Centre of competence for financial markets

“We see ourselves as a hub linking global financial markets and our regional markets, international investors and local issuers, capital markets and corporate customers. With our structuring expertise, new issues and Corporate Solutions for risk hedging, medium-sized businesses can use the financial markets in the same professional way as multinational corporates.”

Willi Hemetsberger, Managing Board member responsible for International Markets

Bank Austria Creditanstalt is active in the financial markets for its own account and on behalf of its customers, through trading and expert teams in the International Markets (INM) business segment. Despite the inherent unpredictability and fluctuations in international money, foreign exchange, bond and equity markets, INM has been a stable and highly profitable source of revenue for the bank over the past years. Revenues generated by INM are not fully included in the INM business segment result. Revenues are partly reflected in other business segments; for example, revenues generated by Treasury Sales are included in the Corporate Customers business segment or the results of CEE subsidiaries. While equity allocated to the business segment was only 3% of the Group total, INM generated € 117 m in net income before taxes in 2004, 14% of the figure for the bank as a whole. The ROE reached 55%.

The major part of operating revenues is derived from the management of investment books and from trading for the bank’s own account. Proprietary trading is a source of revenue and an important factor contributing to the bank’s know-how and market standing as well as its ability to meet customers’ needs.

Over the past few years, customer business has developed into a second, particularly promising source of revenue. Customer business includes sales activities of the trading unit and new issues in the bond and equity markets. An area that is of great importance to the bank is sales of treasury products, primarily involving corporate customers’ use of derivatives for interest rate, currency and liquidity risk management.

However, the performance of the INM business segment extends beyond investment and trading: INM is responsible for asset/liability management and thus for the balance sheet structure and funding for the bank. In organisational terms, INM coordinates all of the BA-CA Group’s activities in money, capital and equity markets. The INM business segment includes the Vienna-based trading units and CA IB’s subsidiaries in London and Warsaw (which are accounted for under the equity method and linked with the bank via business management contracts). INM Vienna performs coordination and management functions in respect of trading activities and asset/liability management for the INM units in CEE.

As centre of competence for financial markets, INM also performs internal tasks complementing current banking business. Structuring expertise in financial engineering is used for numerous standardised investment products and discretionary solutions in business with corporate customers; these activities are increasingly important for the competitiveness of the bank’s other business segments, in line with the trend away from lending towards capital markets.