Mid-year result 2016: Good start after privatisation

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1 PRESS RELEASE OF KOMMUNALKREDIT AUSTRIA AG Mid-year result 06: Good start after privatisation IFRS interim result after tax: EUR 7.5 million Excellent equity base: total capital ratio 37.%, CET ratio 7.9% High asset quality: non-performing-loan ratio 0.0% Expert in infrastructure financing: position strengthened (Vienna, 6 August 06) After the demerger and the privatisation implemented last year, Kommunalkredit Austria AG (Kommunalkredit) reports a satisfactory development in the first half of 06. The bank generated an IFRS interim result after tax of EUR 7.5 million. It has an excellent capital base, with a total capital ratio of 37.% and a CET ratio of 7.9%, and a credit portfolio of high quality with no defaulting loans in the first half of the year. We had a good start after the privatisation. We have a clear business model, owners who fully support our strategy, and a strong capital base; thus, we are able to use the opportunities of the market to our advantage, says Alois Steinbichler, CEO of Kommunalkredit. Kommunalkredit is well positioned in the market as an expert in infrastructure financing, and we have numerous projects in the pipeline. Paradigm change in infrastructure financing The environment for infrastructure financing in Europe has changed drastically in recent years. As governments hit the debt ceiling currently, the national debt of 7 out of 8 EU Member States exceeds the Maastricht limit of 60% of GDP, the financing of infrastructure investments is subject to increasing constraints. This leads to a shift from budget financing to project financing. Moreover, new regulatory provisions for banks are making it more difficult for them to hold long-term assets, and the costs of long-term lending have increased significantly. At the same time, the historically low level of capital market yields is compelling investors to broaden their investment universe. In this environment, infrastructure investments represent an attractive asset class that is likely to generate stable cash flows in the long term, with institutional investors benefiting from a more favourable regulatory treatment of equity than in the case of corporate investments. Kommunalkredit s clear business model: The expert in infrastructure finance Kommunalkredit operates on the basis of a clearly defined business model, pursuing a strategy that is fully supported by Gesona Beteiligungsverwaltungs GmbH, the bank s majority owner, and the Association of Austrian Municipalities (holding 0.%). The bank has positioned itself as an expert in public-sector-related infrastructure project business. It acts as a bridge between project sponsors requiring structuring and financing solutions, on the one hand, and institutional investors (insurance companies, investment funds, etc.) seeking investment opportunities, on the other hand. In this environment, public-sector-related infrastructure projects are an attractive target segment. The bank s primary focus is on projects in the sectors of social infrastructure (care homes, health care and educational institutions, administrative buildings), transport (commuter transport, road and rail transport) and energy and environment (sustainable sources of energy). Kommunalkredit has a wealth of experience in providing advisory and arranging services for infrastructure projects; moreover, it benefits from the technological expertise of Kommunalkredit Public Consulting (KPC), its subsidiary specialising in the management of support programmes.

2 In geographic terms, the bank s business operations are concentrated in the euro area, with a special focus on Austria, Germany and Switzerland as well as the Netherlands, France and Belgium. On a selective basis, the bank also implements projects in other countries of the EU region. After the successful conclusion of the demerger for new incorporation and the privatisation of Kommunalkredit in 05, the first half of 06 was devoted to the intensification of existing customer relations and the preparation of new projects. Healthy balance sheet structure and strong capitalisation As at 30 June 06, the Kommunalkredit Group reported a slight reduction of its total assets according to IFRS to EUR 3.9 billion, compared with EUR 4. billion at the end of 05. The reduction is due, in particular, to scheduled redemptions of loans and advances to customers and the run-off of demerger-related transactions. In the further development and expansion of its banking operations, Kommunalkredit benefits from a very strong capital position, with regulatory own funds in the amount of EUR 60.0 million as at 30 June 06 (3--05: EUR 59.9 million) and common equity tier of EUR 95.0 million (3--05: EUR 94.9 million). With total risk-weighted assets of EUR million (3--05: EUR 76.8 million), this corresponds to a total capital ratio of 37.% (3--05: 34.%) and a CET ratio of 7.9% (3--05: 5.6%); the leverage ratio stands at 5.5% (3--05: 5.0%). With EUR.8 billion available in long-term funding, Kommunalkredit has a stable funding profile. Moreover, the volume of customer deposits increased notably through the relaunch of KA Direct, the online asset management platform for municipalities and public-sector-related enterprises; as at 30 June 06, customer deposits amounted to a total of EUR 70 million. High asset quality The broad customer base in the public and quasi-public sector is reflected in a stable portfolio of high asset quality: 93.7% of the portfolio is rated investment grade, 6.% of which in the AAA/AA rating range. The capital-weighted average rating of the total portfolio is A+ (according to S&P rating scale). In the first half of 06, Kommunalkredit had no defaulting loans on its books. The non-performingloan (NPL) ratio was 0.0%. Investment grade rating The DBRS rating agency (Dominion Bond Rating Service) has awarded Kommunalkredit an investment grade rating of BBB (low) for the long-term segment and a rating of R- (mid) for the short-term segment. Kommunalkredit s covered bonds have been rated Baa3 by Moody s on account of the high asset quality of the cover pool (84% of assets rated AA or higher). All ratings have a stable outlook. Sound earnings position Kommunalkredit closed the first half of 06 with a satisfactory result for the period of EUR 7.5 million after tax and EUR 34.5 million before tax. Its comprehensive income according to IFRS came to EUR 6.5 million. It results primarily from net interest income of EUR 8.7 million, net fee and commission income of EUR 7.9 million, and a net trading and valuation result of EUR 3.9 million, booked against general administrative expenses of EUR.7 million. The annual contribution to the Bank Resolution Fund amounted to EUR.5 million; the expense for the national bank stability tax came to another EUR.9 million.

3 Result according to Austrian GAAP (Austrian Company Code/Austrian Banking Act) The profit on ordinary activities according to Austrian GAAP amounted to EUR 6.0 million; the after-tax result for the period came to EUR 9.7 million, after appropriation of EUR 5.0 million to a reserve pursuant to 57() of the Austrian Banking Act. Together with a provision of EUR 5.0 million already appropriated to the fund for general banking risks pursuant to 57(3) of the Austrian Banking Act at the end of 05, this further strengthened the capital base of the bank. Kommunalkredit s total assets, as reported in the separate financial statements prepared according to Austrian GAAP, amounted to EUR 3. billion as at 30 June 06 (3--05: EUR 3.5 billion). The reduction from the 05 year-end value is primarily due to the run-down of asset positions and the elimination of demerger-related transactions. Outlook In the second half of 06 Kommunalkredit will consistently pursue its efforts to further strengthen its market position as an expert in infrastructure financing. The bank intends to intensify existing customer relations and, at the same time, develop new projects. In providing finance for new projects, Kommunalkredit places a particular focus on the construction phase, introducing alternative forms of project finance, such as models of availability-based compensation. Thus, public infrastructure projects can be procured and financed on a private basis, which enables the public sector to implement projects that would otherwise have to be ruled out on account of the debt ceiling. Based on the satisfactory results of the first half of the year and the stable earnings secured by the parameters outlined above, the bank expects to close 06 with a positive full-year result. The Interim Financial Report can be downloaded at /Reports/Reports.aspx. For further information, please contact: Kommunalkredit Austria Marcus Mayer (Communication) Phone: +43 (0)/ or +43 (0)664/ mailto:m.mayer@kommunalkredit.at; 3

4 Balance Sheet of the Kommunalkredit Group according to IFRS Assets Cash and balances with central banks 83, ,693.3 Loans and advances to banks 7, ,994.6 Loans and advances to customers,08,693.,353,07.9 Assets at fair value 747, ,69.9 Assets available-for-sale 47,78.0 5,65.3 Derivatives 40, ,055.9 Investments in associates 0.0,3.4 Property, plant and equipment 7,5.4 7,657.5 Intangible assets Current tax assets Deferred tax assets 0.0,775.8 Other assets 9, ,80. Assets 3, ,6,03.8 Liabilities and equity Amounts owed to banks 437, ,975.7 Amounts owed to customers 45, ,00.3 Derivatives 309, ,77.4 Securitised liabilities,87,736.5,57,894.0 Subordinated liabilities 7,5.5 73,848. Provisions 7,80.9 7,376.9 Current tax liabilities 6, ,969.9 Deferred tax liabilities, Other liabilities 4,60.8 8,505.7 Equity 74, ,63.8 of which subscribed capital 59, ,49.3 of which statutory reserves 0, ,508.7 of which available-for sale reserve,07.,578. of which other reserves (incl. result for the period) 03, ,57. of which non-controlling interests Liabilities and equity 3,86, ,6,03.8 The Kommunalkredit Group comprises Kommunalkredit Public Consulting GmbH (fully consolidated), Kommunalkredit Beteiligungs- und Immobilien GmbH (fully consolidated) and Kommunalleasing GmbH (included at pro-rata book value). Mainly interest-rate swaps and FX forward transactions made to hedge interest-rate and FX risks. The bank has no proprietary trading portfolio. 4

5 Income Statement of the Kommunalkredit Group according to IFRS Income Statement to Net interest income 8,70. Interest and similar income 88,003.8 Interest and similar expenses -69,93.6 Loan impairment charges -5. Net fee and commission income 7,908.3 Fee and commission income 8,45.6 Fee and commission expenses Income from investments in associates -,3.4 Net trading and valuation result 3,859.0 General administrative expenses -,674.7 Personnel expenses -4,646.9 Other administrative expenses -8,07.9 Contributions to the Bank Resolution Fund -,508.5 Other operating result 3,553. Other operating income 5,55.8 of which income from re-invoicing to KA Finanz AG 5,55. Other operating expenses -,96.7 of which bank stability tax -,930. Result for the period before tax 34,509.9 Taxes on income -6,997.3 Result for the period after tax 7,5.6 of which: attributable to owners 7,476.3 attributable to non-controlling interests 36.3 The first consolidated financial statements of Kommunalkredit were prepared for the period from to following the demerger for new incorporation effective on 6 September 05. Therefore, comparative figures of the previous year are not available for these mid-year financial statements. The contribution to the Bank Resolution Fund, assessed by the Financial Markets Authority and payable pursuant to the Bank Recovery and Resolution Act, amounts to EUR.5 million for 06 and was recognised in total in the first half of 06. 5

6 Balance Sheet of Kommunalkredit Austria AG according to the Austrian Company Code/Austrian Banking Act Assets Cash and balances with central banks 83, ,693.0 Public-sector debt instruments eligible as collateral for central bank funding 05, ,076. Loans and advances to banks 7, ,33.7 Loans and advances to customers,600,386.8,77,338.6 (after provision pursuant to 57() Austrian Banking Act of EUR 5.0 million) Bonds and other fixed-income securities 7,9.8 55,89.4 Participations,300.,85. Investments in associates 6, ,339.8 Intangible non-current assets Property, plant and equipment,904.,904. Other assets 5, ,475.4 Accruals/deferrals,5. 6,883.5 Total assets 3,98, ,540,044.6 Liabilities Amounts owed to banks 439, ,4.3 Amounts owed to customers 44, ,939. Securitised liabilities,986,53.8,30,774.5 Other liabilities 3, ,350.4 Accruals/deferrals 6,45.3 8,050.0 Provisions 7, ,909.7 Fund for General Banking Risks 5, ,000.0 Additional capital pursuant to Part Title I Chapter 4 of Regulation (EU) No 575/03 66, ,55. Subscribed capital 59, ,49.3 Revenue reserve Statutory reserve pursuant to 57(5) Austrian Banking Act 0, ,000.0 Net profit 39, ,8.3 of which profit carryforward 0,8.3 8,8.3 of which result for the period 9, Total liabilities 3,98, ,540,044.6 In contrast to the Consolidated Financial Statements according to IFRS where Kommunalkredit Austria AG is treated as an economic entity including Kommunalkredit Public Consulting GmbH and Kommunalkredit Beteiligungs- und Immobilien GmbH (KBI) this balance sheet shows the banking operations of Kommunalkredit Austria AG according to Austrian GAAP (Austrian Company Code/Austrian Banking Act). 6

7 Income Statement of Kommunalkredit Austria AG according to the Austrian Company Code/Austrian Banking Act to Net interest income 8,549.6 Interest and similar income 88,088. Interest and similar expenses -69,538.5 Income from investments Net fee and commission income Income from financial transactions -8. Other operating income 6,584.5 of which re-invoicing of administrative expenses to KF/KPC 6,86.3 Operating income 5,556.5 General administrative expenses -9,460.9 Personnel expenses -0,95.5 Other administrative expenses (non-personnel) -6,000.8 Bank Resolution Fund -,508.5 Depreciation -4. Other operating expenses -,930. of which bank stability tax -,930. Operating expenses -,533. Operating result 4,03.3 Result from valuations and realisations,00. of which realisation from early redemption of own issues 4,466. of which realisation from securities, loans and derivatives 4,550.0 of which change in provision pursuant to 57() Austrian Banking Act -5,000.0 of which change in valuation adjustments -5. Profit on ordinary activities 6,04.5 Taxes on income 3,75.6 Other taxes -7.5 Result for the period 9,7.6 Due to the demerger for new incorporation (as at 6 September 05), comparative figures of the previous year are not available. The contribution to the Bank Resolution Fund, assessed by the Financial Markets Authority and payable pursuant to the Bank Recovery and Resolution Act, amounts to EUR.5 million for 06 and is to be recognised in total in the first half of 06. 7