Czech Republic

Bank Austria Creditanstalt established a subsidiary in the Czech Republic as early as 1991, immediately after the profound political changes in Central and Eastern Europe. Initially, business focused on corporate customers but later expanded to include the strongly growing private customer segment. With a market share of 6.1%, HVB Bank Czech Republic is the fourth-largest bank in the Czech Republic. A new communications strategy was implemented in 2004 in order to further strengthen the brand recognition of HVB Bank Czech Republic and its position in the country: the HVB Bank brand will appear throughout the year in a TV spot positioning it as a strong European bank that offers customised services and is close to its customers. A staff of 1,250 in 24 branches serve about 100,000 customers.

HVB Bank Czech Republic ranked third behind Poland and Hungary in net income before taxes (€ 72.4 m) generated by our CEE subsidiaries. The return on equity before taxes rose to 18.0% in 2004. The cost/income ratio improved to 50%. Operating revenues before the provisioning charge were 12% higher. Although a new branch was opened in Prague and investments were made in mobile sales units, the level of general administrative expenses remained unchanged.

HVB Bank Czech Republic was awarded top placements in three categories of the 2004 MasterCard Bank of the Year rankings: third place in the main category “Bank of the Year”, runner-up in the “Most Dynamic Bank of the Year” category, which is awarded by Ernst & Young; and its MAJORDOMUS product was third in the mortgage products category.

Business structure and development
Corporate business focused on financing commercial property and on corporate finance. Due to the increasing number of foreign companies setting up businesses in Prague and other cities in the Czech Republic, the market for commercial property is experiencing a boom. The favourable economic situation was also reflected in lending volumes – the market share of loans to corporate customers increased. The Centre of Competence for EU subsidies assists Czech companies in matters connected with the single European market.

New account products and favourable developments in credit card business contributed to positive trends In the retail customer segment. In spite of intense competition, HVB Bank Czech Republic is among the leading banks in the credit card sector. Approximately 8,000 new payment cards and credit cards were issued in 2004, over half of the bank’s customers have either a payment card or a credit card. The cooperation between the bank and Credit Suisse (co-branded credit cards) is progressing well and forms an excellent basis for further expansion in this segment. Due to its strong market position and expertise in credit card business, Prague was selected as the location of one of the card payment processing centres for Central and Eastern Europe. Combining back-office functions in one location concentrates know-how, unleashes synergies and ensures low cost settlement.

Sales activities concentrated not only on credit cards but also on mortgage loans and consumer credits. The “MAJORDOMUS” product continues to be one of the most successful mortgage products on the Czech market and was promoted accordingly – the lending volume clearly reflects the population’s backlog demand in the area of apartments and houses. By way of structured bond issues HVB Bank Czech Republic offered new investment opportunities to private customers on the Czech bond market.

Mobile sales activities are managed by “HVB Bank Finanãní servis”, a subsidiary established in June 2004. Agreements have been concluded with a large number of regional and institutional partners. Furthermore, HVB Bank Czech Republic intensified cooperation with its subsidiary “Hypo stavebni sporitelna”, a building society whose employees sell bank products such as mortgage and consumer loans. This will enable the bank to cover the entire country with specific products and services in the future.