system provides a correct representation of the risks to be measured. All model assumptions are based on multi-year statistical averages for historical defaults and losses, with appropriate attention being given to the potential impact of turbu-lence in international financial markets.

In this context, credit risk stress tests, which are required by banking supervisory authorities and are carried out on a regular basis, are an essential instrument for assessing future risks in an unfavourable economic environment. Such tests enable the Management Board to assess the adequacy of regulatory capital and economic capital on the basis of different stress scenarios. Credit risk stress calculations for the entire Group are based on a credit portfolio model developed in-house and are analysed for their impact on regulatory and economic capital.

Risk-adjusted pricing and proactive risk management constantly improve the diversification and the risk /earnings ratio of the portfolio.

For real estate customers, the customer-related rating is complemented by a transaction rating.



Bank Austria uses a retail scoring system. The automated rating tool is used for assessing, monitoring and managing the large number of loan expo-sures to private customers, small businesses, independent professionals and small non-profit organisations. Retail scoring comprises an application scoring procedure based on effective and recognised mathematical and statistical methods, and a behaviour scoring procedure taking into account such factors as amounts received in the account and customers’ payment practices. The retail scoring system provides information that is updated on a monthly basis. This gives the bank an efficient tool for lending decisions and early recognition of risk. Automated data processing helps Bank Austria to reduce costs required for credit control while accelerating lending decisions.

Four CEE banking subsidiaries switched from the standardised approach to the Foundation IRB approach in 2011, followed by two further CEE banking subsidiaries in 2012. The forecasting quality of rating models and underlying processes were optimised in close cooperation with specialists at UniCredit Bank Austria AG. In developing models and carrying out validations, attention is given to ensuring the consistent and quality-assured implementation of Group guidelines.

Credit TreasuryCredit Treasury has two main tasks: preparing and monitoring the risk-adequate pricing of loans; and executing risk-transfer and capital-generating measures and transactions.

To ensure uniform pricing within UniCredit Group, the risk-adjusted spread is determined on the basis of multi-year probabilities of default (depending on the term of the loan), added as a price component and monitored on an ongoing basis.

Initially rolled out for a predefined customer segment of Austrian corporate customers as at 1 January 2011, this system is to be extended to cover other segments and regions. Moreover, Credit Treasury is responsible for risk transfers and capital-generating measures/ transactions (via synthetic securitisations, CLNs, etc.) and liquidity-generating measures/ transactions for the entire Bank Austria Group (including CEE).

The Credit Treasury Committee, which holds quarterly meetings, is responsible for strategic coordination and decisions on measures and transactions.

Provisioning processLoans/bonds:Special Credit managers have to review all exposures at regular intervals to see if there is a requirement for recognising an impairment loss. The amount of the impairment loss is the difference between the carrying amount of the loan and the present value of estimated future cash flows. In cases where there is a low probability of restructuring, future cash flows are calculated using the liquidation scenario. The workout unit calculates any provisioning requirement on the basis of the estimated present value of the liquidation proceeds/ recovery percentage.

ABSs:As part of a structured watchlist and impairment process for ABSs, positions are identified which are reviewed for any provisioning requirement at regular intervals. This is usually done by applying specific models, especially cash flow models. These models map the individual transaction structure and calculate a present value of estimated future cash flows. The amount of the impairment loss is the difference between the carrying amount of the ABS position and the present value of estimated future cash flows.

Enhancement of portfolio-based provisioning method UniCredit Bank Austria AG applies a portfolio-based provisioning method (“Pauschale Einzelwertberichtigung” – PEWB) for defaulted assets grouped by similar credit risk characteristics and with no significant exposure at counterparty level. According to recent re-estimation results and with regard to further alignment with parameter-based Expected Loss calculation, the applied method was enhanced in the fourth quarter of 2013, although the over-all approach remained untouched. The consideration of more granular information (counterparty’s exposure, period in default, and status of default) revealed that provisions have to be increased especially for counterparties being insolvent and/or already several years in default.

In total, the enhancement of the PEWB methodology resulted in additional LLP needs of €58.2 million in 2013.

The assumptions and parameters for risk assessment of foreign currency loans were monitored in 2013. As a consequence, the existing portfolio-based provision was increased by €23 million to €215 million.

The following breakdowns of on-balance sheet and off-balance sheet exposures to banks and customers include not only loans and receivables but also exposures from the other IAS 39 categories and the disposal groups, for banks and customers without derivative exposures.




Banking group – On-balance sheet and off-balance sheet exposure to banks: gross and net values (€ million)

exPosure tyPes/Amounts gross exPosure sPeciFic write-Downs PortFolio ADjustments net exPosure

on-balance sheet exposure Non-performing loans 22 21 X –Doubtful loans 19 2 X 17Restructured exposures – – X –Past due – – X –Other assets 28,096 X – 28,096total 28,137 23 – 28,113

off-balance sheet exposureImpaired 473 471 X 2Other 6,903 X – 6,903total 7,377 471 – 6,905totAl 31 December 2013 35,514 495 – 35,019exPosure tyPes/Amounts gross exPosure sPeciFic write-Downs PortFolio ADjustments net exPosure

on-balance sheet exposure Non-performing loans 37 34 X 3Doubtful loans 3 1 X 1Restructured exposures 10 10 X –Past due – – X –Other assets 30,731 X – 30,731total 30,781 46 – 30,736off-balance sheet exposureImpaired 12 12 X –Other 8,167 X – 8,167total 8,179 12 – 8,167totAl 31 December 2012 38,960 57 – 38,903


Banking group – On-balance sheet and off-balance sheet exposure to customers: gross and net values (€ million)

exPosure tyPes/Amounts gross exPosure sPeciFic write-Downs PortFolio ADjustments net exPosure

on-balance sheet exposure Non-performing loans 7,794 5,017 X 2,776Doubtful loans 3,133 1,146 X 1,986Restructured exposures 1,634 661 X 973Past due 442 116 X 326Other assets 147,344 X 728 146,616total 160,346 6,940 728 152,677

off-balance sheet exposurebanking groupImpaired 566 195 X 370Other 39,475 X 34 39,441total 40,040 195 34 39,811totAl 31 December 2013 200,386 7,136 762 192,489exPosure tyPes/Amounts gross exPosure sPeciFic write-Downs PortFolio ADjustments net exPosure

on-balance sheet exposure Non-performing loans 8,212 5,230 X 2,982Doubtful loans 4,607 1,486 X 3,121Restructured exposures 1,769 598 X 1,171Past due 742 170 X 573Other assets 148,975 X 751 148,224total 164,305 7,484 751 156,071off-balance sheet exposurebanking groupImpaired 714 169 X 544Other 50,305 X 39 50,266total 51,019 169 39 50,810totAl 31 December 2012 215,324 7,653 790 206,881




Banking group – On-balance sheet exposure to customers: gross change in impaired exposures (€ million)

chAnges in 2013

source/cAtegoriesnon-PerForming

loAnsDoubtFul

loAnsrestructureD

exPosures PAst-Due exPosures totAl

opening balance – gross exposure 8,212 4,607 1,769 742 15,331Sold but not derecognised – – – – –

increases 3,107 1,919 749 595 6,371Transfers from performing loans 795 1,158 288 502 2,743Transfers from other impaired exposure 1,985 644 349 33 3,010Other increases 328 117 113 60 618

reductions –3,525 –3,394 –885 –896 –8,700Transfers to performing loans –113 –285 –145 –205 –747Derecognised items –538 –88 –32 –31 –689Recoveries –296 –186 –133 –45 –661Sales proceeds –35 –15 –2 – –52Losses on disposals –1 – – – –1Transfers to other impaired exposure –115 –1,977 –383 –535 –3,010Other reductions –2,428 –843 –189 –80 –3,540

closing balance – gross exposure 7,794 3,133 1,634 442 13,002Sold but not derecognised – – – – –

chAnges in 2012


loAnsDoubtFul

loAnsrestructureD


opening balance – gross exposure 7,523 5,025 1,864 600 15,012Sold but not derecognised – – – – –

increases 2,607 2,590 1,178 681 7,057Transfers from performing loans 830 1,811 331 606 3,579Transfers from other impaired exposure 1,538 698 751 20 3,008Other increases 239 80 96 55 470

reductions –1,919 –3,007 –1,273 –539 –6,738Transfers to performing loans –148 –200 –61 –81 –490Derecognised items –617 –130 –410 –10 –1,166Recoveries –348 –402 –121 –38 – 909Sales proceeds –106 –19 –110 –19 –253Transfers to other impaired exposure –228 –2,016 –398 –365 –3,008Other reductions –472 –240 –174 –26 – 912

closing balance – gross exposure 8,212 4,607 1,769 742 15,331Sold but not derecognised – – – – –

The most significant development in the above table is the migration of loans totalling about €1.9 billion from doubtful loans to non-performing loans. Of the total amount, about €710 million relates to UniCredit Bank Austria AG, €345 million to Zagrebačka banka and €146 million to Yapı Kredi.Of the increase of €1,158 million in doubtful loans, which were transferred from originally performing exposures, €310 million relates to UniCredit Bank Austria AG, €289 million to Zagrebačka banka and €121 million to UniCredit Moscow.Within non-performing loans, UniCredit Bank Austria AG accounts for the largest portion of recoveries, i. e. €114 million, followed by Zagrebačka banka with €58 million.In the line showing “Other reductions”, the sale of ATF Bank accounts for a reduction of €2,021 million in non-performing loans and a reduction of €370 million in doubtful loans.


Banking group – On-balance sheet exposure to customers: changes in overall impairment (€ million)

chAnges in 2013


loAnsDoubtFul

loAnsrestructureD


opening gross write-downs 5,230 1,486 598 170 7,484Sold but not derecognised – – – – –

increases 2,433 897 322 151 3,802Write-downs 1,542 645 165 118 2,470Losses on disposal 7 – – – 7Transfers from other impaired exposure 661 125 97 14 897Other increases 222 127 60 20 429

reductions –2,645 –1,237 –259 –205 –4,346Write-backs from assessments –249 –42 –19 –13 –322Write-backs from recoveries –241 –162 –62 –74 –539Gains on disposal –8 – –1 – –10Write-offs –538 –88 –32 –31 –689Transfers to other impaired exposure –63 –651 –129 –53 –897Other reductions –1,546 –294 –15 –35 –1,890

Final gross write-downs 5,017 1,146 661 116 6,940Sold but not derecognised – – – – –

chAnges in 2012


loAnsDoubtFul

loAnsrestructureD


opening gross write-downs 4,703 1,824 618 151 7,296Sold but not derecognised – – – – –

increases 1,971 1,193 652 183 3,999Write-downs 1,244 822 151 164 2,381Losses on disposal 5 1 – – 7Transfers from other impaired exposure 565 212 495 5 1,276Other increases 157 159 6 13 335

reductions –1,445 –1,531 –672 –163 –3,811Write-backs from assessments –145 –186 –14 –26 –371Write-backs from recoveries –380 –183 –48 –47 –657Gains on disposal –8 –2 – – –10Write-offs –617 –130 –410 –10 –1,166Transfers to other impaired exposure –118 – 960 –119 –79 –1,276Other reductions –177 –70 –80 –2 –330

Final gross write-downs 5,230 1,486 598 170 7,484Sold but not derecognised – – – – –




Banking group – On-balance sheet and off-balance sheet credit exposure to customers by segment (€ million)

governments other Public entities FinAnciAl comPAnies

counterPArts/exPosuresnet

exPosuresPeciFic

write-DownsPortFolio

ADjustmentsnet

exPosuresPeciFic


ADjustmentsnet

exPosuresPeciFic


ADjustments

cash exposureNon-performing loans – – X – 5 X 10 84 XDoubtful loans – – X 2 1 X 28 6 XRestructured exposures 1 – X 6 2 X 13 8 XImpaired past-due exposures – – X 6 – X – – XOther exposures 18,306 X 2 6,195 4 11,531 20total 18,307 – 2 6,209 8 4 11,581 98 20

off-balance sheet exposuresNon-performing loans – – X – – X 1 – XDoubtful loans – – X – – X – – XOther impaired assets – – X – – X 1 8 XOther exposures 258 – 149 X – 1,879 X –total 258 – – 149 – – 1,880 8 –

totAl 31 Dec. 2013 18,565 – 2 6,358 8 5 13,461 106 20insurAnce comPAnies other entities totAl

counterPArts/exPosuresnet

exPosuresPeciFic


ADjustmentsnet

exPosuresPeciFic


ADjustmentsnet

exPosuresPeciFic


ADjustments

cash exposureNon-performing loans – – X 2,766 4,929 X 2,776 5,017 XDoubtful loans – – X 1,956 1,138 X 1,986 1,146 XRestructured exposures – – X 954 651 X 973 661 XImpaired past-due exposures – – X 319 116 X 326 116 XOther exposures 438 X – 110,147 702 146,616 728total 438 – – 116,142 6,834 702 152,677 6,940 728

off-balance sheet exposuresNon-performing loans – – X 250 125 X 251 125 XDoubtful loans – – X 70 37 X 70 37 XOther impaired assets – – X 49 25 X 49 33 XOther exposures 70 X – 36,662 X 34 39,017 X 34total 70 – – 37,031 187 34 39,387 195 34

totAl 31 Dec. 2013 508 – – 153,173 7,021 735 192,065 7,135 762


Securitisation transactionsQualitative informationThe Group’s main objectives in its securitization transactions (whether traditional or synthetic) are the optimisation of the loan portfolio by freeing up regulatory and economic capital and obtaining fresh liquidity together with greater diversification of its sources of funding.

The difficult economic environment of the last years suggested also the opportunity to improve, where possible, the usage of securitisation schemes as a tool to support the origination of new loans by leveraging on specialised investors, like supranationals, able to provide protection for newly originated portfolios complying with certain pre-agreed eligibility criteria.

Analysis and realisation of securitisation transactions are carried out within the parent in close cooperation with the legal entities involved and with UniCredit Bank AG as Arranger and Investment Bank. This process requires an economic feasibility study to assess the impact of transactions (according to their nature and aims), on regulatory and economic capital, on risk-adjusted profitability measures and on the level of the Group’s liquidity. If this initial phase produces a positive result, a technical and operational feasibility study is carried out to identify the assets to be securi-tised and design the structure of the transaction. Once technical feasibility has been established, the transaction is realised.

No new securitisation transactions were conducted in 2013 involving the existing portfolio of the banks. On the contrary, concerning synthetic securitisations affecting loans to be newly originated, in two subsidiaries of the CEE Divisions (UniCredit Bulbank AD and UniCredit Tiriac Bank SA), similar initiatives originated in the past with European Investment Fund under the so called JEREMIE programme, 2013 saw the affected portfolios reaching a relatively meaningful size.

Details of the transactions carried out in previous financial years are set out in the following tables.

Starting from H2 2007 the above-mentioned market conditions influenced sponsor and investor transactions, in that stricter monitoring of exposures was required.

In particular, in its role as sponsor the Group purchased Asset-Backed Commercial Paper issued by sponsored conduits. This meant that these vehicles were consolidated as from 2007.

With regard to investment in other parties’ securitisations, i. e. structured credit products, these instruments were ring-fenced in a separate portfolio managed with a view to maximising future cash flow.

Given the asset quality of the underlyings, the best business strategy was considered to be retention in the bank’s books.

In this regard, in H2 2008 it is noted that managerial strategy was transposed for accounting purposes by reclassifying structured credit products from held-for-trading financial assets to loans and receivables with customers (see also A.3.1 Transfers between portfolios).

In line with the above management principles, risk monitoring and maximising profit on securitisation transactions is achieved by:• analysingthemonthlyorquarterlyinvestorreportsproducedbytheTrustee,payingspecialattentiontotheperformanceofthecollateral;• monitoringsimilartransactions’collateralperformanceandissuesofsimilarpaper;• watchingthemarketfundamentalsoftheunderlyingcreditand• stayinginconstantcontactwiththeinvestorsand,wherecollateralismanaged,withthemanagersandanalystsoftheCollateralManager.

Furthermore each portfolio is assigned a market VaR limit by Risk Management. This is monitored bearing in mind the correlations. The Group has spread curves for each rating and product (asset-backed securities, mortgage-backed securities, etc.) and uses them to calculate risk, in the same way as other instruments in its portfolio. The method used is in line with other sources of market risk, and enables us to estimate the possible effects of diversification and to aggregate the VaR with other sections of the portfolio.

Further details are given in the following section “Information on structured credit products and trading derivatives with customers”.



Originator: UniCredit Bulbank AD nAme eiF jeremie

Type of securitisation: Synthetic – First loss Portfolio GuaranteeOriginator: UniCredit Bulbank AD (“UniCredit Bulbank”)Issuer: European Investment Fund (“EIF”)Servicer: UniCredit BulbankArranger: UniCredit BulbankTarget transaction: Capital Relief and Risk Transfer Type of asset: Highly diversified and granular pool of UniCredit Bulbank’s SME loansQuality of asset: PerformingClosing date: 14 July 2011Nominal value of reference portfolio: 49,695,086 €Issued guarantees by the Bank: –Issued guarantees by third parties: First Loss Portfolio Guarantee issued by EIFBank lines of credit: –Third Parties lines of credit: –Other credit enhancements: –Other relevant information: •Theportfolioisintotheramp-upperioduntil14February2014

•TheagreedportfoliomaximumvolumeisequaltoEUR50,000,000•Theguaranteecovers80%ofeachoutstandingloanuptoatotalamountequalto25%of

the portfolio volumeRating Agencies: No rating agency, use of Standardized Approach*)

Amount of CDS or other risk transferred:Amount and Condition of tranching: ISIN n. a. n. a. Type of security senior junior Class A B Rating n. r. n. r. Reference Position 29,817,052 € 9,939,017 € Reference Position at the end of accounting period 29,817,052 € 9,939,017 €Distribution of securitised assets by area:Italy – Northwest – – Northeast – Central – South and IslandsOther European Countries – EU countries 49,695,086 € – non-EU countries –America –Rest of the World –totAl 49,695,086 €Distribution of securitised assets by business sector of the borrower:Governments –Other government agencies –Banks –Finance companies –Insurance companies –Non-financial companies 49,695,086 €Other entities –totAl 49,695,086 €

*) Synthetic securitisation carried out using the Standardised Approach as required under Basel 2.Where there is no eligible external rating, the Bank that holds or guarantees such an exposure may determine the risk weight by applying the “look through” treatment, provided the compositi-on of the underlying pool is known at all times. The unrated most senior position receives the average risk weight of the underlying exposures subject to supervisory review. Where the Bank is unable to determine the risk weights assigned to the underlying credit risk exposures, the unrated position must be deducted from regulatory capital.



Originator: UniCredit Tiriac Bank SA nAme eiF jeremie

Type of securitisation: Synthetic – First loss Portfolio GuaranteeOriginator: UniCredit Tiriac Bank SA (“UniCredit Tiriac”)Issuer: European Investment Fund (“EIF”)Servicer: UniCredit TiriacArranger: UniCredit TiriacTarget transaction: Capital Relief and Risk Transfer Type of asset: Highly diversified and granular pool of UniCredit Tiriac’s SME loansQuality of asset: PerformingClosing date: 12 December 2011Nominal value of reference portfolio: 36,335,458 €Issued guarantees by the Bank: –Issued guarantees by third parties: First Loss Portfolio Guarantee issued by EIFBank lines of credit: –Third Parties lines of credit: –Other credit enhancements: –Other relevant information: •Theportfolioisintotheramp-upperioduntilJune30,2014

•TheagreedportfoliomaximumvolumeisequaltoEUR87,500,000•Theguaranteecovers80%ofeachoutstandingloanuptoatotalamountequalto25%of

the portfolio volumeRating Agencies: No rating agencyAmount of CDS or other risk transferred:Amount and Condition of tranching: ISIN n. a. n. a. Type of security senior junior Class A B Rating n. r. n. r. Reference Position 21,801,275 € 7,267,092 € Reference Position at the end of accounting period 21,801,275 € 7,267,092 €Distribution of securitised assets by area:Italy – Northwest – – Northeast – Central – South and IslandsOther European Countries – EU countries 36,335,458 € – non-EU countries –America –Rest of the World –totAl 36,335,458 €Distribution of securitised assets by business sector of the borrower:Governments –Other government agencies –Banks –Finance companies –Insurance companies –Non-financial companies 36,335,458 €Other entities –totAl 36,335,458 €



Originator: HVB AG – UniCredit BA AG nAme euroconnect sme 2008 euroconnect issuer sme 2007

Type of securitisation: Synthetic Synthetic

Originator:Bayerische Hypo- und Vereinsbank AG (68.1%),

UniCredit Bank Austria AG (31.9%) Bayerische Hypo- und Vereinsbank AG (66.09%) –

Bank Austria Creditanstalt AG (33.91%)

Issuer:

EuroConnect SME 2008 Limited, Bayerische Hypo- und Vereinsbank AG

UniCredit Bank Austria AG

EuroConnect Issuer SME 2007 Limited, Bayerische Hypo- und Vereinsbank AG

Bank Austria Creditanstalt AG

Servicer:Bayerische Hypo- und Vereinsbank AG

UniCredit Bank Austria AGBayerische Hypo- und Vereinsbank AG

UniCredit Bank Austria AG

Arranger:Bayerische Hypo- und Vereinsbank AG

(UniCredit Markets & Investment Banking)Bayerische Hypo- und Vereinsbank AG

(UniCredit Markets & Investment Banking)

Target transaction:Capital Relief /Funding and risk transfer for

concentration risksCapital Relief /Funding and risk transfer for

concentration risksType of asset: Corporate SME Loans Corporate SME loansQuality of asset: Performing PerformingClosing date: 30 September 2008 28 December 2007Total nominal value of reference portfolio at closing 2,488,493,144 € 3,089,092,363 €Guarantees issued by the Bank: – –Guarantees issued by Third Parties: – –Bank lines of credit: – –Third Parties lines of credit: – –Other credit enhancements: Synthetic Excess Spread + Reserve Ledger Synthetic Excess Spread + Reserve LedgerOther relevant information: Replenishing ReplenishingRating agencies: S & P S & P/FitchAmount of CDS or other supersenior risk transferred: – –Amount and Conditions of tranching: issuer bayerische hypo- und vereinsbank Ag

unicredit bank Austria Agbayerische hypo- und vereinsbank Ag

bank Austria creditanstalt Ag ISIN n. a. n. a. Type of security Senior Senior Class A A Rating n. r. n. r. Reference position at the end of accounting period 552,224,120 € 285,808,173 € ISIN XS0388966102 XS0388966441 XS0337935968 XS0337936180 Type of security Mezzanine Mezzanine Mezzanine Mezzanine Class A2 B2 A2 B2 Rating A– A– A– A– Nominal value issued 100,000 € 100,000 € 100,000 € 100,000 € Nominal value at the end of accounting period 100,000 € 100,000 € 100,000 € 100,000 € Reference position at the end of accounting period 16,950,000 € 45,800,000 € 20,450,000 € 40,850,000 € issuer unicredit bank Austria Ag bank Austria creditanstalt Ag ISIN XS0388966524 XS0388966797 XS0337946221 XS0337946650 Type of security Mezzanine Mezzanine Mezzanine Mezzanine Class A2 B2 A2 B2 Rating B+ CCC+ A– BB+ Nominal value issued 100,000 € 100,000 € 100,000 € 100,000 € Nominal value at the end of accounting period 100,000 € 100,000 € 100,000 € 100,000 € Reference position at the end of accounting period 7,950,000 € 7,950,000 € 10,500,000 € 20,950,000 € issuer euroconnect sme 2008 limited euroconnect issuer sme 2007 ltd. ISIN XS0388589128 XS0388589631 XS0336039325 XS0336040331 Type of security Mezzanine Mezzanine Mezzanine Mezzanine Class A B A B Rating BBB+ BBB– A– A–/BB+ Nominal value issued 24,900,000 € 34,850,000 € 35,550,000 € 43,250,000 € Nominal value at the end of accounting period 24,900,000 € 34,850,000 € 35,550,000 € 43,250,000 € ISIN XS0388589714 XS0388590134 XS0336040505 XS0336041222 Type of security Mezzanine Junior Mezzanine Junior Class C D C D Rating B+ n. r./n. r. BBB–/B+ n. r./n. r. Nominal value issued 24,900,000 € 97,100,000 € 37,100,000 € 100,400,000 € Nominal value at the end of accounting period 24,900,000 € 97,100,000 € 37,100,000 € 97,690,418 €



E.7 – Operational riskOperational risk (OpRisk) is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events (including legal risks). For example, compensation paid to customers for incorrect / inadequate product-related advice, IT system failures, damage to property, processing errors or fraud are subject to accurate and consolidated risk measurement and management (collection of loss data, external data, scenarios, indicators), on which the calculation of capital to be held for operational risk is based.

Loss data are collected, and processes are optimised, in close coordination and cooperation with other departments and units including Internal Audit, the Compliance Office, Legal Affairs and the insurance sector. Over the years, UniCredit Bank Austria AG has taken numerous measures in the various divisions to manage and reduce operational risk. Thus data security measures, measures to ensure the confidentiality and integrity of stored data, access authorisation systems, the two-signatures principle, and a large number of monitoring and control processes as well as staff training programmes have been implemented among other measures.

In line with other types of risk, UniCredit Bank Austria AG – like UniCredit – has built up a decentralised operational risk management framework based on representatives within divisions and at banking subsidiaries – Divisional OpRisk Managers (DORM) and OpRisk Managers – in addition to central operational risk management. While the main task of central risk management is to define the methods used and to perform risk measurement and analysis, decentralised risk managers are responsible for taking measures to reduce, prevent, or take out insurance against, risks.

• Activitiesin2013concentratedonsupportingtheholdingcompanyintherevisionofthecurrentAMAmodelaswellasonfurtherdevelopingoper-ational risk management by monitoring operational risk limits; analysing UniCredit Bank Austria AG’s insurance portfolio in respect of the potential mitigation of top risks within operational risk and finally proposing a Banker’s Blanket Bond (BBB) insurance for UniCredit Bank Austria AG; analys-ing, collecting and classifying operational risk events relating to credit risk, and reporting them at Bank Austria Operational & Reputational Risk Committee meetings; developing a process for identifying operational risk-relevant projects and fostering the further integration of the Perma-nent Work Group (PWG) into the Operational Risk framework of UniCredit Bank Austria AG aiming at reducing potential future operational risk through adequate mitigation actions. This was strongly supported by the implementation of the group operational risk strategy process, a structural approach to analysing ongoing key business initiatives and transformation programmes that may have a material impact on the Group operational and reputational risk exposures for material mitigation actions reducing operational key risks in cooperation with relevant stakeholders. The Bank Austria Group OpRisk Strategy 2014 constitutes a working agenda for the UniCredit Bank Austria Permanent Work Group.

• InCEE,thefocuswasonfinalisingthePWGrolloutatallstrategicallyrelevantbankingsubsidiariestoidentifyandimplementpossiblemeas-ures in respect of existing and potential operational risks on the basis of analyses of loss events, KRIs, scenarios, projects and new products. Moreover, operational risk management for CEE at Bank Austria focused on preparing the local operational risk framework at relevant units for the regulatory review in accordance with the AMA rollout plan in cooperation with UniCredit Group as well as on supporting the preparations for the AMA model validations in CEE countries.

Overall, the organisation of operational risk management at UniCredit Bank Austria AG is well established at a high level of quality. A network of independent functions and teams are involved in managing and controlling risks, providing the Management Board with sufficient information on the risk situation and enabling the Management Board to manage risk. The analysis of the general ledger for operational risk relevance con-firmed the extensive and complete operational risk data collection.

Since 2008, the task of dealing with operational risk issues has been performed by a separate Operational Risk Committee (OpRiCo), whose meetings are held on a quarterly basis and are attended by the Chief Risk Officer, the Head of Strategic Risk Management & Control, the Head of UniCredit Operational Risk Management, Compliance, Internal Audit, the Divisional Operational Risk Managers and OpRisk representatives of CEE banking subsidiaries. The Committee is a major step towards integrating operational risk in the bank’s processes; its main tasks are to report on current operational risk issues and developments, to approve operational risk-relevant documents, to report losses and serve as a body to which unresolved issues are referred. As from May 2012, the Committee’s responsibilities were extended to include strategic reputational risk issues and monitoring, and the number of the Committee’s members was enlarged by including persons who are in charge of individual cases of repu-tational risk. Therefore the Committee was renamed “Operational & Reputational Risk Committee” (OpRRiCo).

In 2014 activities with regard to operational risk will focus on:• intensifyingandfurtherexpandingthePermanentWorkGroupwithregardtoactionstomitigateoperationalriskinUniCreditBankAustriaAG

and at strategically relevant CEE banking subsidiaries, taking into account the objectives and measures described in the global Operational Risk Strategy for 2014;

• supportingtheunitsinaccordancewiththeAMArolloutplaninpreparingandcarryingoutregulatoryreviewsincooperationwithUniCreditGroup;

• preparingandimplementingaconceptforintegratingoperationalrisksinthegeneralbudgetingprocess;• analysingthecollectionandclassificationofoperationalriskeventsrelatingtocreditrisk.




E.8 – Reputational riskVarious controversial topics – including nuclear energy, armaments and weapons production, trading and maintenance, large-scale dam projects and mining etc. – may present a partner bank involved in such transactions with reputational risks and lead to a negative perception of the bank by the public.

UniCredit Group has identified reputational risk as the current or future risk of a decline in profits as a result of a negative perception of the Bank’s image by customers, counterparties, shareholders, investors, employees or regulators.

At the beginning of 2012 Operational & Reputational Risk, a separate unit within the CRO management function, was entrusted with strategic manage-ment and monitoring of reputational risk.

Reputational Risk activities in 2013 focused mainly on the continuation of providing support to CEE legal entities in introducing and establishing structures, policies and training, on monitoring and reporting cases of reputational risk and trends with regard to relevant topics and on enhancing the awareness of reputational risk management through training activities within UniCredit Bank Austria AG and CEE.

In 2014, activities with regard to reputational risk will focus on:• implementingnewreputationalriskpolicieswithinUniCreditBankAustriaAGandrollingthemoutatCEEsubsidiaries;• continuingtosupportCEElegalentitiesinenhancingstructures,implementingpoliciesandtrainingetc.forreputationalrisk;• enrichingmonitoringandreportingcasesofreputationalriskandtrendswithregardtorelevanttopics;• extendingawarenessofreputationalriskmanagementthroughfurthertrainingactivitieswithinUniCreditBankAustriaAGandCEE.

E.9 – Business riskBusiness risk is defined as unexpected adverse changes in business volume and/or margins which cannot be attributed to other types of risk. Adverse changes result mainly from a significant deterioration in market conditions, changes in the competitive position or customer behaviour, and from changes in the legal environment.

Business risk measurement thus measures the influence of external factors on a decline in profits and the effect on the market value.

As part of general income and cost management, operational management of business risk is the responsibility of the individual business units.

E.10 – Financial investment risk and real estate riskIn dealing with risks arising from the bank’s shareholdings and equity interests, Bank Austria takes into account potential market price fluctuations in its equity holdings in listed and unlisted companies.

Not included are equity interests in consolidated subsidiaries of the Group because risks associated with such companies are determined and recorded under the various other risk types. The portfolio includes various strategic investments; real estate holding companies are taken into account in real estate risk.

Generally, Value at Risk is determined on the basis of market values and volatilities of the relevant equity interests. For shares in unlisted companies the bank uses book values and volatilities of relevant stock exchange indices and takes account of residual variances.

Real estate risk measures the potential fluctuations in market value of bank-owned real estate on the basis of market prices and the volatility of related rent indices.

Generally, the respective risk is determined by market risk Value-at-Risk and/or PD/LGD models considering the availability of appropriate indices and the quality of market quotations.


E.11 – Legal risksWe generally do not make provisions to the extent it is not possible to reliably predict the outcome of proceedings or to quantify possible losses. In cases where it is possible to estimate in a reliable manner the amount of the possible loss and such loss is deemed probable, we have made provisions in amounts we deem appropriate in light of the particular circumstances and in accordance with applicable accounting principles.

In line with the above policy, provisions have been made in the amount of the estimated risk for the following pending legal proceedings:

The Madoff fraudSeveral customers addressed enquiries and complaints against Bank Austria in connection with certain funds related to the fraudulent actions by Mr. Bernard L. Madoff. The following proceedings are relevant:

Austrian criminal proceedings: UniCredit Bank Austria AG has been named as a defendant in criminal proceedings in Austria which concern the Madoff case. These proceedings were initiated by a complaint filed by the FMA (the Austrian Financial Market Authority) to the Austrian prosecu-tor. Subsequently complaints were filed by purported investors in funds which were invested, either directly or indirectly, in Bernard L. Madoff Investments Securities LLC and Bernard L. Madoff Securities LLC (collectively referred to as “BMIS”). These complaints allege, amongst other things, that UniCredit Bank Austria AG breached provisions of the Austrian Investment Fund Act as prospectus controller of the Primeo Fund. These criminal proceedings are still at the pre-trial stage. In addition, the fee structure and the prospectuses themselves have been examined by an expert appointed by the prosecution.

Austrian civil proceedings: Numerous civil proceedings (with the claimed amount totaling about €150 million) have been initiated in Austria by numerous investors related to Madoff’s fraud in which UniCredit Bank Austria AG, among others, has been named as defendant; different types of claims are asserted, including prospectus liability claims. The plaintiffs invested in investment funds that, in turn, invested directly or indirectly with BMIS. Several judgments have been issued in favour of UniCredit Bank Austria AG in various instances, some are already legally binding. Other judgments have been handed down against UniCredit Bank Austria AG, but none of them is final so far as appeals are pending. With respect to those cases currently on appeal no estimate can be made as to their potential outcomes nor the effects, if any, which the appeal deci-sions may have on other cases pending against UniCredit Bank Austria AG. In four recent Supreme Court cases, different senates of the Austrian Supreme Court have held in favour of UniCredit Bank Austria AG and rejected claims based on various theories of liability and related to prospec-tus liability. At this stage, it is not possible to forecast what effect these decisions may have on other cases.

u.s. securities class Actions in the u.s.: UniCredit Bank Austria AG was named as one of many defendants in two putative class action suits (the Primeo Action and the Herald Action) filed in the United States District Court for the Southern District of New York. An indirect subsidiary of UniCredit Bank Austria AG has also been named in two putative class action suits filed in the United States District Court for the Southern District of New York (the Herald Action and the Thema Action). In each of the suits, the class action plaintiffs claim to represent investors whose assets were invested in BMIS, directly or indirectly.

Proposed amended complaints have been filed; one of which purports to include allegations that the defendants, including UniCredit Bank Austria AG, violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”) by allegedly participating in a plan to enrich themselves by feeding investors’ money into Madoff’s Ponzi scheme and seeks treble damages under RICO, i. e., three times US$2 billion.

On 29 November 2011, the Court dismissed the actions as against UniCredit Bank Austria AG and its indirect subsidiary, among others, and denied plaintiffs’ motion to amend the complaints. The plaintiffs in those actions have filed notices of appeal of that decision. In the Primeo Action, the putative class action plaintiff agreed to stay its appeal and be bound by an affirmance of the dismissal of the Herald Action. On 16 September 2013, the United States Court of Appeals for the Second Circuit affirmed the judgment of the Court. The Plaintiffs in the Herald Action and the Thema Action have filed a petition for panel rehearing and rehearing en banc of the Second Circuit’s affirmance. That petition remains pending.

The united states bankruptcy court appointed Irving H. Picard as Trustee (the “SIPA Trustee”) for the liquidation of BMIS. In December 2010, the SIPA Trustee filed two complaints in the United States Bankruptcy Court in the Southern District of New York against many defendants, includ-ing UniCredit Bank Austria AG and an indirect subsidiary of UniCredit Bank Austria AG, to recover amounts to be determined at trial.



One complaint (the “First trustee complaint”) seeks to recover so-called avoidable transfers to initial transferees of funds from BMIS, subse-quent transfers of funds originating from BMIS (in the form of alleged management, performance, advisory, administrative and marketing fees, among other such payments, said to exceed US$400 million in the aggregate for all defendants), and compensatory and punitive damages against certain defendants alleged to be in excess of US$2 billion.

The other complaint (the “second trustee complaint”) further alleges defendants violated RICO by allegedly participating in a plan to enrich themselves by feeding investors’ money into Madoff’s Ponzi scheme. In this latter complaint, the SIPA Trustee seeks treble damages under RICO, i. e. three times the reported net US$19.6 billion losses allegedly suffered by all BMIS investors.

On 28 July 2011, the Court granted the motion to dismiss the First Trustee Complaint with respect to the claims for aiding and abetting Madoff’s fraud, breach of fiduciary duty, unjust enrichment and contribution. The Court’s decision did not address the claims to recover avoidable transfers, which were returned to the Bankruptcy Court. The SIPA Trustee filed a notice of appeal of the decision. On 20 June 2013, the United States Court of Appeals for the Second Circuit affirmed the judgment of the Court. On 9 October 2013, the SIPA Trustee filed a petition for writ of certiorari to the United States Supreme Court seeking permission to appeal the Second Circuit’s affirmance. On 13 January 2014 the Supreme Court invited the United States Solicitor General (“Solicitor General”) to express the opinion of the United States on whether review should be granted. The Solicitor General has yet to express a view on the matter, and the SIPA Trustee’s petition remains under consideration.

On 21 February 2012, the Court granted the motion to dismiss the Second Trustee Complaint with respect to the RICO claims and the claims for unjust enrichment, conversion and money had and received. The Court’s decision did not address the claims to recover avoidable transfers which were returned to the Bankruptcy Court. On 21 March 2012, the SIPA Trustee filed a notice of appeal. By stipulation of the parties, on 5 April 2012, the SIPA Trustee withdrew his notice of appeal without prejudice. Pursuant to the terms of the stipulation, the SIPA Trustee had until 6 April 2013 to reinstate his appeal. By further stipulation of the parties, which stipulation was so ordered by the Second Circuit Court of Appeals on 25 April 2013, the SIPA Trustee’s time to reinstate his appeal has been extended to 4 April 2014.

On 22 March 2012, UniCredit Bank Austria AG filed an application with respect to each of the First and Second Trustee Complaints requesting that the District Court withdraw the reference from the Bankruptcy Court in respect of the Trustee’s avoidance and recovery claims. On 14 April 2012, the District Court granted UniCredit Bank Austria AG’s application to withdraw the reference.

Certain individuals who are or were affiliated with UniCredit Bank Austria AG and related entities who had been named as defendants in the First Trustee Complaint and the Second Trustee Complaint, and who had not been previously served complaints in those actions, have now been served. These individuals may have similar defenses to the claims as UniCredit Bank Austria AG and its affiliated entities, and may have rights to indemnification from those parties.

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

UniCredit Bank Austria AG intends to defend itself vigorously against the Madoff-related claims and charges. At present it is not possible to relia-bly estimate the timing and results of the various actions, nor determine the level of responsibility, if any responsibility exists. In addition to the proceedings outlined above, additional actions arising out of Madoff’s activities have been threatened and may be filed in the future by private investors or local authorities; in this context the question of whether these cases fall under the statute of limitations will have to be examined. Pending or future actions may have negative consequences for UniCredit Bank Austria AG.

Disputes relating to foreign currency loansIn Central and Eastern Europe, in the last decade, a significant number of customers took out mortgages denominated in a foreign currency. There is now a growing trend for customers – or consumer associations acting on their behalf – to seek to renegotiate the terms of such foreign currency mortgages, including having the loan principal and associated interest payments re-denominated in the local currency with retroactive effect to the time the loan was taken out, and floating rates retrospectively changed to fixed rates. This is resulting in litigation against subsidiar-ies of UniCredit in a number of countries including Croatia, Hungary and Serbia. Specifically in Croatia, a consumer association sued eight of the largest banks in 2012 (including Zagrebačka banka) claiming that (a) for loans linked to Swiss francs, consumers had not been given adequate information prior to taking out the loan and had not therefore been able to make a fully informed decision about the risks of such loans; and (b) a variable interest rate was unlawful, as it was set on the basis of a unilateral decision of the relevant bank, without the factors affecting the setting of the rate being clearly defined. On 4 July 2013 the court of first instance in Zagreb upheld the complaint of the consumer association in a deci-sion which is as yet not binding. All eight banks have appealed. Were the judgment to be upheld in a court of final jurisdiction the banks would, within 60 days of a court ruling, have to offer the customers amended terms, converting the outstanding principal amount to Croatian kuna (HRK) at the CHF/HRK rate prevailing on the date the loan agreement was signed and substituting the variable interest rate for the fixed rate applicable on the date the loan in question was drawn down. At this time, it is not possible to assess the timing of any final decisions, how successful any such litigation may ultimately be or what financial impact it or any associated legislative or regulatory initiatives might ultimately have on the indi-vidual subsidiaries or the Group.



In line with the above policy, no provision has been made for the following pending legal proceedings. Due to the uncertain nature of litigation, however, we cannot exclude that the following may result in losses to the bank:

• ActionbroughtbytheBelgiancompanyvalauret s. A. in Paris on the grounds of alleged involvement of Creditanstalt AG (now UniCredit Bank Austria AG) in wilful deception in connection with a French joint stock company as a result of which the plaintiffs incurred losses through a loss in value of shares acquired by it in the joint stock company.

E.12 – Report on key features of the internal control and risk management systems in relation to the financial reporting processThe Management Board is responsible for establishing and designing internal control and risk management systems which meet the company’s requirements in relation to the financial reporting process. The purpose of this report is to provide an overview of how internal controls are organised in relation to the financial reporting process.

The objective of the internal control system is to assist management in assuring internal controls in relation to financial reporting which are effective and are improved on an ongoing basis. The system is geared to complying with rules and regulations and creating conditions which are conducive to performing specific controls in key accounting processes.

Following the integration of the Bank Austria Group in UniCredit Group, the Italian Savings Law, Section 262 (process description for minimising risk in preparing financial statements) in particular, must be complied with in addition to the existing internal control system.

Pursuant to the “262 Savings Law”, the CEO and the CFO delegated by UniCredit S. p. A. are liable, under civil and criminal law, for any violation of the legal provisions. They are also responsible for every subsidiary within the group of consolidated companies which is covered by financial reporting because the “262 Savings Law” deals with consolidated financial statements.

Internal Audit performs independent and regular reviews of compliance with internal rules also in the area of accounting. The Head of Internal Audit reports directly to the Management Board and provides the Chairman of the Supervisory Board with quarterly reports.

Control environmentThe basic aspect of the control environment is the corporate culture in which management and all employees operate.

UniCredit S. p. A., the parent company of UniCredit Bank Austria AG, works to maintain effective communication and convey the corporate values defined in the Integrity Charter. The Integrity Charter embodies the UniCredit Group’s identity and is based on the following shared values: fair-ness, transparency, respect, reciprocity, freedom to act, and trust.

The implementation of the internal control system in relation to the financial reporting process is also set out in the internal rules and regulations: All accounting entries are made within the guidelines established in the Accounting Policy, and release follows defined instruction and control criteria. For each general ledger account there is a responsible person who reconciles the general ledger accounts in accordance with existing rules. This internal reconciliation process is interrogated by Financial Accounting and reviewed by Internal Audit.

Risk assessmentIn the course of the “262 Savings Law” project, the persons having process responsibility identified risks in relation to the financial reporting process; these risks are monitored on an ongoing basis. The focus is on those risks which are typically considered to be material.

To meet the “262 Savings Law” requirements, controls pursuant to the methodology used by UniCredit S. p. A. are required to be performed at least on a half-yearly basis (for full-year and half-year reporting).



ControlsAll controls are applied in the current business process to ensure that potential errors or deviations in financial reporting are prevented or detected and corrected. Controls range from a management review of results for the various periods to specific reconciliation of accounts and the analysis of continuous accounting processes.

The levels of hierarchy are designed so that an activity and the control of that activity is not performed by the same person (four-eyes principle). In the course of the preparation of financial reports, the general ledger accounts are reconciled with business and front-end systems.

IT security controls are a cornerstone of the internal control system. Defined IT controls are documented under “262 Savings Law” and audited by external auditors pursuant to “International Standards for Assurance Engagements” (ISAE) No. 3402 and are audited by external auditors.

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 inter-national financial reporting in order to identify risks of unintended misreporting at an early stage.

To perform monitoring and control functions with a view to proper financial accounting and reporting, extensive financial information is made available at key levels of the bank. Relevant information is not only provided to the Supervisory Board and the Management Board, middle management levels also receive detailed reports.

MonitoringAs part of the implementation of the internal control system pursuant to the “262 Savings Law”, instruments were introduced to monitor the effec-tiveness of controls. In connection with the compulsory half-yearly certification process for the preparation of the management report, the persons having process responsibility are required to carry out effectiveness tests to check the effectiveness of controls. It must be ascertained whether the controls work according to their design and whether the persons who perform controls have the competence/authority and qualifications required to perform the controls effectively.

All persons having process responsibility confirm by means of certification that their processes are adequately documented, risks have been identified and controls have been evaluated with a view to deriving measures to minimise risk.

The results of these monitoring activities are contained in a management report which is based on the certifications provided to the respective chief financial officer by all persons having process responsibility and issued on a half-yearly basis. The Chief Financial Officer of UniCredit Bank Austria AG receives the certifications by the chief financial officers of the subsidiaries covered by the process in accordance with the group of consolidated companies, and provides the Holding Company and the public with confirmation of the reliability and effectiveness of the internal control system in the context of the financial statements for the first six months and the annual financial statements.

E.13 – Information on the squeeze-out pursuant to the Austrian Federal Act on the Squeeze-out of Minority Shareholders (Gesellschafterausschluss- gesetz) 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 rescis-sion 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 pro-ceedings for a review of the cash compensation offered by UniCredit. An expert has been appointed in these proceedings to review the amount of the cash compensation paid; the expert report is now available and essentially confirms the adequacy of the cash compensation paid in connec-tion with the squeeze-out. A decision by the court of first instance in this case is not yet available.



E.14 – Financial derivativesDerivatives shown in the following tables are classified as financial derivatives and credit derivatives, according to the underlying financial instrument. In these categories, a distinction is made between trading book and banking book and between different counterparties. UniCredit Bank Austria AG’s business volume in derivatives focuses on interest rate contracts.

Over-the-counter transactions are individual agreements concerning volume, maturities and underlying instrument. In large-volume interbank trading, these agreements reflect international practice, while in customer business they are usually adjusted to specific needs. Exchange-traded contracts are always standardised in respect of volume and maturity date.

Derivatives are mainly used by the bank itself for hedging market risk and credit spread risk arising from new issue activities. In customer business, market participants include banks, securities houses, mutual funds, pension funds and corporate customers.

Trading in derivatives at Bank Austria is primarily related to the hedging of positions entered into vis-a-vis customers.

For the purposes of portfolio and risk management, contracts are valued at current prices using recognised and tested models. Market values show the contract values as at the balance sheet date, positive market values indicate the potential default risk arising from the relevant activity.

For the purposes of portfolio management and risk limitation in the derivatives business with banks and customers, UniCredit Bank Austria AG uses a Monte Carlo path simulation to estimate the potential future exposure at portfolio level for each counterparty. The calculations are based on market volatility, correlations between specific risk factors, future cash flows and stress considerations. Netting agreements and collateral agree-ments are also taken into account for simulation purposes.

The simulation calculations are performed for all major types of transactions, e. g. forward foreign exchange transactions, commodity futures transactions, interest rate instruments, securities lending transactions and repurchase agreements, equity-related, commodity-related or inflation-related instruments and credit derivatives. Other (exotic) products are taken into account with an add-on factor (depending on volatility and maturity). The bank applies a confidence interval of 97.5%.

In addition to determining the potential future exposure for the purpose of internal risk management, the path simulation also enables the bank to calculate the mean exposure and the Basel 2-modified mean exposure as well as the effective term of the exposure for each counterparty. In this way, counterparty risk can be taken into account in a Basel 2-compliant internal model for the calculation of capital requirements. In 2009, the bank obtained approval from the Austrian regulatory authorities for the use of the relevant model.

Line utilisation for derivatives business is available online in WSS (“Wallstreet”), the central treasury system, on a largely Group-wide basis. For smaller units not connected to the central system, separate lines are allocated and monitored. Group-wide compliance with lines approved in the credit process is thus ensured at any time.

UniCredit Bank Austria AG additionally limits the credit risk arising from its derivatives business through strict use of master agreements, through collateral agreements and break clauses. In combination with the very good average credit rating of our business partners in the derivatives busi-ness, management takes proper account of default risk.



Regulatory trading portfolio: end of period notional amounts (€ million)

31 Dec. 2013 31 Dec. 2012

DerivAtive instrument tyPes/unDerlyings over the counter cleAring house over the counter cleAring house

Debt securities and interest rate indexes 58,269 522 68,249 118Options 12,523 – 16,100 –Swap 45,374 221 49,092 5Forward 373 – 3,052 –Futures – 301 – 113Others – – 5 –

equity instruments and stock indexes 882 8 1,061 –Options 714 – 837 –Swap – – 28 –Forward 150 – 172 –Futures – 8 – –Others 18 – 24 –

gold and currencies 28,094 42 27,676 70Options 3,032 – 4,206 –Swap 12,639 – 12,567 –Forward 12,423 – 10,904 –Futures – 42 – 70Others – – – –

commodities 308 – 557 –other underlyings 30 – 16 –totAl 87,583 572 97,559 188

Banking book: end of period notional amounts – Hedging derivatives (€ million)

31 Dec. 2013 31 Dec. 2012


Debt securities and interest rate indexes 114,622 – 110,998 –Options 3,569 – 4,022 –Swap 111,053 – 106,924 –Forward – – 51 –Futures – – – –Others – – – –

equity instruments and stock indexes – – – –Options – – – –Swap – – – –Forward – – – –Futures – – – –Others – – – –

gold and currencies 29,294 – 31,350 –Options – – – –Swap 27,784 – 28,797 –Forward 1,510 – 2,552 –Futures – – – –Others – – – –

commodities – – – –other underlyings – – – –totAl 143,916 – 142,348 –

For information on the presentation of hedging transactions see section A.5.3.3 Hedge accounting and sections B.5 and C.21.



Banking book: end-of-period notional amounts – Other derivatives (€ million)

31 Dec. 2013 31 Dec. 2012


Debt securities and interest rate indexes 34 – 34 –Options 34 – 34 –Swap – – – –Forward – – – –Futures – – – –Others – – – –

equity instruments and stock indexes 102 – 107 –Options 102 – 102 –Swap – – – –Forward – – – –Futures – – – –Others – – 5 –

gold and currencies 95 36 – 79Options – – – –Swap 94 36 – 79Forward – – – –Futures – – – –Others – – – –

commodities – – – –other underlyings – – – –totAl 231 36 140 79

Financial derivatives – breakdown by product (€ million)

31 Dec. 2013 31 Dec. 2012

Positive FAir vAlue negAtive FAir vAlue Positive FAir vAlue negAtive FAir vAlue

trAnsAction tyPes/unDerlyingsover the counter

cleAring house

over the counter

cleAring house

over the counter

cleAring house

over the counter

cleAring house

regulatory trading portfolio 1,891 1 1,567 – 2,355 1 2,061 –Options 260 – 178 – 344 – 248 –Interest rate swaps 935 – 900 – 1,445 – 1,437 –Cross currency swap 405 – 347 – 266 – 201 –Equity swaps 132 – – – 136 – – –Forward 146 – 127 – 158 – 171 –Futures – 1 – – – 1 – –Others 12 – 14 – 5 – 4 –

banking book – hedging derivatives 2,913 – 2,273 – 4,125 – 2,989 –Options 61 – 54 – 82 – 56 –Interest rate swaps 2,570 – 1,985 – 3,636 – 2,564 –Cross currency swap 266 – 232 – 393 – 366 –Equity swaps – – – – – – – –Forward 16 – 2 – 13 – 3 –Futures – – – – – – – –Others – – – – – – – –

banking book – other derivatives 1 – 5 2 – – 2 2Options – – – – – – – –Interest rate swaps – – – – – – – –Cross currency swap 1 – 5 2 – – – 2Equity swaps – – – – – – – –Forward – – – – – – – –Futures – – – – – – – –Others – – – – – – 2 –

totAl 4,805 1 3,845 2 6,480 1 5,053 2



OTC financial derivatives – residual life: notional amounts (€ million)

unDerlying/resiDuAl mAturity uP to 1 yeArover 1 yeAr

uP to 5 yeArs over 5 yeArs totAl

regulatory trading book 37,362 33,391 16,831 87,583Financial derivative contracts on debt securities and interest rates 17,983 26,758 13,529 58,269Financial derivative contracts on equity securities and stock indexes 119 505 258 882Financial derivative contracts on exchange rates and gold 19,041 6,010 3,044 28,094Financial derivative contracts on other values 219 118 – 337

banking book 40,096 70,192 33,858 144,146Financial derivative contracts on debt securities and interest rates 35,981 52,534 26,141 114,656Financial derivative contracts on equity securities and stock indexes – 102 – 102Financial derivative contracts on exchange rates and gold 4,115 17,557 7,717 29,389Financial derivative contracts on other values – – – –

totAl 31 Dec. 2013 77,458 103,582 50,689 231,729



regulatory trading book 37,830 38,965 20,763 97,559Financial derivative contracts on debt securities and interest rates 16,765 32,923 18,561 68,249Financial derivative contracts on equity securities and stock indexes 529 443 90 1,061Financial derivative contracts on exchange rates and gold 20,168 5,396 2,113 27,676Financial derivative contracts on other values 369 203 – 572

banking book 37,335 69,188 35,965 142,488Financial derivative contracts on debt securities and interest rates 32,466 52,064 26,502 111,032Financial derivative contracts on equity securities and stock indexes – 102 5 107Financial derivative contracts on exchange rates and gold 4,869 17,022 9,458 31,350Financial derivative contracts on other values – – – –

totAl 31 Dec. 2012 75,165 108,153 56,729 240,047

Credit derivatives – breakdown by product (€ million)

31 Dec. 2013 31 Dec. 2012

PortFolios/DerivAtive instrument tyPes Positive FAir vAlue negAtive FAir vAlue Positive FAir vAlue negAtive FAir vAlue

regulatory trading portfolio 4 20 6 70Credit default products 2 19 2 68Credit spread products 2 1 4 2Total rate of return swap – – – –Others – – – –

banking book – – – –Credit default products – – – –Credit spread products – – – –Total rate of return swaps – – – –Others – – – –

totAl 4 20 6 70



Credit derivatives: end of period notional amounts (€ million)

31 Dec. 2013 31 Dec. 2012

regulAtory trADing booK bAnKing booK regulAtory trADing booK bAnKing booK

trAnsAction cAtegories

with A single counter-

PArty

with more thAn one counter-

PArty (bAsKet)


PArty


PArty (bAsKet)


PArty


PArty (bAsKet)


PArty


PArty (bAsKet)

Protection buyer’s contractsCredit default products 13 5 – – 10 5 – –Credit spread products – – – – – – – –Total rate of return swaps – – – – – – – –Other – – – – – – – –

totAl 13 5 – – 10 5 – –Protection seller’s contracts

Credit default products 746 5 – – 1,234 5 – –Credit spread products 13 – – – 32 – – –Total rate of return swaps – – – – – – – –Other – – – – – – – –

totAl 759 5 – – 1,265 5 – –

Credit derivatives – residual life: notional amount (€ million)



regulatory trading book: 109 568 105 782Credit derivatives with qualified reference obligation – 13 – 13Credit derivatives with not qualified reference obligation 109 555 105 769

banking book: – – – –Credit derivatives with qualified reference obligation – – – –Credit derivatives with not qualified reference obligation – – – –

totAl 31 Dec. 2013 109 568 105 782



regulatory trading book: 527 403 357 1,286Credit derivatives with qualified reference obligation 29 3 – 32Credit derivatives with not qualified reference obligation 498 400 357 1,255

banking book: – – – –Credit derivatives with qualified reference obligation – – – –Credit derivatives with not qualified reference obligation – – – –

totAl 31 Dec. 2012 527 403 357 1,286


F – Additional disclosures

F.1 – Supervisory Board and Management Board 212

F.2 – Related party disclosures 212 F.2.1 – Information on members of the Management Board, the Supervisory Board and the Employees’ Council of UniCredit Bank Austria AG 212

F.2.2 – Related party disclosures 213

F.2.3 – Other information on related party relationships 214

F.3 – Share-based payments 214

F.4 – Employees 217

F.5 – Auditors’ fees 217

F.6 – Geographical distribution 217

F.7 – Effects of netting agreements on the statement of financial position 218

F.8 – Assets pledged as security 218

F.9 – Transfer of financial assets 218

F.10 – Subordinated assets/ liabilities 221

F.11 – Assets and liabilities in foreign currency 221

F.12 – Trust assets and trust liabilities 221

F.13 – Guarantees given and commitments 222

F.14 – Consolidated capital resources and regulatory capital requirements 222

F.15 – Events after the reporting period 224



F.2 – Related party disclosures Related party disclosures as at 31 December 2013 (€ million)

PArent comPAnyunconsoliDAteD

subsiDiAries AssociAtesnon-consoliDAteD

joint ventures Key mAnAgement

Personnelother relAteD

PArties

Loans and advances 3,957 15,227 1,273 – 4 82Equity instruments – – 7 – – –Other receivables 385 3,513 53 – – –totAl Assets 4,342 18,740 1,333 – 4 82Deposits 9,895 7,976 9,288 1 17 113Other financial liabilities 87,090 3,250 1 – – 128Other liabilities 12 23 – – – –totAl liAbilities 9,995 11,249 9,289 1 17 241

F.2.1 – Information on members of the Management Board, the Supervisory Board and the Employees’ Council of UniCredit Bank Austria AG

F.2.1.1 – Emoluments of members of the Management Board and the Supervisory BoardThe emoluments paid by UniCredit Bank Austria AG to Management Board members in the 2013 financial year (excluding payments into pension funds) totalled €2,945,603.17 (comparable emoluments in 2012 totalled €1,727 thousand). Of this total, €2,087,942.87 (2012: €1,483 thousand) related to fixed salary components and €857,660.30 were variable salary components (2012: €244 thousand). The changes resulted from one-off effects in connection with Management Board changes and from cash deferrals from previous years pursuant to legal requirements. Moreover, a provision was made for variable remuneration for 2012 (subject to clawback) in the amount of €1,557,000.00, which may be paid in subsequent years pursuant to the same legal provisions governing compensation. Several members of the Management Board receive their emoluments from companies which are not included in the group of consolidated companies of Bank Austria; these emoluments granted to Management Board members for activities in UniCredit Bank Austria AG and in subsidiaries in the 2013 financial year amounted to €2,757,040.69 (2012: €2,656 thousand) and are partly (2013: €1,083,019.80; 2012: €1,384 thousand) charged to UniCredit Bank Austria AG. These Management Board members also received emoluments for activities which are not connected with the Bank Austria Group but are in the interest of UniCredit Group.

Payments to former members of the Management Board and their surviving dependants (excluding payments into pension funds) totalled €8,772,856.20. (Of this total, €5,228,490.58 was paid to former Management Board members of Creditanstalt AG, which merged with Bank Austria in 2002, and their surviving dependants; €1,546,578.13 was paid to former Management Board members of Österreichische Länderbank AG, which merged with Zentralsparkasse in 1991, and their surviving dependants.) The comparative figure for 2012 was €8,311 thousand. Emoluments paid to this group of persons for activities in subsidiaries amounted to €14,885.09 (2012: €19 thousand).

The emoluments of the Supervisory Board members active in the 2013 business year totalled €330,443.08 (2012: €340 thousand) for UniCredit Bank Austria AG, and €2,020.00 (2012: €2 thousand) for the two credit associations.

F – Additional disclosures (CONTINUED)

F.1 – Supervisory Board and Management BoardThe following persons were members of the Management Board of UniCredit Bank Austria AG in 2013:chairman and chief executive officer: Willibald CERNKODeputy chairman: Gianni Franco PAPAmembers: Helmut BERNKOPF, Francesco GIORDANO, Dieter HENGL, Jürgen KULLNIGG, Doris TOMANEK, Robert ZADRAZIL.

The following persons were members of the Supervisory Board of UniCredit Bank Austria AG in 2013:chairman: Erich HAMPELDeputy chairman: Paolo FIORENTINOmembers: Alessandro DECIO (from 14 February 2013), Candido FOIS (until 15 January 2013), Olivier Nessime KHAYAT (from 16 May 2013), Alfredo MEOCCI (from 14 February 2013), Jean Pierre MUSTIER (until 16 May 2013), Roberto NICASTRO, Vittorio OGLIENGO, Franz RAUCH, Karl SAMSTAG, Wolfgang SPRISSLER, Ernst THEIMER, Wolfgang HEINZL, Adolf LEHNER, Johannes KOLLER (from 13 March 2013), Emmerich PERL, Josef REICHL (until 12 March 2013), Robert TRAUNWIESER, Barbara WIEDERNIG


F.2.1.2 – Loans to members of the Management Board and of the Supervisory BoardLoans to members of the Management Board amounted to €1,779,386.54 (2012: €1,870 thsd), overdrafts granted to them were €47,671.48 (2012: €76 thousand). Repayments during the business year totalled €54,815.63 (2012: €78 thousand).

Loans to members of the Supervisory Board amounted to €356,726.05 (2012: €233 thousand). Overdrafts granted to Supervisory Board members totalled €3,995.35 (2012: €49 thousand). Repayments during the business year totalled €34,943.67 (2012: €25 thousand).

Loans to the Supervisory Board include those made to members of the Employees’ Council who are members of the Supervisory Board. The maturities of the loans range from five to twenty-five years. The rate of interest payable on these loans is the rate charged to employees of UniCredit Bank Austria AG.

F.2.2 – Related party disclosuresIn order to ensure full compliance with legislative and regulatory provisions currently in effect as regards disclosure of transactions with related parties, UniCredit has adopted procedures for identifying related-party transactions designed to ensure that appropriate information is provided to enable compliance with the obligations of the Directors of UniCredit, as a listed company and the parent company of the Group.

Transactions carried out within the Group and/or generally with Austrian and foreign related parties are executed as a rule on an arm’s length basis, on the same terms and conditions as those applied to transactions entered into with independent third parties.

Intra-group transactions were carried out based on assessments of a mutual economic advantage, and the determination of applicable terms and conditions took place in compliance with substantial correctness, keeping in mind the common goal of creating value for the entire Group. The same principle was also applied to the provision of services, combined with the principle of charging for such services at minimal rate solely to recover related production costs.

Pursuant to IAS 24, Bank Austria’s related parties include:• companiesbelongingtoUniCreditGroupandcompaniescontrolledbyUniCreditbutnotconsolidated;• associatesandjointventures;• UniCredit’s“keymanagementpersonnel”;• closefamilymembersofkeymanagementpersonnelandcompaniescontrolled(orjointlycontrolled)bykeymanagementpersonnelortheirclose

family members;• Groupemployeepost-employmentbenefitplans.

Banking operations – outsourcing in 2013 Bank Austria has completed its consolidation programme for banking operations. Procurement functions as well as the operational security function were transferred in 2012 to UniCredit Business Integrated Solution (UBIS), the Group-owned provider of banking operations services. HR-related services, especially payroll services, were also outsourced to UBIS, which set up a joint venture with HP to manage those HR-related services. Bank Austria’s subsidiary Domus FM, which provides services in the area of facility management, was sold to UBIS while maintaining the full service scope rendered to Bank Austria.

Value Transformation Services (V-TServices), a new joint venture between UniCredit Business Integrated Solutions and IBM, started its activities on 1 September 2013. The main goal of the joint venture is to improve the ICT infrastructure and increase the performance and efficiency of the systems. UBIS RTO (Retained Organisation) will continue to be responsible as a hub for coordination and control of the outsourced services.

Compensation agreement In connection with the “Restated Bank of the Regions Agreement”, UniCredit S. p. A. and UniCredit Bank Austria AG signed a contract valid from 1 January 2010 to 31 March 2016 which may be terminated from 1 January 2015 and includes a commitment by UniCredit S. p. A. to pay 13.8% of profit before tax of the CIB Division Markets segment in return for the commitment by UniCredit Bank Austria AG to pay 12M Euribor + 200bps recorded annually on a notional value of €1.28 billion. Cooperation agreement In the course of the integration of HVB (now UniCredit Bank AG) into the UniCredit group of companies, HVB has been assigned the role of centre of competence for markets and investment banking for the entire corporate group. Among other things, HVB acts as counterparty for derivative transactions conducted by UniCredit companies in this role. For the most part, this involves hedge derivatives that are externalised on the market via HVB. UniCredit Bank Austria AG and UniCredit Bank AG signed a corresponding cooperation agreement for 10 years in 2010.

Restated Bank of the Regions Agreement (ReBoRA)In the Restated Bank of the Regions Agreement, “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 2013, UniCredit held a direct interest of 99.996% in UniCredit Bank Austria AG.

As at 31 December 2013, there were the following interlocking relationships with UniCredit S. p. A.:•FourmembersoftheSupervisoryBoardofUniCreditBankAustriaAGweremembersoftheExecutiveManagementCommitteeofUniCredit.

Guarantee of Bank Austria for a portfolio of non-performing loans of Ukrsotsbank The terms of the guarantee were set out in 2010 according to the rules of the National Bank of Ukraine; they are not at arm’s length from a non-Ukrainian point of view. The main purpose of the guarantee transaction was to enable Ukrsotsbank to fulfil the statutory capital requirements. On 27 December 2011, Ukrsotsbank and Bank Austria had signed a replacement of the guarantee, which expired at 10 January 2013. For the replacement of this guarantee a significant part of the portfolio was transferred to UniCredit Bank Austria by means of a sub-participation agreement.

F.2.3 – 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 trustees of the private foundation has 14 members. These included four members of the Supervisory Board of UniCredit Bank Austria AG.

After the change in the legal form of Anteilsverwaltung Zentralsparkasse into a private foundation (“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.

F.3 – Share-based payments

Description of payment agreements based on own equity instrumentsOutstanding instrumentsGroup Medium & Long Term Incentive Plans for selected employees include equity-settled share-based Payments based on the shares of the parent company UniCredit S. p. A:• StockOptionsallocatedtoselectedTop&SeniorManagersandKeyTalentsoftheGroup;• PerformanceStockOptions&PerformanceSharesallocatedtoselectedTop&SeniorManagersandKeyTalentsoftheGroupandrepresented

respectively by options and free UniCredit ordinary shares that the Parent Company undertakes to grant, conditional upon achieving performance targets approved by the Parent Company’s Board of Directors;

• EmployeeShareOwnershipPlan(ESOP)thatofferstoeligibleGroupemployeesthepossibilitytobuyUniCreditordinaryshareswiththefollowingadvantages: granting of free ordinary shares (“Discount Shares” and “Matching Shares” or, for the second category, rights to receive them) meas-ured 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.

• GroupExecutiveIncentiveSystemthatofferstoeligibleGroupExecutivesavariableremunerationforwhichpaymentwillbemadewithinfiveyears.For the first two years the beneficiary will receive the payment by cash and for the next years they will receive the payment by UniCredit shares; the payments are related to the achievement of performance conditions (other than marked conditions) stated in the Plan Rules.

• SharePlanforTalentthatoffersfreeUniCreditordinarysharesthattheParentCompanyundertakestogrant,conditionaluponachieving performance targets approved by the Parent Company’s Board of Directors

Measurement modelStock Options and Performance Stock OptionsThe Hull and White Evaluation Model has been adopted to measure the economic value of Stock Options. This model is based on a trinomial tree price distribution using the Boyle’s algorithm and estimates the early exercise probability on the basis of a deterministic model connected to:• reachingaMarketShareValueequalstoanexerciseprice-multiple(M);• probabilityofbeneficiaries’earlyexit(E)aftertheendoftheVestingPeriod.

No new Stock Options Plans and Performance Stock Options were granted during 2013.


Other equity instruments – Performance SharesThe 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 Shares Plans were granted during 2013.

Other equity instruments – Share Plan for TalentThe plan offers three “Free UniCredit Shares” instalments, having subsequent annual vesting, to selected beneficiaries.

The economic value of Performance Shares is measured considering the share market price at the grant date less the present value of the future dividends during the performance period. Parameters are estimated by applying the same model used for Stock Options measurement.

No new Share Plans for Talent were granted during 2013.

Group Executive Incentive SystemThe amount of the incentive will be determined on a basis of the achievement of quantitative and qualitative goals stated by the plan. In particular, the overall evaluation of the employee’s relevant manager shall be expressed as a percentage, from a minimum of 0% to a maximum of 150% (non market vesting conditions).

This percentage, adjusted by the application of a risk /opportunity factor – Group Gate – at first payment, multiplied by the Bonus Opportunity will determine the effective amount that will be paid to the beneficiary.

The economic and equity effects will be recognised on the basis of the instrument’s vesting period.

Group Executive Incentive System 2012 – SharesThe 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 vesting period.

shAres grAnteD grouP executive incentive system 2012

1st instAlment (2015) 2nD instAlment (2016) 3rD instAlment (2017) *)

Date of granting Board resolution (Grant Date) 27 March 2012 27 March 2012 27 March 2012Date of Board resolution 11 April 2013 11 April 2013 11 April 2013Vesting Period start-date 1 January 2012 1 January 2012 1 January 2012Vesting Period end-date 31 December 2014 31 December 2015 31 December 2016UniCredit Share market price [€] 3.52 3.52 3.52Economic value of vesting conditions [€] –0.19 –0.37 –0.63Performance shares’ fair value per unit at the grant Date [€] 3.33 3.15 2.89

*) refers only to Executive Vice President assignations

Group Executive Incentive System 2013 Variable incentive related to 2013 defined on the basis of: • individualperformance,aswellasresultsatbusinessleveland,asrelevant,atcountryand/orGrouplevel• definitionofabalancedstructureofupfront(followingthemomentofperformanceevaluation)anddeferredpayments,incashandinshares• distributionsofsharepaymentswhichtakeintoaccounttheapplicableregulatoryrequirementsregardingtheapplicationofshareretentionperiods.

In particular, the payment structure has been defined in line with Bank of Italy provisions requiring a share retention period of 2 years for upfront shares and of 1 year for deferred shares

• applicationofanoverallrisk /sustainabilityfactor,relatedtoannualGroupand/orconcerningeverysingleBusiness/Countryprofitability,solidityandliquidity results (“Group Gate”) as well as a Zero Factor related to future Group and/or concerning every single Business/Country profitability, solidity and liquidity results as approved by the Board of Directors of UniCredit S. p. A.

All profit-and-loss and net equity effects related to the plan will be booked during the vesting period



Employee Share Ownership Plan (Let’s Share 2012)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 2012.

Measurement of Free Shares ESOP 2012Free shAres

1st election winDowFree shAres

2nD election winDow

Date of Free Shares delivery to Group employees 5 February 2013 5 August 2013Vesting Period start-date 31 January 2013 31 July 2013Vesting Period end-date 31 January 2014 31 July 2014Discount Shares’ fair value per unit [€] 4.35 3.78

All profit-and-loss and net equity effects related to free shares had been booked during the vesting period (except adjustments, according to Plan Rules, that will be booked during the next closing after vesting period);

The UniCredit free ordinary shares assigned in plan rules applications had been acquired on the market.

Other informationLet’s Share for 2014 (ex 2013) – Employee Share Ownership Plan for 2014 In May 2013 the Ordinary Shareholders’ Meeting approved the “UniCredit Group Employee Share Ownership Plan for 2014” (“Let’s Share for 2014”) that offers to eligible Group employees the opportunity to purchase UniCredit ordinary shares at favourable conditions, starting from January 2014, in order to reinforce employees’ sense of belonging and commitment to achieve the corporate goals.

Let’s Share for 2014 was launched on November 27, 2013 in 11 countries across the Group (Austria, Bulgaria, Czech Republic, Germany, Hungary, Italy, Poland, Serbia, UK, Slovakia, and Luxemburg) with a participation rate of about 3.4% of the eligible employees.

Let’s Share for 2014 is a broad based share plan under which:• duringthe“EnrolmentPeriods”(fromJanuary2014toDecember2014)theParticipantscanbuyUniCreditordinaryshares(“InvestmentShares”)

by means of monthly or one-off contributions (via one instalment in January or July 2014) taken from their current account. In case, during this Enrolment Period, a Participant leaves the Plan, he/she will lose the right to receive any free ordinary shares at the end of the Enrolment Period;

• atthefirstmonthoftheEnrolmentPeriod(January2014/July2014),eachParticipantwillreceiveadiscountof25%ontheoverallamountofshares purchased; the Free Shares will be locked up for one year. The Participant will lose the entitlement to the Free Share if, during the holding period, he/she will no longer be an employee of a UniCredit Group company unless the employment has been terminated for one of the specific reasons stated in the Rules of the Plan. In some countries, for fiscal reasons, it will not be possible to grant the Free Shares at the beginning of the Enrolment Period: in that case an alternative structure is offered that provides to the Participants of those countries the right to receive the Free Shares at the end of the Holding Period (“Alternative Structure”);

• duringthe“HoldingPeriod”(fromJanuary2014toJanuary2015orfromJuly2014toJuly2015),theParticipantscanselltheInvestmentSharespurchased at any moment, but they will lose the corresponding Free Shares (or right to receive them).

The Free Shares are qualified as “Equity Settled Share-based Payments” as Participants, according to Plan’s Rules, will receive UniCredit Equity Instruments as consideration for the services rendered to the legal entity where they are employed. The fair value will be measured at the beginning of Enrolment Period according to the price paid by Participants to acquire the first instalment of the Investment Shares on the market.

All profit-and-loss and net equity effects related to Let’s Share for 2014 will be booked during the holding period.

Let’s Share for 2014 did not have any effect on the 2013 consolidated financial statements.

Effects on profit and lossAll share-based payments granted after 7 November 2002 for which the vesting period ends after 1 January 2005 are included within the scope of IFRS 2.

Payroll costs in 2013 included share-based payments of €2 million.



F.5 – Auditors’ fees(pursuant to Section 237 no. 14a and Section 266 no. 11 of the Austrian Business Code)The following table shows the fees charged by the auditors of the consolidated financial statements for the 2013 financial year in the following categories:

Auditors’ fees (€ thsd)

2013 2012

Fees for the audit of the financial statements and the consolidated financial statements 3,784 4,064Deloitte Austria (2012: KPMG Austria) 2,263 2,592Austrian Savings Bank Auditing Association 1,521 1,473

other services involving the issuance of a report 522 532Deloitte Austria (2012: KPMG Austria) 522 521Austrian Savings Bank Auditing Association – 11

tax consulting services 440 –Deloitte Austria (2012: KPMG Austria) 440 –Austrian Savings Bank Auditing Association – –

other services 2,088 1,172Deloitte Austria (2012: KPMG Austria) 963 84Austrian Savings Bank Auditing Association 1,125 1,088

totAl 6,834 5,768

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

31 Dec. 2013 31 Dec. 2012

totAl Assets oPerAting income totAl Assets oPerAting income

Austria 97,394 1,873 100,418 1,768Total European countries 98,649 4,903 103,464 5,005

Western Europe 673 13 738 13Central and Eastern Europe 97,976 4,891 102,726 4,992

America 54 2 72 –10Asia 113 12 3,642 10totAl 196,210 6,791 207,596 6,773

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

F.6 – Geographical distribution

F.4 – EmployeesIn 2013 and 2012, the Bank Austria Group employed the following average numbers of staff (full-time equivalents):

Employees2013 2012

Salaried staff 55,377 57,708Other employees 66 75totAl*) 55,443 57,783

of which: in Austria 7,306 7,496of which: abroad 48,137 50,287

*) Average full-time equivalents of staff employed in the Bank Austria Group (employees of companies accounted for under the proportionate consolidation method are included at 100%), excluding employees on unpaid sabbatical or maternity /paternity leave



F.9 – Transfer of financial assetsIn the ordinary course of business, the Group enters into transactions that result in the transfer of financial assets, primarily debt and equity securities and loans and advances to customers. The transferred financial assets continue either to be recognised in their entirety, or are derecognised in their entirety.

The Group transfers financial assets primarily through the following transactions:• Saleandrepurchaseofsecurities• Securitieslending• Securitisationactivitiesinwhichloansandadvancestocustomersorinvestmentsecuritiesaretransferredtospecial-purposeentitiesortoinvestors

in the notes issued by special-purpose entities. Every special-purpose entity is assessed in order to evaluate whether the majority of the risks and rewards incident to the activities is attributable or not to the bank and its consolidation is therefore needed according to applicable IFRS (SIC 12).

Transferred financial assets that are not derecognised in their entiretySale and purchase agreementsSale and purchase agreements are transactions in which the Group sells a financial asset and simultaneously agrees to repurchase it at a fixed date in the future. The Group continues to recognise the financial asset in its entirety in the statement of financial position because it retains all the risks and rewards of ownership. The cash consideration received is recognised as a financial asset and a financial liability is recognised for the obligation to pay the repurchase price. Because the Group sells the contractual rights to the cash flows of the securities it does not have the ability to use the trans-ferred assets during the term of the arrangement.


Assets and liabilities subject to accounting offsetting or under master netting agreements and similar ones (€ millon)

FinAnciAl liAbilities oFFset in the stAtement oF

FinAnciAl Position

net Amounts PresenteD in the stAtement oF

FinAnciAl Position vAlues oF FinAnciAl Assets

relAteD Amounts not recogniseD in the stAtement oF FinAnciAl Position

gross Amounts oF FinAnciAl Assets

FinAnciAl instruments

cAsh collAterAl receiveD net Amounts

Assets1) Derivatives 3,081 – 3,081 –2,702 –190 1902) Repos – – – – – –3) Securities lending – – – – – –4) Others – – – – – –totAl 31 Dec. 2013 3,081 – 3,081 –2,702 –190 190liabilities1) Derivatives 2,842 – 2,842 –2,702 – 1402) Repos – – – – – –3) Securities lending – – – – – –

4) Others – – – – – –totAl 31 Dec. 2013 2,842 – 2,842 –2,702 – 140

F.7 – Effects of netting agreements on the statement of financial position

F.8 – Assets pledged as securityAssets used to guarantee own liabilities and commitments (€ million)

31 Dec. 2013 31 Dec. 2012

Financial instruments held for trading 21 –Financial instruments designated at fair value – 30Financial instruments available for sale 5,948 4,788Financial instruments held to maturity 729 1,045Loans and receivables with banks 567 372Loans and receivables with customers 24,305 25,251Property, plant and equipment – 26totAl 31,570 31,512


Under repurchase agreements, financial assets were sold to third parties with a commitment to repurchase the financial instruments at a price specified when the assets were sold. The assets transferred are either securities held by the bank or borrowed from other parties. In those cases where Bank Austria is the transferor, securities held by the bank continue to be recognised as assets in its statement of financial position. In those cases where Bank Austria is the transferee, the bank does not recognise the assets in its statement of financial position.

Securities lendingSecurities lending agreements are transactions in which the Group lends equity securities for a fee and receives cash as collateral. The Group continues to recognise the securities in their entirety in the statement of financial position because it retains substantially all the risks and rewards of ownership.

The cash received is recognised as a financial asset and a financial liability is recognised for the obligation to repay this collateral. Because the Group sells the contractual rights to the cash flows of the securities it does not have the ability to use the transferred assets during the term of the arrangement.

Security borrowing transactions collateralized by other securities or without collateral (€ million)

Amounts As At 31 Dec. 2013

Amounts oF the securities borroweD/trAnsAction PurPose

lenDer breAKDowngiven As collAterAl in FunDing trAnsActions solD

solD in rePo trAnsActions other PurPoses

Banks 294 31 26 33Financials companies – – – –Insurance companies – – – –Non Financials companies – – – –Others – – – –totAl 294 31 26 33

Sales transactions relating to financial liabilities with repayment exclusively based on assets sold and not derecognised: fair value (€ million)

31 Dec. 2013

FinAnciAl Assets helD For trADing

AvAilAble-For-sAle FinAnciAl Assets

helD-to-mAturity investments

tyPe/PortFolios A b A b A btotAl

31 Dec. 2013totAl

31 Dec. 2012

balance-sheet assets 78 – 2,330 – 461 – 2,868 3,214Debt securities 78 – 2,330 – 461 – 2,868 3,214Equity securities – – – – X X – –UCIS – – – – X X – –Loans – – – – – – – –

Derivatives – – x x x x – –Associated financial liabilities 76 – 2,243 – 461 – 2,780 3,248

Deposits from customers – – 788 – 461 – 1,249 1,719Deposits from banks 76 – 1,455 – – – 1,531 1,529Debt securities in issue – – – – – – – –

totAl 31 Dec. 2013 2 – 86 – – – 88 xtotAl 31 Dec. 2012 –1 – –35 1 1 – x –34

A= Financial assets sold and fully recognised

B= Financial assets sold and partially recognised

The carrying amounts are equal to the fair values.




SecuritisationsThe Group sells loans and advances to customers and investment securities to special-purpose entities (SPEs) that in turn issue notes to investors that are collateralised by the purchased assets. If the Group sells assets to a consolidated SPE then the transfer is in the form of the Group assuming an obligation to pass cash flows from the underlying assets to investors in the notes. Derecognition of the transferred assets is prohibited because either the cash flows that it collects from the transferred assets on behalf of the investors are not passed through to them without material delay or the majority of risks and rewards of such assets has not been substantially transferred. In these cases, the consideration received from the investors in the notes in the form of cash is recognised as a financial asset and a corresponding financial liability is recognised. The investors of the notes have recourse only to the cash flows of the transferred financial assets.

Exposures deriving from the securitisation of own assets (€ million)

bAlAnce sheet exPosure As At31 Dec. 2013

bAlAnce sheet exPosure As At31 Dec. 2012

gross exPosure (nominAl Amount) net exPosure

gross exPosure (nominAl Amount) net exPosure

Assets sold and totally derecognised – – – –Assets sold but not derecognised 2 2 3 3Synthetic transactions 371 370 564 558totAl 374 372 566 561

Exposures deriving from the securitisation of own assets broken down by subordination degree (€ million)

Amounts As At 31 Dec. 2013 Amounts As At 31 Dec. 2012

senior mezzAnine junior totAl senior mezzAnine junior totAl

balance sheet exposure 280 92 – 372 472 88 – 561Assets sold and totally derecognised – – – – – – – –Assets sold but not derecognised 2 – – 2 3 – – 3Synthetic transactions 277 92 – 370 470 88 – 558

Securitisation exposures: breakdown by quality of underlying assets (€ million)

Amounts At 31 Dec. 2013

on bAlAnce-sheet

senior mezzAnine junior

QuAlity oF the unDerlying Assets/exPosuresgross

exPosure net exPosuregross


exPosure net exPosure

with own underlying assets: 1,552 280 82 92 – –Impaired – – – – – –Other 1,552 280 82 92 – –

with third-party underlying assets: 682 546 226 224 – –Impaired 6 6 – – – –Other 676 540 226 224 – –

Amounts At 31 Dec. 2012

on bAlAnce-sheet

senior mezzAnine junior

QuAlity oF the unDerlying Assets/exPosuresgross



exPosure net exPosure

with own underlying assets: 1,537 472 82 88 – –Impaired – – – – – –Other 1,537 472 82 88 – –

with third-party underlying assets: 1,076 891 145 148 – –Impaired 8 6 – – – –Other 1,068 885 145 148 – –


F.10 – Subordinated assets / liabilities

F.11 – Assets and liabilities in foreign currency

(€ million)

31 Dec. 2013 31 Dec. 2012

Available-for-sale financial assets 77 77Loans and receivables with banks 610 816Loans and receivables with customers 287 295subordinated assets 974 1,189Deposits from banks 15 154Deposits from customers 85 96Debt securities in issue 3,310 3,773subordinated liabilities 3,410 4,023

(€ million)

31 Dec. 2013 31 Dec. 2012

Assets liAbilities Assets liAbilities

USD 27,149 22,532 26,420 23,105JPY 19 203 775 286CHF 13,096 1,481 14,860 1,819Other 59,241 44,870 59,882 48,366totAl 99,505 69,086 101,937 73,576

F.12 – Trust assets and trust liabilities (€ million)

31 Dec. 2013 31 Dec. 2012

Loans and receivables with banks – 6Loans and receivables with customers 543 528Equity securities and other variable-yield securities 7,749 6,441Debt securities 15,894 9,603Other assets 692 965trust Assets 24,877 17,543Deposits from banks 8,890 4,862Deposits from customers 15,872 12,581Debt securities in issue – –Other liabilities 115 99trust liAbilities 24,877 17,543

Transferred financial assets that are derecognised in their entiretySecuritisationsWhen the Group transfers substantially all the risks and rewards of ownership of financial assets to an unconsolidated SPE and retains a relatively small interest in the SPE or a servicing arrangement in respect of the transferred financial assets, the transferred assets are derecognised in their entirety. If the financial assets are derecognised in their entirety, then the interest received as part of the transfer and the servicing arrangement represent continuing involvement with those assets according to IFRS 7.




F.14 – Consolidated capital resources and regulatory capital requirements

Capital managementBank Austria, as part of UniCredit Group, places a high priority on capital management and capital allocation. The Bank’s capital management strategy is characterised by a strong commitment to maintaining a sound capital base; the strategy is based on a risk-oriented and earnings-oriented allocation of capital to achieve the highest possible shareholder value.

From 2013 Bank Austria’s internal capital is set at a level that will cover adverse events with a probability of 99.93% (confidence interval).

At the same time regulatory capital ratio targets (Core Tier 1) are set so as to be consistent with regulatory expectations and the Risk Appetite Framework defined by the bank.

Capital management activities form a major part of the Group’s planning and budgeting process as well as within ICAAP/Pillar 2 processes. Bank Austria is regularly monitoring capital evolution and regulatory trends at country level and at Group level.

Capital management activities comprise:

• planningandbudgetingprocesses:– proposals as to risk propensity, development and capitalisation objectives– analysis of RWA development and changes in the regulatory framework– proposals for the financial plan and an appropriate dividend policy

• monitoringprocesses– analysis and monitoring of limits for Pillar 1 and Pillar 2– analysis and monitoring of the capital ratios of the Bank Austria Group as well as at single entity level

Capital is managed dynamically which means that Bank Austria prepares the financial plan, monitors capital ratios for regulatory purposes on an ongoing basis and anticipates the appropriate steps required to achieve the goals set.

F.13 – Guarantees given and commitments (€ million)

31 Dec. 2013 31 Dec. 2012

Financial guarantees given to: 4,534 5,549Banks 502 743Customers 4,032 4,807

commercial guarantees given to: 16,433 15,524Banks 1,610 1,174Customers 14,824 14,350

other irrevocable commitments to disburse funds 15,597 15,718Banks 1,162 152

Usage certain 1,112 103Usage uncertain 50 49

Customers 14,435 15,566Usage certain 5,366 6,248Usage uncertain 9,069 9,318

underlying obligations for credit derivatives: sales of protection – –Assets used to guarantee others’ obligations – 238other commitments 4,922 2,936totAl 41,487 39,965


Capital requirementsThe capital requirements pursuant to Section 22 of the Austrian Banking Act comprise requirements resulting from credit risk, all types of risk in the trading book, commodities risk and foreign-exchange risk outside the trading book and from operational risk.

Regulatory developments – Basel 3 /CRD IV, CRRThe final Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD IV) for the implementation of Basel 3 in the European Union were published in the EU Official Journal on 27 June 2013. The new legal framework replaces Capital Requirements Directives 2006/48/EC and 2006/49/EC and came into force in Austria on 1 January 2014.

After the framework is fully implemented, Basel 3 will consist of stricter requirements for regulatory capital with a minimum of Common Equity Tier 1 Capital of 4.5% of RWA, Total Tier 1 Capital of 6% and Total Capital of 8%. In addition, all banks will be required to hold a capital conservation buffer consisting of Common Equity Tier 1 Capital of 2.5% on top of the new minimum requirements. This will lead to an effective total requirement of 7% Common Equity Tier 1 Capital, 8.5% Tier 1 Capital and 10.5% Total Capital.

Furthermore, Member States can set an additional buffer requirement to dampen excess lending growth (counter-cyclical buffer up to 2.5%). In addition, systemic risk buffers (up to 3% in 2014, as from 2015 without limitation) and capital surcharges for systemically important banks (0–3.5%) can be set by the authorities. Where an authority imposes the systemic risk buffer and the systemic bank surcharge is applicable, the higher of the two should apply.

With the steady improvement in its capital ratios in 2013, Bank Austria has a strong capital base to meet the new capital adequacy requirements (Basel 3).

As part of the Joint Risk Assessment and Decision (“JRAD”) process, the bank-specific minimum total capital ratio is currently being discussed. The JRAD process has not yet been completed.



F.15 – Events after the reporting periodOn 23 January 2014 the Mariahilfer Straße 70 property in Vienna (formerly owned by the subsidiary RIGEL Immobilien GmbH) was sold.

On 19 February 2014, UniCredit Bank Austria AG sold its stake in Mezzanin Finanzierungs AG as well as the premises of its headquarters in Schottengasse 6–8, Vienna.

All circumstances had already been classified as held for sale in the statement of financial position at 31 December 2013. Furthermore, in the course of the restructuring of the leasing business, two Russian subsidiaries of UniCredit Leasing S. p. A. were taken over by ZAO UniCredit Bank, Moscow, on 13 February 2014.

The political crisis in Ukraine came to a head in February 2014, leading to political upheaval which has recently assumed geopolitical dimensions in the region. The crisis in Ukraine is currently the major risk factor for CEE. A further escalation could also lead to disturbances in Ukraine’s neighbouring countries, especially if the already high political and economic risks continue to increase. However, as economic trends in large neighbouring countries have stabilised, repercussions should remain limited.

Net capital resources of the Bank Austria group of credit institutions (€ million)

31 Dec. 2013 31 Dec. 2012

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

Reserves and minority interests 13,243 13,709

Intangible assets –419 –509

Deductions from Tier 1 capital (in particular 50% deduction pursuant to Section 23 (13) 3 to 4d of the Austrian Banking Act) –787 –804

core capital (tier 1) 13,718 14,078Net subordinated liabilities 2,510 2,494

Revaluation reserves and undisclosed reserves 239 308

IRB excess in risk provision – –

Deductions from Tier 2 (50% deduction pursuant to Section 23 (13) 3 to 4d) –678 –752

supplementary capital resources (tier 2) 2,071 2,050Deductions from Tier 1 and Tier 2 (deduction pursuant to Section 23 (13) 4a) – –137

net capital resources (excl. tier 3) 15,789 15,991Tier 3 (re-assigned subordinated capital) 169 204

net cAPitAl resources (incl. tier 3) 15,958 16,194

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

31 Dec. 2013 31 Dec. 2012

capital requirements ofa) Credit risk pursuant to standardised approach 4,598 5,397

b) Credit risk pursuant to internal ratings-based (IRB) approach 3,690 3,793

Credit risk 8,288 9,190

Operational risk 1,024 1,012

Position risk – debt instruments, equities, foreign currencies and commodities 169 204

Settlement risk – –

cAPitAl reQuirement 9,481 10,405Total RWA 118,510 130,067

Capital ratios31 Dec. 2013 31 Dec. 2012

Tier 1 capital ratio, based on all risks 11.6% 10.8%Total capital ratio, based on all risks 1) 13.5% 12.5%Tier 1 capital ratio, based on credit risk 13.2% 12.3%Total capital ratio, based on credit risk 2) 14.3% 13.0%

1) Net capital resources (incl. Tier 3) as a percentage of the risk-weighted assessment basis for all risks2) Total capital resources less requirement for trading book, commodities risk, exchange rate risk and operational risk as a percentage of the risk-weighted assessment basis for credit risk



Concluding Remarks of the Management Board

of UniCredit Bank Austria AG

The Management Board of UniCredit Bank Austria AG has prepared the consolidated financial statements for the financial year begin-ning on 1 January 2013 and ending on 31 December 2013 in accordance with International Financial Reporting Standards (IFRSs) published by the International Accounting Standards Board as adopted by the European Union. The management report of the Group was prepared in accordance with the Austrian Business Code and is consistent with the consolidated financial statements.

The consolidated financial statements and the management report of the Group contain all required disclosures; in particular, events of special significance which occurred after the end of the financial year, and other major circumstances that are significant for the future development of the Group have been appropriately explained.








Report of the Auditors

Auditors’ report *)

Report on the consolidated financial statementsThe Auditing Board of the Austrian Savings Bank Auditing Association and Deloitte Audit Wirtschaftsprüfungs GmbH have audited the accompanying consolidated financial statements of UniCredit Bank Austria AG, Vienna, for the financial year from 1 January 2013 to 31 December 2013. These consolidated financial statements comprise the statement of financial position at 31 December 2013, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended 31 December 2013, and the notes to the consolidated financial statements.

Management’s responsibility for theconsolidated financial statements andfor the consolidated accountingUniCredit Bank Austria AG’s management is responsible for the con-solidated accounting as well as the preparation and fair presentation of these consolidated financial statements in accordance with Inter-national Financial Reporting Standards as adopted by the EU and in accordance with the additional requirements of Section 59a of the Austrian Banking Act. This responsibility includes: designing, imple-menting and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility and description ofthe type and scope of the statutory audit The responsibility of the Austrian Savings Bank Auditing Association and of Deloitte Audit Wirtschaftsprüfungs GmbH is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with laws, regulations

and principles governing an audit of financial statements which are applicable in Austria and in accordance with International Stand-ards on Auditing (ISAs), issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence 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 presen-tation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionOur audit did not give rise to any objections. Based on the results of our audit in our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the group as of 31 December 2013, and its financial performance and its cash flows for the financial year from 1 January 2013 to 31 December 2013 in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU.

This report has been translated from German to English for referencing purposes only. Please refer to the official legally binding version as written and signed in German. Only the German version is definitive.


Statement on the consolidated management reportLaws and regulations require us to perform audit procedures to determine whether the consolidated management report is consistent with the consolidated financial statements and whether the other disclosures made in the consolidated management report are not misleading to the group’s position. The audit report must also include a statement as to whether the consolidated management report is consistent with the consolidated financial statements and if the disclosures pursuant to section 243a of the Austrian Business Code are appropriate.

In our opinion, the consolidated management report for the group is consistent with the consolidated financial statements. The disclosures pursuant to section 243a Austrian Business Code are appropriate.

*) The report (in the German language, or translations into another language, including shortened or amended versions) may not be made public or used by third parties, when reference is made in part or in whole to the auditors’ report, without the express written consent of the auditors.

This report has been translated from German to English for referencing purposes only. Please refer to the official legally binding version as written and signed in German. Only the German version is definitive.

Consolidated financial statements for 2013UniCredit Bank Austria AG, Vienna


Austrian Savings Bank Auditing Association

Auditing Board

Gerhard Margetich Christian Spitzer Certified Accountant Auditor

Deloitte Audit Wirtschaftsprüfungs GmbH

Peter Bitzyk Gottfried Spitzer Certified Accountant Certified Accountant



Cooperation between the Supervisory Board and the Management Board was good and effective in the 2013 financial year. In this context, the Supervisory Board performed its duties as defined by law and in the Articles of Association and the rules of procedure, with due regard to the Austrian Code of Corporate Governance. The Supervisory Board held five meetings and passed six resolutions by written circular vote. For the efficient performance of its duties, the Supervisory Board created five committees from among its members; four of these are permanent committees and one is for a current project. The Supervisory Board was directly involved in decisions on issues which are of fundamental importance to the bank, and it passed resolutions on matters within its competence after in-depth analyses. In addition to periodic meetings, the Chair-man of the Management Board and the Chairman of the Supervisory Board discussed major issues and current business developments in regular talks.

Focus of the Supervisory Board’s activityIn the reporting period, the Management Board regularly provided information to the Supervisory Board, in writing and orally and in a timely and comprehensive manner, on business policy, financial developments, results, and on risk management, liquidity manage-ment and capital management. The Supervisory Board in this way performed its advisory and supervisory functions. Besides regularly concerning itself with the financial position and results, the Super-visory Board conducted intense, ongoing discussions on reports relating to Internal Audit activities and the EuroSIG project and the relevant findings of Internal Audit, and on findings and measures in connection with the review of credit risk performed by Oesterrei-chische Nationalbank, Austria’s central bank, pursuant to Section 70 of the Austrian Banking Act. The Supervisory Board gave special attention to the GOLD project and the related new approach adopted by the Commercial Banking Division, Corporate & Investment Banking Division, Private Banking Division and CEO Support Services, and in this connection it gave approval for adjustments to the distribution of responsibilities of Management Board members.

In order to comply with legal requirements in connection with Basel III, the rules of procedure were adjusted as of 1 January 2014 for the Supervisory Board, the Strategy and Nominations Committee, the Credit/Risk Committee, the Remuneration Committee and the Management Board. In this context the Supervisory Board members were informed of the new Governance rules for members of a super-visory board. In addition, the Fit & Proper Policy – comprising mini-mum requirement rules for members of the Supervisory Board – was approved.

While completing a separate training programme on the prevention of money laundering activities, the Supervisory Board deepened its knowledge in this area and focused on the anti-corruption report. The Supervisory Board issued an updated statement of compliance with the Austrian Code of Corporate Governance. The self-evalua-tion by the Supervisory Board was an issue discussed at three meetings, with an efficiency test on the basis of a detailed ques-tionnaire carried out for 2012 and approved for 2013. To the extent that the results of the self-evaluation in 2012 indicated a need for changes, they were taken into account for the Supervisory Board’s future activities.

In regard to companies in which the bank has an equity interest, there were a number of developments in the 2013 financial year. These included the return of the banking licence of AS “UniCredit Bank”, Latvia, and the acquisition of SIA “UniCredit Leasing” under the leasing reorganisation project; the acquisition of shares in UniCredit Bulbank AD; the capital increase at FactorBank Aktien-gesellschaft; the increase in the capital facility of UniCredit Turn-Around Management GmbH; and the acquisition of a company for property development and property held in connection with the planned relocation of the bank’s headquarters. Further develop-ments were the sale of EK Mittelstandsfinanzierungs AG, the conclusion of a joint venture with RCI and Nissan for car finance in Russia, and the merger of the UniCredit banks in the Czech Republic and Slovakia.

Besides giving attention to all measures relating to the separate financial statements and the consolidated financial statements and the audit reports, the Supervisory Board took decisions in respect of the Bank Austria Group’s funding plan and the ceiling applicable for 2013, and its extension, as well as the appointment of persons authorised to represent and act on behalf of the bank. The subject of a number of reports were the performance of the company “Special Assets Holding for Repossession of Assets and Equities”, the status of the Ramius exposures and the closing of the sale of JSC ATF Bank, Kazakhstan. Finally, the activities of the Supervisory Board also included giving advance approval to loans to members of the Supervisory Board and of the Management Board as well as other related parties as defined in Section 28 of the Austrian Bank-ing Act, and discussing the details of major legal issues.

The Supervisory Board was constantly provided with information, through written and oral presentations, on the main issues dealt with by the Supervisory Board Committees and on the result of their meetings.

Report of the Supervisory Board for 2013


Committee activitiesThe Credit/Risk Committee held five meetings and passed three resolutions by written circular vote. All loans approved under the Management Board’s approval authority were brought to the Credit/Risk Committee’s notice and the Committee passed resolu-tions on loan applications requiring its approval. Close attention was paid to the presentation of credit risk, market risk, liquidity risk and reputation risk as part of periodic reporting with regard to Austria and CEE. These were supplemented by details of the credit portfolio structure and risk policy principles, as well as of opera-tional risk and ICAAP.

Besides capital management and regulatory capital requirements, extensive discussions in 2013 focused on risk strategy, risk appe-tite, funding and liquidity management.

The Committee, on an ongoing basis, dealt with portfolio reports classified by industry and region, risk reports on significant specific exposures, the risk situation in Turkey and, on specific occasions, with large exposures pursuant to Section 27 of the Austrian Bank-ing Act, the recovery and resolution plan, and the changes made by the Basel Committee with regard to the calculation of the liquidity coverage ratio.

The Audit Committee held four meetings, which were also regularly attended by representatives of the auditors. The Committee closely discussed the separate financial statements and the consolidated financial statements as well as the audit reports, including the report on the effectiveness of risk management, and provided the Supervisory Board with information on these topics. The manage-ment letter of the auditors and the status report on measures taken in this connection were subject to detailed analysis. The Audit Committee also dealt with the proposal concerning the election of the auditors for the 2014 financial year, and with the engagement letter of the auditors. The activities of the Audit Com-mittee also focused on the final EuroSIG report and accompanying findings of Internal Audit, on the risk management report and the complaint management report. In addition, the Audit Committee examined the Corporate Governance Report for 2012, the external Corporate Governance Report on the evaluation of compliance with the provisions of the Austrian Code of Corporate Governance in the 2012 financial year, and the Governance Rule Book reports. Inter-nal Audit documented the effectiveness of the internal control and audit systems in its report for 2012 and subsequent quarterly reports, and presented the Internal Audit Bank Austria Group 2013

audit plan for approval. Besides the 2012 annual report, extensive compliance-related information focused on quarterly reports on the results of compliance assessment mapping, status information on anti-money laundering activities, compliance in securities business, regulatory issues and the 2013 Compliance Activities Plan. Activities of the Audit Committee also included the monitoring of the financial reporting process with due regard to the “262 Savings Law” together with the relevant considerations for quality assurance measures.

The Strategy and Nominations Committee held one meeting in which it dealt with the extension of the terms of Management Board members.

The Remuneration Committee held one meeting and passed one res-olution by written circular vote. Its discussions focused on the 2013 Group Remuneration Policy and on general information regarding the implementation of CRD III and the resolutions required in this context.

The Committee charged with the sale of the Schottengasse building passed one resolution by written circular vote and formalised the sale of the building housing the bank’s headquarters by way of the sale of an equity interest.

Supervisory Board and Management Board changesAlessandro Decio and Alfredo Meocci were elected to the Supervisory Board at the Extraordinary General Meeting on 14 February 2013 following the resignation of Karl Guha on 31 December 2012 and of Candido Fois with effect from 15 January 2013. Alessandro Decio was elected Chairman of the Credit/Risk Committee and member of the Audit Committee at the Supervisory Board meeting on 11 March 2013.

All previously elected members of the Supervisory Board with the exception of Jean Pierre Mustier were re-elected to the Supervisory Board for the maximum term permitted by the Articles of Association at the Annual General Meeting on 16 May 2013. Olivier Nessime Khayat was elected to the Supervisory Board for the first time and, by written circular vote of the Supervisory Board, to member of the Audit Committee with effect from 3 June 2013; he replaced Roberto Nicastro. With the same resolution Erich Hampel was appointed Chairman of the Remuneration Committee and Paolo Fiorentino Deputy Chairman, and Roberto Nicastro was appointed member of the same committee.



Report of the Supervisory Board for 2013 (CONTINUED)

Josef Reichl left the Supervisory Board with effect from 12 March 2013 and was replaced by Johannes Koller with effect from 13 March 2013 in accordance with the decision taken by the Employees’ Council.

The Supervisory Board thanks the members who have left the Board for their valuable contribution to its activities.

Helmut Bernkopf commenced his functions as member of the Management Board on 1 January 2013.

The term of Gianni Franco Papa, Deputy Chairman of the Management Board, as a member of the Management Board was extended until 21 January 2017, and the term of Francesco Giordano as a member of the Management Board was extended until 31 January 2017.

Details of the composition of the Supervisory Board and the Super-visory Board Committees and of the Management Board in the past financial year are given in the “Supervisory Board and Management Board of UniCredit Bank Austria AG” section of the Annual Report.

Audit of the separate financial statementsand consolidated financial statementsThe accounting records, the 2013 separate financial statements and the management report were audited by the Auditing Board of the Austrian Savings Bank Auditing Association and by Deloitte Audit Wirtschaftsprüfungs GmbH. As the audit did not give rise to any objections and the legal requirements were fully complied with, the auditors’ report was expressed without qualification.

The Supervisory Board endorsed the findings of the audit, agreed with the separate financial statements and management report, including the proposal for the appropriation of profits, presented by the Man-agement Board, and approved the 2013 separate financial state-ments, which were thereby adopted pursuant to Section 96 (4) of the Austrian Joint Stock Companies Act.

The compliance review of the Corporate Governance Report pursuant to Section 243b of the Austrian Business Code was performed by Univ. Prof. DDr. Waldemar Jud Corporate Governance Forschung CGF GmbH and has not given rise to any major objections in its final findings.

The 2013 consolidated financial statements were audited by the Auditing Board of the Austrian Savings Bank Auditing Association and by Deloitte Audit Wirtschaftsprüfungs GmbH for consistency with International Financial Reporting Standards (IFRSs) published by the International Accounting Standards Board as adopted by the European Union, and the management report of the Group was audited for consistency with the Austrian Business 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 posi-tion of the Group as at 31 December 2013, and of the results of the Group’s operations and its cash flows for the financial year beginning on 1 January 2013 and ending on 31 December 2013, in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The auditors certified that the management report of the Group was consistent with the consolidated financial statements, and that the legal requirements for exemption from the obligation to prepare also separate consolidated financial statements pursuant to Aus-trian law were met, and they expressed their unqualified opinion.

The Supervisory Board has endorsed the findings of the audit.

A word of thanksThe Supervisory Board expresses its thanks and appreciation to the Management Board, the Employees’ Council, management and employees in Austria and all other countries for their work in 2013. With their strong dedication they contributed to a continuation of the bank’s positive development in a challenging environment.


The Supervisory Board

Erich HampelChairman of the Supervisory Board


Corporate Governance

Corporate Governance Report for the 2013financial year of UniCredit Bank Austria AG 236

Statement by Management 243

Supervisory Board and Management Boardof UniCredit Bank Austria AG 244



Preface:The Austrian Code of Corporate Governance (ACCG) is the standard for good corporate management and corporate control in the Austrian capital market.

After enactment of the Austrian Statute Amending Business Law [Unternehmensrechtsänderungsgesetz] the ACCG was given even more importance, as listed joint-stock companies [Aktiengesellschaf-ten] have been put under a statutory obligation to prepare a Corpo-rate Governance Report.

The Code itself primarily applies to listed Austrian joint-stock compa-nies. The Preamble to the ACCG recommends that also joint-stock companies that are not listed on a stock exchange follow the rules of this Code to the extent that they are applicable to them.

UniCredit Bank Austria AG is an Austrian joint-stock company having its registered office in Vienna; since 21 May 2008 its shares have not been listed on the stock exchange anymore. In line with the rec-ommendation contained in the Preamble to the ACCG UniCredit Bank Austria AG will continue to orient itself by the rules of the ACCG as amended from time to time, which can be found on the website of the Austrian Working Group on Corporate Governance at www.corpo-rate-governance.at.

This Corporate Governance Report of UniCredit Bank Austria AG for the 2013 financial year was prepared by using the Opinion on Corpo-rate Governance Reports published by the Austrian Financial Report-ing and Auditing Committee according to Section 243b of the Aus-trian Business Code [Unternehmensgesetzbuch/UGB] and Annex 2 of the Austrian Code of Corporate Governance 2012 pursuant to the compliance statement. Data as at 31 December 2013.

A. UniCredit Bank Austria AG departed from the following C-Rules of the ACCG (July 2012) in the 2012 business year (Explain):The company applies the Austrian Code of Corporate Governance as amended from time to time. Deviations exist with respect to the fol-lowing C-Rules (comply or explain):

Rules 4 to 5 – Publication requirements with regard to the share-holders’ meeting: since its delisting from the stock exchange the company is a closely held corporation. Invitations and documents are sent directly to the shareholders. It is intended to simplify the holding of shareholders’ meetings.

Rules 29, 31 and 60 – Publication of the emoluments of the management board regarding each member: due to the closely held structure the emoluments are not published.

Rule 45 – Non-competition clause supervisory board: Members of the supervisory board of UniCredit Bank Austria AG can assume functions on the supervisory boards of competing companies if the company holds a stake in the competitor.

Rule 51 – Publication of the emoluments of the supervisory board regarding each member: due to the closely held structure the emolu-ments are not published.

Rule 52a – Limitation of the number of supervisory board mem-bers to ten members: due to an agreement between our majority shareholder and the holders of registered shares our supervisory board will continue to consist of eleven members who are elected by the shareholders’ meeting.

Rule 66 – Preparation of quarterly financial statements in accord-ance with IAS 34: UniCredit Bank Austria AG is not required to pre-pare quarterly financial statements as at 31 March and 30 Septem-ber in accordance with IAS 34. However, with a view to maintaining a high level of transparency in the market, UniCredit Bank Austria AG will continue to publish condensed interim reports as at the above dates. The income statement and the statement of financial position contained in the condensed interim reports are prepared in accord-ance with International Financial Reporting Standards (IFRS) comple-mented by explanatory information.

Rule 74 – Publication of the financial calendar at least two months before the start of the new business year: The necessary co-ordination with the parent company (UniCredit S.p.A) may result in UniCredit Bank Austria AG not being able to publish the financial cal-endar at least two months before the start of the new business year.

for the 2013 financial year of UniCredit Bank Austria AG

Corporate Governance Report

Disclaimer: The English translation of UniCredit Bank Austria AG’s Corporate Governance Report serves information purposes only. The exclusively binding version shall be the German text.


B. Additional information according to Section243b of the Austrian Business Code (“UGB”):

1. Information regarding the Management Board and its working procedures:Supervisory board mandates:Supervisory board mandates or comparable functions of Management Board members in other Austrian and foreign companies which are not included in the consolidated financial statements (C-Rule 16):

Willibald Cernko:UniCredit Leasing (Austria) GmbH, Chairman Supervisory BoardUniCredit Business Integrated Solutions Austria GmbH, Chairman Supervisory BoardUniCredit Business Integrated Solutions SCpA, Member Board of DirectorsCEESEG AG, Chairman Supervisory BoardNotartreuhandbank AG, Deputy Chairman Supervisory BoardWiener Börse AG, Chairman Supervisory Board

Gianni Franco Papa: –

Helmut Bernkopf:BWA Beteiligungs- und Verwaltungs-Aktiengesellschaft, Member Supervisory BoardCA Immobilien Anlagen Aktiengesellschaft, Deputy Chairman Supervisory BoardOesterreichische Kontrollbank Aktiengesellschaft, Member Supervisory BoardBausparkasse Wüstenrot Aktiengesellschaft, Member Supervisory BoardLenzing Aktiengesellschaft, Member Supervisory Board

Francesco Giordano:–

Dieter Hengl:Oesterreichische Kontrollbank AG, Member Supervisory BoardWien Mitte Immobilien GmbH, Chairman Supervisory Board

Jürgen Kullnigg:–

Doris Tomanek:UniCredit Business Integrated Solutions Austria GmbH, Member Supervisory BoardBank Pekao SA, Member Supervisory Board

Robert Zadrazil: Oesterreichische Kontrollbank AG, Member Supervisory Board

The Management Board’s working procedures:The Management Board has sole responsibility for managing the com-pany in the best interests of the company. The Management Board runs the business on the basis of the duties and rights conferred by law, the Articles of Association and the internal rules of procedure. The Management Board meets every week and reports regularly to the Supervisory Board. The Management Board’s distribution of responsibilities:For the distribution of responsibilities within the Management Board see page 244. For further information on the Management Board see page 244.

2. Information regarding the Supervisory Board and its working procedures: Supervisory Board mandates:Further supervisory board mandates or similar functions of Supervisory Board members in Austrian or foreign listed companies (C-Rule 58):

Erich Hampel:Österreichische Post Aktiengesellschaft, Member Supervisory BoardZagrebačka banka dd, Chairman Supervisory Board

Paolo Fiorentino:AS Roma, Member Board of DirectorsPirelli & C. SpA, Member Board of Directors

Alessandro Decio:Mediobanca SpA, Member Board of DirectorsBorsa Italiana SpA, Member Board of DirectorsBank Pekao SA, Member Supervisory Board

Roberto Nicastro:Bank Pekao SA, Deputy Chairman Supervisory Board

Franz Rauch:Austria Email Aktiengesellschaft, Deputy Chairman Supervisory Board

Karl Samstag:Allgemeine Baugesellschaft-A. Porr Aktiengesellschaft, Member Supervisory BoardBank für Tirol und Vorarlberg Aktiengesellschaft, Member Supervisory BoardBKS Bank AG, Member Supervisory BoardOberbank AG, Member Supervisory Board Schoeller-Bleckmann Oilfield Equipment Aktiengesellschaft, Member Supervisory Board

For further information on the Supervisory Board see page 244.



Corporate Governance Report (CONTINUED)

In the 2013 business year none of the members of the Supervisory Board failed to personally attend more than half of the meetings of the Supervisory Board.

Information on criteria for the independence of members of the Supervisory Board:A member of the Supervisory Board shall be deemed independent if said member does not have any business or personal relations with the company or its management board that constitute a material con-flict of interests and are therefore suited to influence the behaviour of the member. Additional criteria for the independence of members of the Supervi-sory Board are laid down on the basis of the guidelines for the assessment of independence contained in Annex 1 to the ACCG: A member of the Supervisory Board shall not have served as a member of the Management Board or as a management-level staff member of the Company or one of its subsidiaries in the past five years. A member of the Supervisory Board shall not maintain or have maintained in the past year any business relations with the Company or one of its subsidiaries to an extent of significance for said member of the Supervisory Board. This shall also apply to business relations with companies in which said member of the Supervisory Board has a considerable economic interest, but not for exercising functions in the bodies of the group. The approval of individual transactions by the Supervisory Board pursuant to L Rule 48 of the ACCG does not auto-matically mean that the person is qualified as not independent. A member of the Supervisory Board shall not have acted as an auditor of the Company or have owned a share in the auditing com-pany or have worked there as an employee in the past three years. A member of the Supervisory Board shall not be a member of the management board of another company in which a member of the Management Board of the Company is a member of the supervisory board. A member of the Supervisory Board may not remain on the Super-visory Board for more than 15 years. This shall not apply to members of the Supervisory Board who are shareholders with a direct invest-ment or who represent the interests of such a shareholder. A member of the Supervisory Board shall not be a closely related family member (direct offspring, spouses, life partners, parents, uncles, aunts, brothers, sisters, nieces, nephews) of a member of the Management Board or of persons who hold one of the aforementioned positions.

Of the elected members of the Supervisory Board, Erich Hampel, a former Chairman of the Management Board of UniCredit Bank Austria AG, does not meet the independence criteria.

Information as to which members of the Supervisory Board fulfil the criteria in C-Rule 54: C-Rule 54 is not applicable for lack of free float.

Number and kind of the Supervisory Board’s committees:The Supervisory Board establishes the following permanent four committees:Credit-/Risk CommitteeAudit CommitteeRemuneration CommitteeStrategic & Nomination CommitteeAdditional in the 2013 business year: Committee charged with the sale of the Schottengasse building

Number of meetings held by the Supervisory Board, reports on its operation and its activities:In 2013 the Supervisory Board held five meetings, in which it per-formed its duties as defined by the law and in the Articles of Associa-tion with due regard to the ACCG. In six cases, resolutions of the Supervisory Board were passed by written circular vote. The Supervisory Board advises and supervises the bank’s Manage-ment Board on an ongoing basis. In this context the Management Board regularly provided information to the Supervisory Board, in writ-ing and orally, on all major developments and business transactions on a timely basis and in a comprehensive manner. The Supervisory Board was involved in all competence-relevant issues and made its decisions, where required, after thorough deliberation and examination. The Supervisory Board gives further information about its activities in its report to the General Meeting.

Number of meetings held by the Committees of the Supervisory Board, their decision-making power and report on their activities:The Credit-/Risk Committee of the Supervisory Board is responsible for approving loans above a specified amount and for overseeing the com-pany’s risk position. As part of its responsibility for overseeing risk management, the Credit-/Risk Committee discusses the structure of the loan portfolio and principles of risk policy, and reports to the Supervisory Board. The Credit-/Risk Committee is authorised to decide on urgent business cases. The Credit-/Risk Committee dealt with large exposures pursuant to Section 27 of the Austrian Banking Act and especially loans requiring its approval. The Credit-/Risk Committee of the Supervisory Board held five meetings and passed three resolutions by written circular vote.

The Audit Committee is responsible for the audit and the preparation of the adoption of the financial statements and consolidated financial statements, the proposal for the appropriation of profits and the man-agement report (of the Group) and for matters related to the auditors. Since 2008 the Audit Committee has performed additional tasks, namely monitoring the financial reporting process, the effectiveness of the internal control system, the internal audit system and the risk man-agement system of the company as well as monitoring the audit of financial statements and the audit of consolidated financial statements.


The Audit Committee audits the Corporate Governance Report and deals with the management letter and the report on the effectiveness of risk management. The Audit Committee held four meetings.

The Strategic & Nomination 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 Strate-gic & Nomination Committee also submits proposals to the Supervi-sory Board for appointments to the Management Board when posi-tions become vacant and it deals with issues of successor planning. The Strategic & Nomination Committee held one meeting.

The Remuneration Committee held one meeting and passed one resolu-tion by written circular vote. The Remuneration Committee focused on all matters relating to the relationship between the company and Man-agement Board members, especially on matters relating to the compen-sation of Management Board members and on the contents of employ-ment contracts with Management Board members. Since November 2011 the Remuneration Committee has been vested with new tasks due to the implementation of the Capital Requirements Directive (CRD III) in the Austrian Banking Act. Amongst those new tasks the Remuner-ation Committee monitors the remuneration policy, remuneration prac-tices and remuneration-related incentive schemes of the company and adopts the general principles of remuneration policy, and reviews them on a regular basis, and is responsible for their implementation. The Remuneration Committee adopted the Group Compensation Policy. In compliance with Rule 43 ACCG the chairman of the Remuneration Committee is the chairman of the Supervisory Board.

The Committee charged with the sale of the Schottengasse building passed one resolution by written circular vote and formalised the sale of the building housing the bank’s headquarters by way of the sale of an equity interest.

3. Disclosure of information regarding the remuneration of Management Board and Supervisory Board members (C-Rules 27, 27a, 28, 30, 31, 43 and 51 as well as R-Rule 28a):

Remuneration of the Management Board:The Supervisory Board has set up a Remuneration Committee pursu-ant to Section 39c of the Austrian Banking Act. Among other tasks, the Remuneration Committee reviews the remuneration of all mem-bers of the Management Board in relation to their tasks and perfor-mance. Therefore the Remuneration Committee assesses the tasks of each member of the Management Board, the situation of the company and standard market remuneration. Long-term remuneration incen-tives shall provide a basis for the company’s sustainable development.

The remuneration contains fixed and variable components. As in previous years, the remuneration of Management Board members is divided into fixed and performance-linked components in accord-ance with Rule 30 of the Austrian Code of Corporate Governance and published in the notes to the consolidated financial statements of UniCredit Bank Austria AG. The variable remuneration compo-nents are linked, above all, to sustainable, long-term and multi-year performance criteria; they include non-financial criteria and do not entice persons to take unreasonable risks.

Measurable performance criteria are set for the variable remunera-tion components: The performance-related component is linked to an “operational matrix” and a “sustainability matrix” which are indi-vidually specified on an annual basis within the framework of Uni-Credit Group. Evaluated are Group, company and individual perfor-mance in both absolute and relative terms in relation 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 performance of UniCredit Group.

UniCredit Group has a Group Incentive Compensation System which fulfils the regulatory requirements and has been imple-mented in UniCredit Bank Austria AG since 1 January 2011. The remuneration mix is set systematically and monitored against the market. Variable remuneration is capped with a maximum limit ex-ante according to incentive schemes. Precautions are taken to ensure that the company can reclaim variable remuneration com-ponents if it becomes clear that these were paid out on the basis of obviously false data.

In compliance with CRD III and the Austrian Banking Act, variable remuneration is paid on a deferred basis. Reference is made to the fact that the payout of the respective deferred variable remunera-tion depends on UniCredit Group’s performance (in case of a nega-tive result).

Contracts concluded with Management Board members (new con-tracts or renewals) provide that in the case of premature termina-tion of a contract with a Management Board member without a material breach, severance payments do not exceed more than two years annual pay and that not more than the remaining term of the employment contract is remunerated. In the case of premature ter-mination of a management contract for a material reason for which a Management Board member is responsible, no severance pay-ment is made. Any agreements reached on severance payments on the occasion of the premature termination of Management Board activities take into account the circumstances under which said Management Board member left the company as well as the eco-nomic situation of the company.



Corporate Governance Report (CONTINUED)

There are no stock option programmes for Management Board members since the 2012 financial year. The above-mentioned principles apply accordingly also in the case of new remuneration systems for senior management staff.

The amendment to the Austrian Banking Act implementing the pro-visions regarding the remuneration policy of the Capital Require-ments Directive (CRD III) entered into force on 1 January 2011. It implements a new framework for the remuneration policies and practices of banks. UniCredit Bank Austria AG adapted its remunera-tion policy to the new European legal situation and updates it on an ongoing basis.

For the term of the employment contract of a Management Board member, payments into a pension fund are made on the basis of a defined-contribution plan. In addition, cover is provided against disa-bility risk, also via a pension fund. There are severance payment arrangements based on the legal provisions applicable to the sever-ance payment scheme for employees. In the case of a public takeo-ver offer, there are no arrangements for the Management Board that deviate from the above.

The company bears the proportionate costs of a D&O insurance which UniCredit Group concluded for the Group companies.

Remuneration of the Supervisory Board:The compensation schedule for Supervisory Board members pro-vides that the Chairman of the Supervisory Board receives double, and the Deputy Chairman one and a half times, the compensation received by a Supervisory Board member. Members of the Credit-/Risk Committee and members of the Audit Committee receive addi-tional 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 state-ment of compliance with the ACCG the emoluments regarding each member of the Management Board and the Supervisory Board are not published.

Information to the General Meeting:In the course of the ordinary General Meeting on 16 May 2013, the Chairman of the Supervisory Board provided information on the principles of the remuneration system.

4. Report on the measures taken by the company to promote women on the Man-agement Board, on the Supervisory Board and in executive positions (Section 80 of the Austrian Joint-Stock Companies Act [Aktiengesetz /AktG] as laid down in Section 243b (2) (2) of the Austrian Business Code [Unternehmensgesetzbuch/UGB]:

As early as at the beginning of the 1990s UniCredit Bank Austria AG and its predecessor banks took women-specific measures. One of them was to create the position of a Women’s Officer, who is still active within UniCredit Bank Austria AG. Today, diversity management in UniCredit Bank Austria AG is located organisationally in Identity & Communications and thus forms an essential part of sustainability management. Since UniCredit Bank Austria AG was integrated in Uni-Credit Group the numerous efforts aiming at equal opportunities have been intensified and more measures for implementation of the equal-ity strategy have been taken.

In the course of an analysis project carried out at UniCredit in Austria, Germany and Italy in 2009, among other things, career barriers for women were identified by means of a number of qualitative interviews and focus groups. One major finding of the survey was that having a family-friendly environment in the company is a necessary basis for all women and, in particular, for ambitious and career-oriented female employees. This means that the numerous family-friendly activities carried out by UniCredit Bank Austria AG in the past were indispensa-ble and are still necessary today.

For example, UniCredit Bank Austria AG considers it very important to support employees who are on parental leave. Since 1993 special events, including provision of childcare services at those events, have been organised for employees on parental leave to make it easier for them to return to work. Those who return from parental leave are offered almost any part-time model; teleworking is also an option. Company kindergartens for a total of about 200 children are offered at two locations in Vienna and holiday childcare is provided during the entire summer holidays as well as during the semester and Easter holidays. A number of courses were offered at the bank’s Kaiserwas-ser sports facilities in 2013.

In the past UniCredit Bank Austria AG received many different awards for its special family-friendly measures. For example, in June 2010 the bank won the 3rd prize of the Kinderbetreuungspreis [Child Care Award] 2010 of the Federal Ministry of Economic Affairs, Family and Youth. In 2011 UniCredit Bank Austria AG participated in the “Taten statt Worte” [action speaks louder than words] competition and came in second out of 70 companies in the category of large firms for its women- and family-friendly policies.


In 2009 UniCredit Bank Austria AG decided to subject itself to an audit in connection with “Family and Work”. On 16 November 2009 UniCredit Bank Austria AG was awarded the basic certificate by the Ministry of Economic Affairs, Family and Youth. Interim reports must be submitted at regular intervals to document progress made and/or measures taken. A working group focuses on further developing “audit ideas and measures” at monthly meetings. The bank under-went a successful re-audit in 2012. The 2013 interim report was very favourable.

A very important step was taken by UniCredit Group in 2010 when the Group established the Global Job Model. Until then the Group had many different jobs and titles in all divisions and countries. In the meantime there is a standardised job catalogue of about 250 jobs and all employees know their position and the way in which they can pursue career opportunities. The defined goal of UniCredit Group is to considerably increase the share of women in jobs requir-ing higher qualifications in the next few years. To reach this goal, Doris Tomanek, female Management Board member of UniCredit Bank Austria AG with responsibility for human resources, was man-dated with a group-wide “Gender Diversity Project” in autumn 2011. The project, renamed “Gender Balance Programme” in the mean-time, focuses on gender diversity and the advancement of women. The programme underlines Bank Austria’s und UniCredit’s strong commitment to efforts in these areas. The “business case” for diver-sity and equal opportunities is recognised across the Group. This leads to specific measures aimed at bringing about real changes that can be perceived by all those involved rather than being merely symbolic. Appointing women to managerial positions is a key objec-tive under the programme. In 2013 the “Global Policy on Gender Equality” was implemented on a group-wide basis.

In 2009, the European Works Council and Human Resources man-agers created an essential base for equality of opportunity. They prepared and signed a common “Declaration of equal opportunities and non-discrimination”. The Group is working to implement various measures in different countries on the basis of that Declaration.

In order to motivate female employees to actively seize career opportunities and provide them with guidance on which way to take, the “Shaping my Future” seminar was implemented in a number of countries in 2012. The follow-up seminar was rolled out in 2013. For Austria, it should be noted that members of the women’s net-work, which comprises about 100 members, agreed to act as train-ers and to support women in their development.

It is important to emphasise that the percentage of women among talents defined in Austria has risen from 20% to around 50% within a few years. In some business areas the percentage of women among talents amounts to 80%. More than one-fifth of participants in the Executive Development Programme (EDP) are women.

UniCredit Group does not use a women’s quota; rather, efforts are being made to achieve a change of mindset and enhance awareness by showing managers the status quo and developments regarding the number of women whenever nominations and appointments are made. Both genders are represented in external hiring processes and internal appointment processes; this is reflected in the establishment of a shortlist which includes at least one candidate of each gender.

Another measure of UniCredit Bank Austria AG in 2010 was to make women “visible” also in the language used, with a view to creating awareness in the company by means of language and communica-tion. The corporate wording defined, and communicated to all employees, the way in which persons should communicate at Uni-Credit Bank Austria AG in a gender-sensitive way.

In spring 2011, the Vienna Economic Chamber ranked UniCredit Bank Austria AG first in the DiversCity competition. This shows that UniCredit Bank Austria AG is on the right track, takes gender diversity seriously and proves its diversity philosophy with deeds rather than words. Despite this remarkable award UniCredit Bank Austria AG is well aware that the goals have not yet been achieved in the various diversity dimensions and consequently also in respect of gender diversity as a focal area.

C. Report on external evaluation:The evaluation of adherence to the Austrian Code of Corporate Gov-ernance by UniCredit Bank Austria AG in the 2013 financial year was carried out by Univ. Prof. DDr. Waldemar Jud Corporate Governance Forschung CGF GmbH. The report on the external evaluation is avail-able at http:// ir.bankaustria.at g Corporate Governance.

The Management Board:

Willibald Cernko

Gianni Franco Papa Helmut Bernkopf

Francesco Giordano Dieter Hengl

Jürgen Kullnigg Doris Tomanek

Robert Zadrazil


Statement by Management

We state to the best of our knowledge that the consolidated finan-cial statements prepared in accordance with the applicable finan-cial reporting standards provide a true and fair view of the financial position and performance of the Group, and that in the manage-ment report of the Group the business trends including business

results and the position of the Group have been presented in such a way as to provide a true and fair view of the financial position and performance of the Group, and that the management report of the Group describes the material risks and uncertainties to which the Group is exposed.







Information regarding the Management Board

ChairmanWillibald Cernko, born 1956Chief Executive Officer (CEO)Member from 1 April 2003 until 31 December 2007 and Chairman from 1 October 2009, end of the current term of office: 30 September 2015

Deputy ChairmanGianni Franco Papa, born 1956CEE BankingMember and Deputy Chairman from 22 January 2011, end of the current term of office: 21 January 2017

MembersHelmut Bernkopf, born 1967Commercial BankingFrom 1 January 2013, end of the current term of office: 31 December 2015

Francesco Giordano, born 1966Chief Financial Officer (CFO)From 1 February 2011, end of the current term of office: 31 January 2017

Dieter Hengl, born 1964Corporate & Investment BankingFrom 1 August 2011, end of the current term of office: 31 July 2014 (term of office extended on 20 January 2014 until 31 July 2017)

Jürgen Kullnigg, born 1961Chief Risk Officer (CRO)From 1 November 2012, end of the current term of office: 31 October 2015

Doris Tomanek, born 1956Human Resources Austria & CEEFrom 7 May 2010, end of the current term of office: 6 May 2016

Robert Zadrazil, born 1970Private BankingFrom 1 October 2011, end of the current term of office: 30 September 2014 (term of office extended on 20 January 2014 until 30 September 2017)

Information regarding the Supervisory BoardThe term of office of elected members will end with the Annual General Meeting in 2018. The employees’ representatives are delegated to the Supervisory Board without a time limit.

ChairmanErich Hampel, born 1951Former Chairman of the Management Board of UniCredit Bank Austria AG (Member and Deputy Chairman from 1 October 2009 until 2 November 2011, Chairman from 2 November 2011)

Deputy ChairmanPaolo Fiorentino, born 1956Deputy General ManagerCOO Head of Global Banking Services Strategic Business Area UniCredit Group (from 4 May 2006, Chairman from 21 January 2011 until 2 November 2011, Deputy Chairman from 2 November 2011)

MembersAlessandro Decio, born 1966Group Chief Risk OfficerUniCredit Group(from 14 February 2013)

Candido Fois, born 1941Chairman UniCredit Credit Management Bank SpA(from 5 June 2009 until 15 January 2013)

Olivier Nessime Khayat, born 1963Deputy Head of Corporate and Investment BankingUniCredit Group (from 16 May 2013)

Alfredo Meocci, born 1953Board Member of Italian Public Contracts Supervision Authority(from 14 February 2013)

Jean Pierre Mustier, born 1961Deputy General ManagerHead of CIB DivisionUniCredit Group(from 20 April 2011 until 16 May 2013)

Corporate Governance | Supervisory Board and Management Board

of UniCredit Bank Austria AG

Supervisory Board and Management Board


Roberto Nicastro, born 1964Group General ManagerUniCredit Group (from 4 May 2006)

Vittorio Ogliengo, born 1958Head of CIB Italy and Head of CIB InternationalUniCredit Group (from 4 May 2006)

Franz Rauch, born 1940Former Managing Director Franz Rauch GmbH(from 17 March 2003)

Karl Samstag, born 1944Deputy Chairman of the Management Board Privatstiftung zur Verwaltung von Anteilsrechten (from 4 May 2006)

Wolfgang Sprißler, born 1945Former Spokesman of the Management Board (CEO) Bayerische Hypo- und Vereinsbank AG (now: UniCredit Bank AG)(from 19 March 2002)

Ernst Theimer, born 1947Chairman of the Board of Trustees Privatstiftung zur Verwaltung von Anteilsrechten (from 7 July 2010)

Delegated by the Employees’ CouncilWolfgang Heinzl, born 1953Chairman of the Employees’ Council(from 7 November 2000)

Adolf Lehner, born 1961First Deputy Chairman of the Employees’ Council (from 4 December 2000)

Johannes Koller, born 1964Fourth Deputy Chairman of the Employees’ Council(from 13 March 2013)

Emmerich Perl, born 1950Member of the Employees’ Council (from 20 April 2005)

Josef Reichl, born 1956Member of the Employees’ Council(from 25 October 2007 until 12 March 2013)

Robert Traunwieser, born 1955Member of the Employees’ Council(from 24 April 2009)

Barbara Wiedernig, born 1961 Third Deputy Chairman of the Employees’ Council(from 24 April 2009)

Representatives of the Supervisory AuthoritiesCommissionerHans-Georg KramerSecretary-General Federal Ministry of Finance

Deputy CommissionerUlrike Huemer Head of Municipal Department 6 of the City of Vienna

State Cover Fund CommissionerAlfred Katterl

Deputy State Cover Fund CommissionerChristian Wenth

Trustee pursuant to the Austrian Mortgage Bank ActBernhard Perner

Deputy Trustee pursuant to the Austrian Mortgage Bank Act Hannes Schuh


The Supervisory Board formed the following permanent committees:

Credit-/Risk Committee:Chairman: Alessandro Decio (Member and Chairman from 11 March 2013)

Deputy Chairman:Franz Rauch (Member from 25 January 2006, Deputy Chairman from 13 July 2006)

Members:Roberto Nicastro (from 13 July 2006)Vittorio Ogliengo (Chairman from 13 July 2006 until 21 January 2011, member from 21 January 2011)Wolfgang Sprißler (from 25 January 2006)

Delegated by the Employees’ Council:Wolfgang Heinzl (from 7 November 2000)Adolf Lehner (from 2 May 2006)Barbara Wiedernig (from 11 March 2011)

Audit Committee:Chairman: Wolfgang Sprißler (Member from 17 March 2003, Deputy Chairman from 13 July 2006 until 2 November 2011, Chairman from 2 November 2011)

Deputy Chairman:Erich Hampel (from 2 November 2011)

Members:Alessandro Decio (from 11 March 2013)Olivier Nessime Khayat (from 3 June 2013)Roberto Nicastro (from 13 July 2006 until 3 June 2013)Karl Samstag (Chairman from 31 July 2008 until 2 November 2011, member from 2 November 2011)

Delegated by the Employees’ Council:Wolfgang Heinzl (from 7 November 2000)Adolf Lehner (from 2 May 2006)Emmerich Perl (from 6 November 2011)

Remuneration Committee:Chairman:Erich Hampel (Deputy Chairman from 1 October 2009 until 3 June 2013, Chairman from 3 June 2013)

Deputy Chairman:Paolo Fiorentino (Chairman from 21 January 2011 until 3 June 2013, Deputy Chairman from 3 June 2013)

Members:Roberto Nicastro (from 3 June 2013)Jean Pierre Mustier (from 2 November 2011 until 16 May 2013)

Delegated by the Employees’ Council:Wolfgang Heinzl (from 6 November 2011)Adolf Lehner (from 6 November 2011)

Strategic & Nomination Committee:Chairman:Paolo Fiorentino (from 21 January 2011)

Deputy Chairman:Erich Hampel (Member from 4 November 2009 until 21 January 2011, Deputy Chairman from 21 January 2011)

Members: Roberto Nicastro (from 13 July 2006)Vittorio Ogliengo (from 13 July 2006)

Delegated by the Employees’ Council:Wolfgang Heinzl (from 7 November 2000)Adolf Lehner (from 2 May 2006)

Corporate Governance | Supervisory Board and Management Board

Supervisory Board and Management Board (CONTINUED)


Additional Information

Office Network 250Austria 250Central and Eastern Europe 252

CEE Network 254

Investor Relations 256



Austria

Office Network

Head Office1010 Vienna, Schottengasse 6–8Tel: (+43) 05 05 05-0Fax: (+43) 05 05 05-56155Internet: www.bankaustria.at e-mail: [email protected]

BranchesAmstetten*, Arnoldstein, Baden, Bludenz, Bregenz* (2), Bruck/Leitha, Bruck/Mur*, Brunn/Gebirge, Deutsch Wagram, Deutsch-kreutz, Dornbirn, Eisenstadt* (2), Feistritz /Drau, Feldbach*, Feldkirch, Fohnsdorf, Fulpmes, Gänserndorf, Gmünd* (2), Gmunden, Gols*, Graz* (12), Groß-Enzersdorf, Groß-Petersdorf, Guntramsdorf, Hall /Tirol, Hallein, Hard, Heidenreichstein, Hinterbrühl, Höchst, Hollabrunn, Horn, Imst, Innsbruck* (4), Judenburg*, Kapfenberg, Kitzbühel, Klagenfurt* (4), Klosterneuburg, Knittelfeld, Korneuburg, Krems*, Kufstein*, Leibnitz*, Leoben*, Lienz*, Liezen*, Linz* (7), Lustenau, Maria Enzersdorf, Mattersburg, Mauerbach, Mistelbach, Mödling* (2), Neu-dörfl, Neun kirchen, Neusiedl /See, Obdach, Oberpullendorf, Oberwart*, Perchtoldsdorf, Pöls, Pressbaum, Purkersdorf*, Rankweil, Reutte, Ried/ Innkreis, Riezlern, Salzburg* (6), Schladming*, Schrems, Schwaz, Schwechat, Sierning, Spittal /Drau*, St. Johann/Pongau, St. Pölten* (3), Stegersbach, Steyr* (3), Stockerau*, Strasshof, Straßwalchen, Telfs, Ternitz, Traun, Tulln, Velden, Villach* (8), Vöckla-bruck*, Völkermarkt*, Waidhofen/Ybbs, Weiz*, Wels*, Vienna* (110), Wiener Neu- dorf, Wiener Neustadt*, Wolfsberg, Wörgl, Zell /See.

*) With offices serving corporate customers.

Retail BankingRegional Offices Vienna City1010 Vienna, Schottengasse 6–8Tel: 05 05 05-53108

Vienna East1030 Vienna, Gärtnergasse 17Tel: 05 05 05-62300

Vienna West1120 Vienna, Schönbrunner Strasse 231Tel: 05 05 05-48804

Vienna North1210 Vienna, Schwaigergasse 30Tel: 05 05 05-48803

International Community1010 Vienna, Stephansplatz 2Tel: 05 05 05-53108

Customer Direct Service1120 Vienna, Schönbrunner Strasse 231Tel: 05 05 05-39525

Lower Austria3100 St. Pölten, Rathausplatz 3Tel: 05 05 05-47212

Burgenland7000 Eisenstadt, Pfarrgasse 28Tel: 05 05 05-47212

Styria8010 Graz, Herrengasse 15Tel: 05 05 05-31640

Carinthia9500 Villach, Hans-Gasser-Platz 8Tel: 05 05 05-31640

Upper Austria4020 Linz, Hauptplatz 27Tel: 05 05 05-96111

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 05-65100

Corporate Banking Regional OfficesVienna City 11010 Vienna, Schottengasse 6–8Tel: 05 05 05-56022

Vienna City 21020 Vienna, Lassallestrasse 5Tel: 05 05 05-53482

Lower Austria, Burgenland3100 St. Pölten, Rathausplatz 3Tel: 05 05 05-509332340 Mödling, Enzersdorfer Strasse 4Tel: 05 05 05-50933

Upper Austria4020 Linz, Hauptplatz 27Tel: 05 05 05-671044600 Wels, Dr.-Salzmann-Strasse 9Tel: 05 05 05-67104

Tyrol6020 Innsbruck, Maria-Theresien-Strasse 36Tel: 05 05 05-65431

Styria8010 Graz, Herrengasse 15Tel: 05 05 05-93105

Salzburg5020 Salzburg, Rainerstrasse 2Tel: 05 05 05-96145

Vorarlberg6900 Bregenz, Kornmarktplatz 2Tel: 05 05 05-68111

Carinthia9020 Klagenfurt, Burggasse 4Tel: 05 05 05-64402


Selected subsidiaries and equity interests of UniCredit Bank Austria AG in AustriaSchoellerbank Aktiengesellschaft1010 Vienna, Renngasse 3Tel: (+43 1) 534 71-0www.schoellerbank.at

Bank Austria Finanzservice GmbH1020 Vienna, Lassallestrasse 5Tel: (+43) 05 05 05-53000www.baf.at

Bank Austria Real Invest Immobilien-Management GmbH1020 Vienna, Lassallestrasse 5Tel: (+43 1) 331 71-0www.realinvest.at

Immobilien Rating GmbH1020 Vienna, Taborstrasse 1–3Tel: (+43) 05 05 05-51880www.irg.at

Bank Austria Wohnbaubank AG1020 Vienna, Lassallestrasse 1Tel: (+43 1) 331 47-5601

card complete Service Bank AG1020 Vienna, Lassallestrasse 3Tel: (+43 1) 711 11-0www.cardcomplete.com

DC Bank AG (Diners Club) 1040 Vienna, Rainergasse 1Tel: (+43 1) 50 135-0www.dcbank.at

ERGO Versicherung Aktiengesellschaft1110 Vienna, Modecenterstrasse 17Tel: (+43 1) 313 83-0www.ergo-austria.at

UniCredit Leasing (Austria) GmbH(UniCredit Global Leasing S.p.A.)1040 Vienna, Operngasse 21Tel: (+ 43 1) 588 08-0www.unicreditleasing.at

FactorBank Aktiengesellschaft1041 Vienna, Floragasse 7Tel: (+43 1) 506 78-0www.factorbank.com

UniCredit Business Integrated SolutionsAustria GmbH*1090 Vienna, Nordbergstrasse 13Tel: (+43 1) 717 30-0

*) Majority-owned by UniCredit Business Integrated Solutions S.C.p.A., Milan

Bank Austria Private Banking OfficesPrivate Banking Vienna Hohenstaufengasse 6, 1010 ViennaTel: 05 05 05-46000

Private Banking Vienna Hietzing Altgasse 20, 1130 ViennaTel: 05 05 05-53727

Private Banking Vienna Döbling Himmelstrasse 9, 1190 ViennaTel: 05 05 05-46213

Private Banking Lower Austria WestRathausplatz 3, 3100 St. PöltenTel: 05 05 05-36863

Private Banking Lower Austria South/BurgenlandKollonitschgasse 1, 2700 Wiener NeustadtTel: 05 05 05-55874

Private Banking Upper Austria Hauptplatz 27, 4020 LinzTel: 05 05 05-67242

Private Banking Salzburg Getreidegasse 1, 5020 SalzburgTel: 05 05 05-96361

Private Banking Tyrol Museumstrasse 20, 6020 InnsbruckTel: 05 05 05-95524

Private Banking Vorarlberg Kornmarktplatz 2, 6900 BregenzTel: 05 05 05-98304

Private Banking Styria Herrengasse 15, 8010 GrazTel: 05 05 05-93327

Private Banking Klagenfurt Neuer Platz 6, 9020 KlagenfurtTel: 05 05 05-94296

Private Banking Villach Hans-Gasser-Platz 8, 9500 VillachTel: 05 05 05-94329



Central and Eastern Europe

Office Network (CONtINuEd)

AzerbaijanYapı Kredi Bank Azerbaijan678.C.Mammadquluzade street, 73 F Baku CityBaku, AzerbaijanTel: (+994 12) 497 77 95Fax: (+994 12) 497 02 76www.yapikredi.com.azBIC: KABAAZ22

Bosnia and Herzegovina UniCredit Bank a.d. Banja Luka Marije Bursac 778000 Banja LukaTel: (+387 51) 243 200 Fax: (+387 51) 212 830 www.unicreditbank-bl.ba BIC: BLBABA22

UniCredit Bank d.d. Kardinala Stepinca b.b 88000 MostarTel: (+387) 36 312 112 Fax: (+387) 36 312 116 www.unicreditbank.ba BIC: UNCRBA22

BulgariaUniCredit Bulbank AD 7, Sveta Nedelya Sq. 1000 SofiaTel: (+359 2) 923 2111 Fax: (+359 2) 988 4636www.unicreditbulbank.bg BIC: UNCRBGSF

CroatiaZagrebačka banka d.d. Trg bana Josipa Jelacica 10 10000 ZagrebTel: (+385 1) 3773 333 Fax: (+385 1) 3789 764 www.zaba.hrBIC: ZABAHR2X

MacedoniaRepresentative Office Skopje11 Oktomvri 6 /2–11000 SkopjeTel: (+389 2) 3215 130Fax: (+389 2) 3215 140

MontenegroRepresentative Office PodgoricaHercegovacka 1381 000 PodgoricaTel: (+382 0) 20 66 77 40Fax: (+382 0) 20 66 77 42

RomaniaUniCredit Tiriac Bank S.A.Bd. Expozitiei No. 1F 012101 Bucharest 1 Tel: (+40 21) 200 2020 Fax: (+40 21) 200 2022 www.unicredit-tiriac.ro BIC: BACXROBU

RussiaZAO UniCredit Bank Prechistenskaya nab., 9 119034 MoscowTel: (+7 495) 258 7200 Fax: (+7 495) 258 7272 www.unicreditbank.ru BIC: IMBKRUMM

JSCB Yapı Kredi Bank Moscow (CJSC)2, Goncharnaya Naberezhnaya115172 MoscowTel: (+7 495) 234 98 89Fax: (+7 495) 956 19 72www.ykb.ruBIC: YKBMRUMM


Central and Eastern Europe

SerbiaUniCredit Bank Serbia J.S.C. BelgradeRajićeva 27–2911000 BelgradeTel: (+381 11) 3777 888Fax: (+381 11) 3342 200www.unicreditbank.rs BIC: BACXRSBG

SlovakiaUniCredit Bank Czech Republic and Slovakia, a.s.Šancova 1/A813 33 BratislavaTel: (+421 2) 4950 1111Fax: (+421 2) 4950 3406www.unicreditbank.skBIC: UNCRSKBX

SloveniaUniCredit Banka Slovenija d.d.Šmartinska 1401000 LjubljanaTel: (+386 1) 5876 600Fax: (+386 1) 5876 684www.unicreditbank.siBIC: BACXSI22

Czech RepublicUniCredit Bank Czech Republic and Slovakia, a.s.Zeletavska 1525/1140 92 Prague 4 – MichleTel: (+420) 955 911 111www.unicreditbank.czBIC: BACXCZPP

TurkeyYapı ve Kredi Bankası A.Ş.Yapı ve Kredi Plaza D BlokLevent 34330, IstanbulTel: (+90 212) 339 70 00Fax: (+90 212) 339 60 00www.yapikredi.com.trBIC: YAPITRIS

UkrainePJSC Ukrsotsbank29, Kovpaka Str.03150 KievTel: (+380 44) 230 3299Fax: (+380 44) 529 1307www.unicredit.com.uaBIC: UKRSUAUX

HungaryUniCredit Bank Hungary Zrt.Szabadság tér 5–61054 BudapestTel: (+36 1) 301 1271Fax: (+36 1) 353 4959www.unicreditbank.huBIC: BACXHUHB



CEE Network

Market share (%) ranking

russia, UniCredit Bank 1.5 8

Poland, Bank Pekao 1) 10.6 2

Ukraine, Ukrsotsbank 3.4 7

hungary, UniCredit Bank 6.0 7 Czech republic, UniCredit Bank Czech Republic & Slovakia 6.8 4 slovakia, UniCredit Bank Czech Republic & Slovakia 6.4 5

romania, UniCredit Tiriac Bank 6.9 5

slovenia, UniCredit Banka 6.1 5

Croatia, Zagrebačka banka 26.5 1

serbia, UniCredit Bank 8.7 3 Bosnia and herzegovina, UniCredit Bank and UniCredit Bank Banja Luka 21.6 1

Bulgaria, UniCredit Bulbank 15.0 1

turkey, Yapı Kredi 2) 9.2 5 azerbaijan, Yapı Kredi Bank Azerbaijan 1.6 15

l Representative offices in Macedonia, Montenegro and Belarus 3)

1) Poland (Bank Pekao) under management responsibility of UniCredit2) Total assets consolidated proportionately3) Representative office of UniCredit Bank RussiaSource: CEE Strategic Analysis



Investor Relations

Financial calendar12 May 2014 Publication of the results as of 31 March 2014

6 August 2014 Publication of the half-year results as of 30 June 201411 November 2014 Publication of the results as of 30 September 2014All 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: Planning & Controlling AustriaExternal Reporting

Photographs: Prefaces: Erich Hampel: UniCredit; Willibald Cernko: Paul Wilke Pages showing Management Board members: Paul WilkeSorter pages: UniCredit

Creative concept: Orange 021

Design, graphic development and composition: Mercurio GP – Milan

graphics: www.horvath.co.at

Printed by: Die Stadtdrucker

Contact:Bank AustriaIdentity & CommunicationsP. O. Box 22.000A-1011 Vienna, Austriae-mail: [email protected]: within Austria: 05 05 05-0; from abroad + 43 5 05 05-0

NotesThis report contains forward-looking statements relating to the future performance of Bank Austria. These statements reflect estimates which we have made on the basis of all information available to us at present. Should the assumptions underlying forward-looking statements prove incorrect, or should risks – such as those mentioned in this report – materialise to an extent not anticipated, actual re-sults may vary from those expected at present. Market share data are based on the most recent information available at the editorial close of this report.

“Bank Austria” as used in this report refers to the group of consolidated companies. “UniCredit Bank Austria AG” as used in this report refers to the parent company.

In adding up rounded figures and calculating the percentage rates of changes, slight differences may result compared with totals and rates arrived at by adding up component figures which have not been rounded off.

DisclaimerThis edition of our Annual Report is prepared for the convenience of our English-speaking readers. It is based on the German original, which is the authentic version and takes precedence in all legal respects.

UniCredit Bank Austria AG/Corporate RelationsLassallestrasse 5, 1020 Vienna, AustriaTel: (+43) (0)5 05 05-57232 Fax: (+43) (0)5 05 05-8957232e-mail: [email protected] Internet: http://ir.bankaustria.atGünther StromengerTel: (+43) (0)5 05 05-57232Erich KodonTel: (+43) (0)5 05 05-54999Andreas PetzlTel: (+43) (0)5 05 05-59522

RatingsLong-terM sUBorDinateD LiaBiLities short-terM

Moody’s1) Baa1 Ba1 P-2Standard & Poor’s2) A– BBB– A-2

Both, public-sector covered bonds and mortgage bonds of Bank Austria are rated Aaa by Moody’s.1) Grandfathered debt is rated Aa3, grandfathered subordinated debt is rated A1.2) Grandfathered debt is rated AA–, grandfathered subordinated debt is also rated AA–.

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