BA boss warns despite rise in profit

Bank Austria (BA) chief Willibald Cernko has pointed out the finance institute’s performance has not reached pre-crisis levels yet.

Cernko announced yesterday (Thurs) BA achieved a net profit of 640 million Euros between January and June of this year, around 52 per cent more than in the first half of 2010. The businessman said BA’s performance was dampened by the new so-called bank solidarity levy.

The tax came into effect in January after an agreement between the Social Democrats (SPÖ) and the People’s Party (ÖVP), which formed a government coalition, last year. SPÖ Chancellor Werner Faymann said the tax was only justified after the country’s leading banks received hundreds of millions of Euros in participation capital from the state. The SPÖ leader explained he expected an extra 500-million-Euro windfall each year due to the levy.

Cernko claimed today BA transferred 63 million Euros to the state because of the new levy in the first half of this year. He added BA had to pay an additional 15 million Euros in Hungary where a similar taxation scheme was introduced. BA handles the Eastern European (EE) operations of UniCredit, Italy’s most powerful bank. Experts have warned that banks may increase various fees to let their private customers carry the main burden of the bank tax in Austria.

The BA head said his bank avoided losses in all but one of the 18 countries it did business in. BA’s Kazakh branch was identified as the only department which experienced significant difficulties between January and June 2011. Cernko made clear he had generally been content with BA’s overall performance so far this year. However, the banker warned that BA “has not yet reached pre-crisis figures.”

BA’s core capital ratio was 10 per cent in June. Its equity was 18 billion Euros that month. More than 10,000 of BA’s 62,300 employees work for its Austrian representation. Cernko replaced Erich Hampel as BA boss in October 2009. Cernko worked for UniCredit’s German affiliate HypoVereinsbank (HVB) before taking over at BA.

BA, Erste Group Bank AG (Erste Bank) and Raiffeisenzentralbank (RZB) are the domestic financial market’s strongest players. All three banks received state aid during the crisis.

Cernko recently made headlines by hinting interest in taking over the Austrian department of Hypo Group Alpe Adria (HGAA). The BA head said in March it would be “ignorant” to rule out an engagement due to the 60,000 clients of HGAA’s domestic branch. HGAA had to be nationalised due to its disastrous performance in December 2009.

The bank – which is strongly engaged in Central and Eastern Europe (CEE) – is currently trying to get rid of real estate it owned and some subsidiary companies in a desperate bid to get back in the black. BA decided to abstain from snatching BA’s Austrian branch, according to a report by the Kurier newspaper in March.