Half-year result 2017 of Kommunalkredit Austria AG
Wien (OTS) –
- IFRS result for the period above target at EUR 13.9 million
- Positive development of new business: 14 projects with a
volume of over EUR 300 million
- High-quality loan portfolio: no loan defaults, NPL ratio of 0.0%
- Excellent capitalisation: Total capital ratio 34.4%;
common equity tier 1 ratio 26.9%
Kommunalkredit Austria AG (Kommunalkredit) reports a sound IFRS after-tax result of EUR 13.9 million for the first half of 2017. The bank is making good progress with the implementation of its business model as a specialist in infrastructure finance: The development of new business has been highly positive. Kommunalkredit strengthened its sales team and opened a branch office in Germany. Customer deposits almost doubled and the bank’s funding base was further strengthened.
As Kommunalkredit CEO Alois Steinbichler notes, “We are on track with the implementation of our strategy. New business development is satisfactory and we have made significant progress in structural terms. This is also reflected in our figures – the result for the period is above target.”
Essential successes in the first half of 2017
– New business growth: The bank achieved notable growth in its new business and concluded 14 transactions in seven countries with a financing volume of over EUR 300 million, comprising the refinancing for a construction stage of the A2 Motorway in Poland and the financing of the Gipuzkoa waste-to-energy facility in Spain. Other transactions include a hospital in Great Britain, care homes in Germany, solar installations in France, Germany and Great Britain, and waste-to-energy facilities in Great Britain and Germany.
– Successful placements: Acting as a bridge between project sponsors and institutional investors, Kommunalkredit not only wants to carry infrastructure financing deals on its books, but also place them with investors. In the first half of 2017, the bank succeeded in placing a volume of over EUR 200 million.
– Strengthened sales team: Kommunalkredit strengthened its sales team through the recruitment of internationally experienced specialists. In January 2017, a branch office was opened in Frankfurt am Main.
– Customer deposits doubled: The range of funding instruments was broadened and the bank’s funding base was strengthened significantly:
Customer deposits almost doubled to EUR 402.6 million in the first half of 2017 (31/12/2016: EUR 210.8 million). An essential contribution to this increase was made by the KOMMUNALKREDIT DIREKT online platform, an efficient investment product and cash management tool for municipalities and quasi-municipal enterprises. Moreover, the bank implemented a “Debt Issuance Programme”, from which it issued the first Austrian Social Covered Bond on 12 July 2017. The issue had a volume of EUR 300 million and was 1.8 times oversubscribed. It marked the bank’s successful return to the capital market after its privatisation in 2015.
– High-quality credit portfolio: Kommunalkredit has a portfolio of high asset quality, reporting not a single credit default in the first half of 2017. The non-performing-loan (NPL) ratio was 0.0%.
– Excellent capitalisation: The bank has an excellent capital base:
As at 30 June 2017, the bank reported a total capital ratio of 34.4% and a common equity tier 1 ratio of 26.9%.
– Improved rating: On 13 June 2017, Standard & Poor’s awarded Kommunalkredit’s covered bonds an A rating. Moody’s upgraded the covered bonds twice in the course of the current business year: from Baa3 to Baa2 on 17 March 2017 and to Baa1 on 25 July 2017.
Income position: IFRS after-tax result for the period of EUR
In the first half of 2017, Kommunalkredit generated an after-tax result for the period according to IFRS of EUR 13.9 million, which is above its original target. The budgeted reduction from the first half of 2016 (HY1 2016: EUR 27.5 million) is primarily due to the fact that positive one-off effects of the redemption of own issues were lower than in the previous year. Moreover, the reduction of the existing portfolio resulted in a decrease in net interest income.
Material income and expense items
– Net interest income in the first half of 2017 amounted to EUR 16.2 million (HY1 2016: EUR 18.7 million). The reduction from the previous year’s value resulted from the scheduled maturing of assets, which was partly offset by new business transactions.
– Net fee and commission income amounted to EUR 8.8 million (HY1 2016: EUR 7.9 million). The increase was due to higher fee and commission income from banking operations.
– General administrative expenses came to EUR 25.9 million (HY1 2016:
EUR 22.7 million). The increase was due to targeted investments in the implementation of the bank’s strategy and to one-off effects of regulatory requirements (MiFiD 2, IFRS 9).
– The net trading and valuation result was positive at EUR 6.4 million (HY1 2016: EUR 31.9 million). It resulted primarily from the redemption of CHF-denominated covered bonds within the framework of a tender offer and the closure of the related hedging transactions, as well as interest-related changes in the valuation of the fair value portfolio, including derivatives. The bank has no proprietary trading book.
– Kommunalkredit contributed EUR 1.7 million to the Bank Resolution Fund. After the release of a provision of EUR 0.8 million for the Bank Resolution Fund, the expense for the period amounted to EUR 0.9 million (HY1 2016: EUR 2.5 million). Moreover, the bank paid EUR 0.3 million (HY1 2016: EUR 1.9 million) under the heading of the stability tax payable by Austrian Banks. In 2016, Kommunalkredit had opted for a one-off special payment of EUR 7.7 million, which significantly reduces the tax burden for business years 2017 and beyond.
– The tax result was positive at EUR 3.1 million due to the capitalisation of deferred taxes from tax loss carryforwards (HY1 2016: EUR -7.0 million). This is a purely notional amount according to IRFS, which does not result in cash inflows.
Material balance sheet items
As at 30 June 2017, the Kommunalkredit Group’s total assets according to IFRS came to EUR 3.3 billion, down by EUR 0.5 billion from the 2016 year-end value (31/12/2016: EUR 3.8 billion). The reduction of total assets is primarily due to the aforementioned placements and scheduled redemptions of customer loans and advances, reduced investment of liquidity with the Austrian National Bank, and lower market values of hedging derivatives as a result of rising interest rates.
In its interim financial statements as at 30 June 2017, Kommunalkredit reported regulatory own funds of EUR 288.5 million (31/12/2016: EUR 290.3 million) and common equity tier 1 of EUR 225.5 million (31/12/2016: EUR 225.5 million). Thus, given its own funds requirement of EUR 77.5 million (31/12/2016: EUR 59.2 million), the bank is very well capitalised. Its total capital ratio as at 30 June 2017 was 34.4% (31/12/2016: 42.3%). The common equity tier 1 ratio stood at 26.9% (31/12/2016: 32.9%). The reduction compared to the 2016 year-end values reflects the higher own funds requirement due to the new business volume of over EUR 300 million.
After a satisfactory first half of the year, Kommunalkredit expects to close the full year 2017 with a sound result, although extraordinary income from the early redemption of own issues will be lower than in 2016 and costs are being incurred through new initiatives in the deposit business. In the first half of 2017, Kommunalkredit made substantial structural progress in the implementation of its business model as a specialist bank in the fast growing market for infrastructure finance. The bank achieved considerable growth in its new business; it placed a substantial volume of finance with investors, significantly increased its volume of customer deposits and therefore looks forward with optimism to the second half of the year.
For the detailed Interim Reports according to IFRS and Austrian GAAP, please refer to
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