Key Events during the Financial Year
Changes in the Managing Board
David Roberts, Chairman of the Managing Board, announced at the end of August 2009 that he would be resigning from the Bank for health reasons on 15 September 2009. Byron Haynes, who has been a member of the Managing Board since August 2008, was named as his successor. In addition to his function as the Chief Executive Officer, Byron Haynes currently retains his responsibilities as the Bank's Chief Financial Officer. Stephan Koren continues to be Deputy Chairman of the Board.
Changes in the Supervisory Board
Mike Rossi stepped down from the Supervisory Board in July 2009. Cees Maas, formerly chief financial officer, chief risk officer and deputy managing board chairman of ING Group NV, was appointed to the Supervisory Board of BAWAG P.S.K. on 27 July 2009.
After Supervisory Board Chairman Wulf von Schimmelmann resigned on 15 October 2009, Cees Maas was elected as Chairman in his place. Von Schimmelmann vacated his post because of obligations in connection with his appointment as chairman of the supervisory board of Deutsche Post AG in January 2009.
After Deputy Chairman Daniel Wolf announced his retirement from the Supervisory Board in December, Scott Parker was appointed to the Board effective 15 December 2009. Pieter Korteweg was appointed as the new Deputy Chairman of the Supervisory Board.
Capital and Guarantee Contributions by the Republic of Austria and Shareholders
BAWAG P.S.K., its shareholders and the Republic of Austria agreed to a capital increase and a guarantee from the Republic of Austria for certain assets in 2009. The agreement is in line with the objectives of the Financial Market Stability Act and stipulates the subscription of participation capital issued by BAWAG P.S.K. in the amount of EUR 550 million by the Republic of Austria. The agreement also provides a guarantee from the Republic of Austria for certain assets in a maximum amount of EUR 400 million valid until 30 June 2014. Furthermore, the Bank's shareholders granted a capital contribution of EUR 205 million in August 2009.
Pre-approval for the assistance package was granted by the EU Commission on 22 December 2009. After this, the contracts were signed by the Bank, its shareholders and the Republic of Austria. Under the agreement, BAWAG P.S.K. has undertaken to provide loans amounting to a total of EUR 1.7 billion to small and medium-sized businesses and households in Austria in addition to its currently existing loans over the next three years.
The approval from the EU Commission is limited to six months. In this time, the Commission will review and assess the documents and information submitted by and still to be submitted by the Republic of Austria before coming to a final decision. Any potential compensatory measures deemed necessary by the EU commission will be determined on final approval.
For 2009, the Austrian government is entitled to a guarantee fee and a semi-annual dividend on the participation capital in the amount of 9.3 per cent p.a. The dividend will be disbursed once approval is granted by the Annual General Meeting deciding on the 2009 financial year. The guarantee fee was paid in early 2010.
Basel II – Application for an Internal Rating Based Approach
BAWAG P.S.K. filed an application with the Austrian Financial Market Authority in December 2009 to gain approval for the use of an internal rating based (IRB) approach for calculating its own funds requirements stemming from credit risk instead of the previously used Basel II standardised approach.
Moody’s Rating for BAWAG P.S.K.
The rating agency Moody's completed a review of its rating for BAWAG P.S.K. in October 2009. Despite the challenging business conditions, the agency confirmed its rating for BAWAG P.S.K. on 2 November 2009 and assigned the Bank a stable outlook. In light of the numerous downgrades announced for other financial institutions, this result is satisfying. Long-term bonds from BAWAG P.S.K. are rated at Baa1, short-term liabilities at P2, and the Bank's financial strength rating is D. In February 2010, Moody's completed its review for the outstanding hybrid capital notes due to changes in its rating methodology. The rating for these instruments was adjusted to B2
In its rating explanation, Moody's specifically recognised the extensive improvements already made by the Bank and noted that BAWAG P.S.K. is on the right path; it also included special praise for the improvements made in the area of risk. However, the Bank's profitability also has to be improved over the medium term in order to achieve rating improvements, the agency said.
In its justification for the stable outlook, Moody's noted that the Bank has successfully stabilised its position under its new management. The support being provided by the new shareholder group is also having positive effects, said Moody's.
Key Sales Initiatives in 2009
Opening of New Flagship Branches
Vienna's first "flagship branch", the customer centre at the corner of Wipplingerstraße and Tuchlauben in the first district, was opened on 15 December 2009. This centre was created by combining the two branches at Seitzergasse and Fleischmarkt, and offers an entirely new level of modern banking service in a functional and appealing atmosphere. The focus is on providing individual, tailored advice and service.
A branch in Salzburg's Lehen district was renovated and reopened. At the end of the year, BAWAG's branch network consisted of 71 outlets in Vienna and 82 in the other provinces. PSK BANK offers its services at 1,230 post offices throughout Austria, including new Postpartner offices.
Kommunalmilliarde (One Billion for Municipalities)
In June 2009, an initiative was launched under the motto "One Billion for Municipalities from BAWAG P.S.K." to assist provincial and municipal governments in Austria in realising targeted infrastructure investments despite the difficult economic conditions. To this end, BAWAG P.S.K. provided financing in a total amount of EUR 1 billion under very attractive terms to stimulate regional growth and to promote the protection and creation of jobs.
The provision of this billion Euros in targeted financing is the logical continuation of BAWAG P.S.K.'s long tradition and close ties with the public sector.
"One Billion for Municipalities" generated a great deal of positive response among public sector entities across the country.
Unternehmen Österreich ("Enterprise Austria")
BAWAG P.S.K. presented its new autumn campaign, "Unternehmen Österreich" (Enterprise Austria), in September 2009. This is a long-term, sustainable initiative that is designed to benefit all Austrians and to strengthen the Austrian economy.
It includes different, custom-tailored services and solutions for private, commercial and municipal customers and offers a range of attractive savings and investment products related to Austria.
BAWAG P.S.K. introduced the Security Barometer in October 2009 as a means of labelling all savings, investment and life insurance products in a way that clearly depicts their relationship between security and earnings.
BAWAG P.S.K. Group's direct bank, easybank, continued on its very successful course, which is based on offering simple and transparent products, in the 2009 financial year. easybank's free salary account was named the winner of the Chamber of Labour's comparison test for the fourth time in a row.
SPhinX companies filed a lawsuit with the Supreme Court of the State of New York in March 2008 against over fifty parties, one of them being BAWAG P.S.K. No amount has been specified for the alleged damages.
Various motions for the dismissal of this suit are still pending. In addition, documents are being collected and reviewed to gather evidence for the case, and witnesses have already been questioned in hearings lasting several days. BAWAG P.S.K. has filed claims with the liquidators of SPhinX for investments in SPhinX funds that have not been redeemed in the amount of roughly USD 29.4 million.
There were no significant developments in this case during the 2009 financial year, and the Bank's claims have still not been recognised. A draft plan for the distribution of the liquidation proceeds has been drawn up, but no final decision on the plan has yet been made.
Implementation of the Payment Services Directive
The Payment Services Act (ZaDiG) came into force on 1 November 2009. The necessary changes in the Bank's General Terms and Conditions and in its other forms and terms were made in good time, and the necessary approvals were also obtained from the Bank's customers. The technical changes needed to meet the new regulations (e.g. with regard to the value and posting dates when handling payment transfers) were also made.
Changes in the Group’s Holdings
Sparda Bank Vienna
SPARDA Bank Aktiengesellschaft was incorporated into BAWAG P.S.K. by way of an upstream merger with retroactive effect as of 30 June 2008. This merger was entered into the commercial register on 23 January 2009, bringing the merger process to a legal conclusion. The Sparda Bank brand is being maintained.
Merger of ÖVKB's Retail Business
In May 2009, BAWAG P.S.K. decided to merge the retail business operations of Österreichische Verkehrskreditbank (ÖVKB) into BAWAG P.S.K. This merger became effective on 1 October 2009.
This transfer of business activities was decided to leverage synergies, especially with BAWAG P.S.K.'s own retail banking franchise, and to gain access to ÖVKB's very attractive rail station outlets for all of the Group's retail customers.
Other Material Changes in the Group's Holdings
The liquidation of the Irish subsidiary BAWAG International Finance Ltd. was initiated in the first half of 2009. The liquidation of BAWAG Capital Advisors was begun in November 2009. Liquidation was also initiated for a number of companies in Jersey and one in Luxembourg.
In the second half of 2009, the Bank sold its shares in Athena Erste Beteiligungen AG and in IPO Beteiligungs-Management AG, and increased its stake in Athena Zweite Beteiligungen AG. A group of properties was also sold by way of transfer of the properties into project companies and the subsequent sale of these companies.