Austrian Banks Record Profits Due to Special Items
This year, Austrian banks achieved earnings of € 1.0bn. This does not relate to operating business, but with special items.
Austria´s banks seem to have conquered the crisis very quickly. In spite of difficulties in the Eurozone, all banks achieved higher earnings. But the increased profits are mainly based on special items, such as the buy-back of own bonds. The operating business was substantially weaker.
Last year, the consolidated profits came at € 710m, which is a decline by 84% against 2010. Most Austrian banks had to write down their subsidiaries in Eastern Europe. Erste Group even registered losses of € 719m. By contrast, the first quarter of 2012 showed highly positive figures. The consolidated pre-tax profits totaled € 1.28bn. However, the bulk this profits is everything but sustainable. Special items reached € 644m.
Erste Group´s CEO Andreas Treichl: “We are buying back our own securities and achieve profits. Isn´t it wonderful? But who should understand this?” In the first quarter of 2012, Erste Group´s net income came at € 346.5m. Special items reached € 250.6m, further € 160m are expected in the second quarter. Bank Austria´s net income was € 399m in the first quarter, special items accounted for € 124m. In the first three months of 2012, RBI (Raiffeisen Bank International) doubled its net income to € 541m. The buy-back of hybrid bonds generated profits of € 270m.
Above all, hybrid bonds are bought back. Most of the securities were issued before the financial crisis and have an unlimited maturity. According to Basel III, the hybrid bonds are not seen as equity. In the last year, the securities depreciated, however. The loss in value reached up to 50%. Over the last months, the hybrid bonds were bought back at favorable prices.