BA boss ‘proud’ despite profit drop

Bank Austria (BA) chief Willibald Cernko has admitted being “proud” of how his finance institute performed in the past years.

The banker pointed out that BA was the only leading Austrian bank which did not sustain annual losses since the collapse of Lehman Brothers in 2008. The bankruptcy of the US investment bank kicked off an economic crisis which still affects countries, companies and individuals across the globe.

Cernko said yesterday (Weds) that BA achieved a net profit of 209 million Euros in 2011. This means that the bank raked in 70.5 per cent less than in the year before. Its total assets rose from 193 billion to 199.2 billion Euros at the same time. BA’s performance was tarnished by the struggles of its Kazakh subsidiary banking company. BA bosses now plan to sell the affiliate.

Cernko – whose contract as CEO was extended until 2015 last week – emphasised he was optimistic about operations in Eastern Europe (EE) in general. Doing business in the area is widely seen as an economic risk factor for firms and banks due to poor infrastructure, widespread corruption and volatile economic forecasts.

The BA chief stressed that his bank would not withdraw from the region. He said that the vast majority of BA’s 14 affiliates performed well in 2011. Operations especially prospered in Turkey and Russia, according to BA’s annual business report.

Writing off the value of Greek government bonds confronted BA with costs of 400 million Euros last year while around 100 million Euros had to be transferred to the Republic of Austria in bank tax. The fee was introduced in 2010. SPÖ Chancellor Werner Faymann said at that time that the measure was “reasonable and fair”.

Social Democratic (SPÖ) Finance Secretary Andreas Schieder – whose party forms a government coalition with the Austrian People’s Party (ÖVP) – announced last month that the solidarity bank charge would rise. ÖVP Finance Minister Maria Fekter explained that the decision would mean annual tax revenues of 625 million Euros a year.

Schieder claimed that concerns about higher customer service fees were inappropriate. The state secretary said that various consumer information investigations were showing that the banks did not jack up their activity fees because of the bank tax.

The SPÖ-ÖVP government agreed about upping the tax following the partial nationalisation of Volksbank AG (ÖVAG). The Viennese bank nearly collapsed under its immense losses caused by a disappointing performance in EE. ÖVAG’s international subsidiary, Volksbank International (VBI), was sold to Russian financial institute Sberbank for 505 million Euros.

BA manages UniCredit’s activities in the EE region. The Italian bank sustained a loss of 9.2 billion Euros last year – more than ever before. UniCredit boss Federico Ghizzoni said he was optimistic about being back in the black this year. Ghizzoni plans to carry out a consequent cost reduction regime to achieve this goal. UniCredit has total assets of 927 billion Euros. Its workforce level ranges around 160,000 while the number of branches was 9,500 in 2011.