Serbia and Montenegro

Our subsidiary in Serbia, operating as HVB Bank Serbia and Montenegro since August 2004 and not consolidated in the BA-CA Group, was established in December 2001 as one of the country’s first international banks. As part of its expansion strategy in Central and Eastern Europe, Bank Austria Creditanstalt signed the contract for the acquisition of the Serbian Eksimbanka on 19 November 2004. 58.7% of the shares were acquired from former shareholders including the European Bank for Reconstruction and Development (EBRD). Pursuant to legal provisions in Serbia a binding takeover bid was submitted to the other shareholders and over 99% accepted the offer. Jointly, HVB Bank Serbia and Montenegro and Eksimbanka serve some 70,000 customers through 39 branches. Three new branches were opened in Belgrade, Ni‰ and Novi Sad before the end of 2004. With combined assets totalling some € 365 m, the two subsidiaries are number five in the Serbian banking market with a share of 5.3%.

In 2004, HVB Bank Serbia and Montenegro’s net income before taxes reached € 4.8 m. The return on equity was 23% and the cost/income ratio was a low 57%. All areas of the bank’s business operations contributed to the good performance. As a result of increased lending and higher deposits, net interest income grew by more than € 3.1 m or 83%.

Business structure and development
The bank was able to strengthen its position in corporate customer business. The number of corporate customers rose strongly. Following a successful test phase in 2003, HVB Bank acts as clearing bank for the IATA (International Air Transport Association) for payment transactions between airlines and travel agencies.

Retail customers
There was a good response from the market to new products introduced in the course of the year, including loans for specific financing purposes such as vehicles or other consumer durables. Advertising campaigns assisted in marketing these products. HVB Bank Serbia and Montenegro was the first bank in Serbia to introduce a further innovative product, “Saving for the loan”, which is a combination of a savings plan and a loan. Mortgage loan business is being developed successfully: by way of a long-term loan granted by the European Bank for Reconstruction and Development (EBRD), the bank can extend individual housing construction loans. HVB Bank Serbia and Montenegro has a leading position in electronic banking. The bank now serves over 12,000 retail customers.