Income statement for 2005

The most salient feature of the 2005 income statement is the strong growth in operating revenues, which was significantly higher than the increase in the net charge for losses on loans and advances, and also exceeded the comparatively modest growth of costs. Revenue growth thus fed through to operating profit. The other items in the income statement mainly reflect one-off income (gains on sales) and the addition to provisions for restructuring costs, which largely offset each other for the year as a whole.

In 2005, the group of consolidated companies was enlarged mainly with the acquisition of Hebros Bank AD, Plovdiv, of Banca Comerciala “Ion Tiriac” S.A., Bucharest, and of Eksimbanka a.d., Belgrade (see note 3 to the consolidated financial statements). Also newly included in consolidation are our subsidiaries BPH Leasing S.A., Warsaw, and Hypo Stavebni Sporitelna, Prague, a Czech company. As a result of these changes and several disposals and further additions, operating revenues and general administrative expenses increased by only about 2% each, and net income before taxes rose by about 1%.

In 2005 we redefined the business segments (for methodological changes, see note 31; the comparative figures for the previous year have been adjusted to reflect the new definition). Austrian customer business previously comprised two business segments – Private Customers and Corporate Customers. From 2005, it has been divided into three segments: “Private Customers Austria” covers business with private individuals only. “SMEs Austria” encompasses small and medium-sized enterprises (SMEs) and includes business customers (previously in the Private Customers segment). “Large Corporates and Real Estate” comprises multinational corporates, financial institutions, and public sector and commercial real estate business. The other business segments – International Markets, CEE and Corporate Center – have remained unchanged. This means that segment reporting is now divided into six business segments. With this new definition we aim to enhance transparency – both externally and especially within the bank, in line with our value-based management approach. The business segments now reflect more homogeneous customer portfolios enabling the bank to provide targeted services as well as enhancing benefits for customers and reducing costs.

A number of changes in IFRSs became effective on 1 January 2005. Most of the changes were applicable retrospectively; therefore we have adjusted the previous year’s figures to reflect the changes. The effects on the income statement relate mainly to the net charge for losses on loans and advances, the net trading result and net income from investments. These effects remained within narrow limits: the adjusted net income before taxes for 2004 was € 23 m higher than the published figure; at the level of net income, the previous year’s figure was adjusted by € 7 m.

An analysis of the income statement requires exchange rate effects arising from the translation of amounts in CEE-based financial statements to be taken into account. The most pronounced appreciation was recorded in the currencies of Poland (+12.5%), Romania (+11.0%) and the Czech Republic (+7%). The exchange rate effects had an impact on both income and expense items, and thus largely offset one another in the results. For this reason, they hardly impact the overall picture. If the CEE financial statements are translated at constant average exchange rates for 2004, the positive exchange rate effect – including hedging costs – is about € 22 m or approximately 2% of net income before taxes.