Facts on Austria and Its Banks

CESEE is a long-term growth market for bank services and therefore offers good prospects for Austrian banks.

Economic developments have been very diverse in CESEE; after 20 years of transformation, the countries do not represent a homogeneous economic region.

In the long term – and after the end of the current global financial crisis – CESEE will be the region with the best growth prospects in Europe. In 2010, average growth came to 1.5%. Until 2015, the ten CESEE EU Member States are expected to reclaim their growth edge (of about 2 percentage points) over the euro area countries.

Austrian banks’ exposure to CESEE is relatively high (September 2010: EUR 209.2 billion), but regionally well diversified. Austrian banks’ subsidiaries rely to a large extent on funding via deposits.

Austrian banks’ total international exposure (135% of GDP) continues to be low relative to other countries (Swiss banks: 289% of the national GDP), despite their claims on CESEE countries.

Given their strong focus on the growth markets in CESEE, Austrian banks are only marginally exposed to markets currently facing difficult conditions, such as Greece and Ireland (some 0.7% of Austrian banks’ foreign claims each).

Operating earnings in CESEE buttress Austrian banks’ profitability as their domestic business has weakened. At the end of September 2010, the CESEE subsidiaries’ operating result – while weighed down by substantial loan loss provisions – amounted to about EUR 1.6 billion.

The CESEE portfolio is characterized by traditional retail banking activities. Accordingly, the CESEE subsidiaries’ net interest income accounts for some 70% of their total operating income.

In the first three quarters of 2010, Austrian banks posted a consolidated operating result of around EUR 4.2 billion. Their tier 1 capital ratio amounted to about 9.8% in September 2010.

Provisional estimates for 2010 predict a significant improvement of Austrian banks’ (unconsolidated) operating profits. While the net profit constituted EUR 0.04 billion in 2009, it is expected to have risen to EUR 3.06 billion in 2010.

The OeNB’s fall 2010 stress test once more attested to the overall crisis resilience of the Austrian banking system. The effects a potential new global crisis would have vary from institution to institution, however.

The results of the 2010 CEBS stress tests carried out on behalf of the Ecofin Council were satisfactory for all participating Austrian banks. In 2011, a new round of stress tests will be conducted by the European Banking Authority.

Austria’s growth and wealth figures have been outperforming the euro area averages. Austrian per capita income in 2009, for instance, was 12.9% higher than the euro area average.

Austria has a diversified economy with a well-balanced sectoral structure.

Current account surpluses (2009: 2.5% of GDP) confirm Austria’s international competitiveness (current account of the euro area in 2009: –0.6% of GDP).

Austria’s foreign trade is well diversified both by region and by product type; and since the majority of transactions (71.1%) take place with other EU Member States, exposure to foreign exchange risk is very low.

An international net lender, Austria is not dependent on capital imports. Capital exports in 2009 ran to EUR 4.7 billion.

In 2009, Austria’s net debtor position amounted to EUR 34 billion or 12% of GDP and was hence some 5 percentage points smaller than that of the euro area (17% of GDP as at the end of September 2009).

The moderate unit labor cost growth of recent years (1.2%) has sustained Austria’s competitiveness.

Low unemployment (the lowest in the EU) and a low frequency of strikes contribute to Austria’s high level of social stability.

At 67.1% in 2009, Austria’s government debt ratio is low by international standards.

Despite expansive fiscal policies, the Austrian government debt ratio is forecast by the EU to remain below the euro area and EU averages in 2010 and 2011. According to current forecasts, at 73%, this ratio will remain approximately 16 percentage points below the euro area average and 10 percentage points below the EU average in 2011.

Austria has a high saving ratio (currently 11.0%), i.e. households have accumulated substantial financial wealth (EUR 440 billion or 160% of GDP).

Household debt (94% of net income) and corporate debt (238% of the gross operating surplus or 91% of GDP) levels are low by international standards and do not pose a problem.

Households and banks have benefited from the fact that, unlike many other countries, Austria has not experienced a real estate bubble over the past few years and there are no signs of any price bubbles or any troubling financial development.

Austria outperforms the euro area average in most major economic indicators.

According to a recent international comparative study, Austria’s innovation performance is above the EU average, which is key to the country’s future economic development.