Christoph Raninger, CEO of Wiener Privatbank, considers the bank to be on the right track despite the difficult financial year 2020: "The COVID-19 crisis year 2020 could be considered as a kind of stress test for Wiener Privatbank's business model. At the onset of the crisis we were able to satisfy our clients’ demand for safe real estate investments, and in the second half of the year also with our capital market services. This means that we were well positioned for every market phase, enabling the bank to achieve significant growth in its core business. However, COVID-19 did leave its mark and adversely impacted earnings due to one-off effects."
Real Estate and Capital Market specialist
As a real estate one-stop-shop, the Bank offers an integrated combination of investment services and financing from a single source, which together represent holistic access to one of the most interesting and stable forms of investment on the market. This has enabled the bank to succeed, particularly in volatile and uncertain times caused by the crisis, such as the first half of 2020.
Additionally, the bank relies on sound capital market expertise consisting of professional wealth management with in-house asset management as well as tailored capital market and issuer services. Securities brokerage with global market access complete the bank’s service range, and in this segment, the bank has been able to offer added value to its clients, especially in times of volatile markets. By focusing more closely on the SME segment, the bank also succeeded during the market recovery in the second half of the year, in accompanying the only two IPOs in the Direct Market Plus segment of the Vienna Stock Exchange and at the same time noticeably increased the bank's securities custody business.
Increase in core business leads to growth and an increase in net interest and commission income; COVID-19 one-off effects impact net profit for the year
The more focused positioning in the capital markets business had a noticeably positive impact on the bank's targeted growth. As a result, the volume of securities deposits increased significantly by 45% from EUR 728 million to EUR 1.056 million in the year under review, thus exceeding the billion Euro threshold for the first time. Accordingly, total Assets under Management also increased by 15% from EUR 1.532 million to EUR 1.755 million. The more modest increase in Assets under Management compared to the growth in deposits is due to the reduction of excess liquidity on the balance sheet.
With interest rates in the U.S. dollar falling at the beginning of 2020 and the persistently negative interest rate environment also in the Euro, interbank deposits were significantly reduced. At the same time, COVID-19-related risk-reduction measures were implemented in banking book investments, which also had an impact on the balance sheet. Due to these measures, the balance sheet total decreased from EUR 406 million to EUR 313 million year-on-year, despite a slight increase in loans and advances to customers (excl. single loan loss provision).
The development in the core business has had a positive impact on the bank's results: due to the stable lending business and the reduction of excess liquidity, net interest income improved by approx. 10% from EUR 5.1 million to EUR 5.7 million. Based on the positive developments in the securities deposits and capital market business as well as successful sales of real estate investments, especially in the first half of 2020, net commission income increased by around 15% from EUR 7.4 million to EUR 8.4 million.
On the other hand, the bank also had to take into account the developments of the COVID-19 pandemic: due to the market distortions at the beginning of the crisis, risk reduction measures were taken in the banking book, which led to realized losses from financial investments in the amount of EUR -1.2 million. At the same time, risk provisions in the amount of EUR -9.5 million were made in the loan book due to COVID-related market developments and the associated impact on an existing customer loan. As already announced in the ad hoc release on December 21, 2020, the bank did not expect to report a profit according to the Austrian Commercial Code (UGB) for the past year and according to IFRS reported a loss for the year of EUR -7.89 million.
"The positive development in the core business shows that apart from the COVID-19-related one-off effects, the bank has a stable business model as well as a stable core client base. In addition, we have succeeded in focussing on new market niches in the capital market business and therefore we believe that we are on the right track with our positioning as a real estate and capital market specialist, despite the unfortunate one-off effects of the pandemic," says Eduard Berger, member of the Management Board.
Strong Capital Base
As at 31 December 2020, Wiener Privatbank continued to maintain strong capital ratios. Due to the consistent implementation of measures to strengthen the balance sheet, such as an improvement of collateralization against loan exposures and risk-reduction measures in the banking book, the Tier 1 capital ratio improved from 17.97% to 18.68% despite the unfortunate impact of the pandemic on earnings.
Christoph Raninger comments: "Capital adequacy is a key quality measure for any bank. With our capital ratios, we are not only well above the regulatory requirements, but also clearly above the average for Austrian banks. Thus, despite pandemic-related one-off effects, we continue to be on solid ground and are well positioned for further growth."
Changes in Management
In October last year, the bank announced that Mr. Juraj Dvorak was resigning from the Management Board of Wiener Privatbank SE by mutual agreement. As a Management Board member responsible for the CEE business area, Mr. Dvorak was to drive the expansion of the institution, especially into Slovakia and the Czech Republic. However, due to the COVID-19 pandemic and the associated uncertain market conditions in these two CEE countries, it was decided to discontinue this expansion and to strategically focus on the Austrian home market as well as on the existing international activities. The Management Board will therefore consist of Christoph Raninger and Eduard Berger in the future.
Outlook: Growth based on a clear positioning
Based on a strong capital base, Wiener Privatbank's goal is to further expand its positioning as a dynamic specialist bank with a clear focus on real estate and capital market expertise.
With regard to tangible assets, the emphasis will be on expanding existing strengths, namely by developing new real estate projects together with select partners and offering real estate investments as a stable form of investment. The intention is to expand the product offering in the form of new and contemporary products. This applies not only to bricks and mortar investments but also to capital market products.
In this regard, there will be an explicit focus on sustainability in the future. For instance, the first sustainable mezzanine capital fund for real estate development projects in Austria is to be launched in the first half of the year, which will allow the bank's expertise in real estate and capital markets to be leveraged to a greater extent.
The focus is also on the further expansion of the capital market business. By deliberately focussing on the SME segment in debt capital market and equity capital market transactions, the bank plans to expand its market position in this area by acquiring new clients, thus generating growth in the securities and brokerage business. On the asset management side, the aim is to maintain a balanced spectrum of investments, depending on the prevailing market situation, in order to be able to offer institutional as well as private clients the right assets and capital market products suitable for every market phase. Overall, these measures should lead to a continuation of growth in Assets under Management.
Going forward, the bank will also emphasize on innovation. A modern core banking system is to be implemented, and further digitalization initiatives are also on the agenda. In this context, the bank intends to implement an APP for mobile devices that is designed to meet the client needs of a private bank. Further steps in process digitalization will be taken to achieve a more efficient client interaction. The bank also intends to develop and use digital investment products in the future.
CEO Christoph Raninger summarizes: "After the unfortunate outcome of the 2020 financial year due to the pandemic, we are optimistic for the future and are looking forward to reaping the benefits of 2020’s hard work. Through implementing a value chain between capital market services, securities deposits and brokerage, we have succeeded in becoming substantially stronger and adding further value in this area and we intend to continue along this path this year. Also, we are developing new, innovative products, for instance Austria’s first sustainable mezzanine capital fund, and committing ourselves to new real estate projects. Innovation and sustainability will be key topics for this year, and in this regard we look forward to being able to present tangible progress in the near future."