Preface by the CEO
Preface by the CEO The financial year 2005 and the early months of 2006 saw events that led up to a turning point in the history of BAWAG P.S.K. First, during the year ended, two previously independent institutions - BAWAG and P.S.K. - were merged with retrospective effect from 1 January 2005 to create the new BAWAG P.S.K. AG, the fourth- largest Austrian bank, with 1.3 million personal banking customers and some 60,000 corporate customers.
The drastic events that were to shape our bank's future develop- ment began to unfold in mid-October 2005, when international bro- ker Refco in the United States had to file for bankruptcy under suspicion of falsifying accounts. All of you will have followed the public discussion about BAWAG transactions between 1995 and 2000 that came to light during investigations in connection with Refco's bankruptcy. Their consequences were extensive and led to a thorough reform of our bank.
The Managing Board and Supervisory Board of BAWAG P.S.K. were recomposed both structurally and with respect to their membership. Our new management took decisive action during the early months of this financial year to significantly improve the bank's corporate governance standards. The Managing Board was given new terms of reference, those of the Supervisory Board were reviewed, and we created a central managing board remit covering every aspect of risk. Furthermore, the bank's new management elected to adopt the corporate governance code applicable to listed companies in Austria.
Furthermore, the bank's shareholders decided to sell their stake. The selling process has already been initiated and is being carried out in accordance with best practice.
So as not to impede that selling process and to prevent a drawn-out period of uncertainty in connection with potential litigation risks in the United States, we have striven for a settlement with Refco's creditors and the US authorities. To capture the necessary outlay in the accounts and in order to give our bank added stability and strength, the Republic of Austria has issued a guarantee on behalf of BAWAG P.S.K. for E 900 million. In addition, a consortium of Austrian financial institutions has furnished E 450 million to strengthen our capital base. This has given us firm foundations for BAWAG P.S.K.'s positive development in years to come.
The Managing Board welcomes the shareholders' decision to sell the bank and is supporting the process that has now been initiated. We have wholehearted confidence in BAWAG P.S.K.'s strengths. Our broad customer base, a dense national sales network, close cooperation with the Austrian Post Office, a strong position as the principal provider of banking services to our institutional clients and the public sector and our dominant position in pay- ment services are all extremely attractive assets - and they are the reason why BAWAG P.S.K. can look forward to a sustainable, stable and successful future.
One of the principal focuses of our business activities in 2005, and one that will be sustained, was our expansion within Central Europe. For instance, Dresdner Bank CZ, acquired in 2005, merged with our subsidiary Interbanka at the end of March 2005 to create BAWAG Bank CZ. Another milestone was the creation of a banking sub- sidiary in Slovenia in September. Initially, this subsidiary, called BAWAG banka d.d., will concentrate exclusively on corporate customers. Its entry into the personal banking segment will take place at a later date. In July 2005, we became the first Central European bank to open a representative office in Tripoli, the capital of Libya. The representative office receives support from BAWAG Malta Bank Ltd., which has been operating suc- cessfully in Sliema for two years.
The events during 2005 and, above all, the first few months of 2006 put extraordinary strain on our workforce. However, in an extremely tense period, their enormous dedication and hard work were exceptional, proving again that they are, beyond doubt, our group's most important resource. I must therefore express my thanks to every single member of staff.
Our customers too gave us their confidence and loyalty during a very trying period, so let me end by thanking them for doing so.
I undertake to do everything in my power to win you over to our new BAWAG P.S.K. and to confirm you in your trust.
Ewald Nowotny (CEO)
Chairman of the Managing Board