IMMIGON PORTFOLIOABBAU IA AG
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Vienna (24 April 2015) - The VBAG Group continued its rapid and systematic process of winding down assets and risks in 2014, and substantially reduced total assets to euro 15.1 billion (2013: euro 20.9 billion). In order to tackle expected medium-term problems regarding the fulfilment of regulatory capital requirements, the Volksbanks decided in 2014 to comprehensively restructure the association and change VBAG's business model. This restructuring is designed to lay the foundations for a new, sustainable Association of Volksbanks that is fit for the future.
Splitting up VBAG is at the heart of the restructuring plan. The duties that VBAG is statutorily required to fulfil as the Association of Volksbanks' central organisation are to be transferred to Volksbank Wien-Baden. The association will also transfer service functions that VBAG provides to the Volksbank sector and that are essential to the smooth-running of the banks. The job of the remaining part of VBAG is to swiftly continue the winding-down process that has been successfully underway for two years and meet obligations to creditors when they become due, thus completing the liquidation of VBAG.
The legal split-up of VBAG, the transfer of the spun-off part of the business to Volksbank Wien-Baden, the surrender of VBAG's banking licence and its departure from the liability association are planned for 4 July. With effect from this date, the wind-down company will be named immigon portfolioabbau ag. The name immigon has been created from the first part of the Latin word imminuere (to reduce) and the ending -gon, used in geography to describe angular shapes.
The restructuring of the Association of Volksbanks, split-up of VBAG and associated transfer of business to Volksbank Wien-Baden is currently being examined and remains subject to approval by the banking regulator, the European Commission and other authorities and institutions.
As already reported, the change in business model with the objective of creating a wind-down company has accounting implications. It results in a change to the accounting and valuation methods used for the assets and liabilities allocated to that wind-down company in the course of the split-up. This has had a major impact on the results, which is more strongly reflected in the single-institution figures prepared in accordance with the Austrian Commercial Code than in the consolidated results prepared in accordance with IFRS.
The pre-tax result for the VBAG Group as at 31 December 2014 was euro -466 million, and the consolidated result after taxes and minority interests euro -500 million.
Net interest income grew by euro 14 million to reach euro 203 million at year-end. Net fee and commission income fell slightly, primarily as a result of the winding-down measures in the non-core business. It stood at euro 20 million as at 31 December 2014. At euro 27 million, net trading income was up on the previous year.
General administrative expenses were almost unchanged at euro -247 million as at 31 December 2014. The number of staff fell considerably to 1,317 by the end of the year. For VBAG's restructuring an expense of euro -36 million was reported.
The other operating result totalled euro -82 million at year-end. Key factors behind this figure were the valuation of the disposal groups, the deconsolidation result for the sold VBLI companies and VB Malta, the banking levy and the adjustment to the carrying amounts of loss-bearing instruments.
Risk provisions amounted to euro -38 million in 2014. Due to the winding-down of the non-core lending portfolios, fewer write-downs were required than in the previous year, however there were fewer releases from portfolio-based allowances. Overall, this resulted in an increase of euro 14 million.
Income from financial investments totalled -46 million in the reporting period. The equity valuation of VB Romania was euro -275 million and reported under income from discontinued operation.
The total assets of the VBAG Group fell by euro 5.8 million on the previous year as a result of the winding-down and amounted to euro 15.1 billion at the end of the year.
Since 1 January 2014, the CRR (Capital Requirement Regulation) has determined the group of companies consolidated for regulatory purposes. Since then, capital ratios have no longer been reported for the VBAG Group of credit institutions, but instead for the largest scope of consolidation (VB Holding Group of credit institutions, which largely consists of the VBAG Group, VB Regio Invest Bank AG and VB Holding itself). The common equity tier 1 capital ratio (in relation to total risk) stood at 6.2% at year-end 2014, while the equity ratio (total risk) was 14.2%.
As at 31 December 2014, the valuation losses of euro 550 million recorded in preparation for the split up of VBAG led to a result after taxes of euro -887.9 at individual bank level, which is reported in accordance with the Austrian Commercial Code. As was already announced following the relevant AGM resolutions of 23 December 2014, this means that the VBAG will be unable to meet the regulatory standards in the period prior to the split-up. The regulator was, of course, fully informed of this in advance of the announcement. The regulatory core capital ratio (total risk) stood at -2 % at year-end 2014, while the equity ratio (total risk) was 4.2 %. Economic equity totalled euro 37 million at the end of 2014.
To make the splitting of VBAG possible, the VBAG Managing Board will propose at the Annual General Meeting on 28 May, a simplified capital reduction in order to offset the accumulated losses and loss carryforwards from previous years against the available capital. The capital reduction of 96.65% is to affect the share and participation capital.
immigon will operate with 75 members of staff. Its balance sheet structure will be as follows with total assets of approximately euro 7.1 billion.
Approximately euro 8.7 billion of assets are being transferred to Volksbank Wien-Baden. The main assets and liabilities to be transferred are as follows:
| Transfer to Volksbank Wien-Baden | |||
| Assets | All figures in euro millions | Liabilities | |
| Loans and advances to Volksbanks | 2,542 | Covered bonds | 1,498 |
| Syndicate business | 1,432 | LiveBank | 410 |
| Investment book | 2,350 | Amounts owed to Volksbanks | 4,266 |
| Liquid funds | 1,351 | Customer deposits | 618 |
| Participations (e.g. in the start:gruppe) | 14 | ||
| Other assets | 963 | Other liabilities | 1,860 |
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