EANS-News: Kommunalkredit Group’s FY 2018 results under IFRS: Significant boost in earnings power

Corporate news transmitted by euro adhoc with the aim of a Europe-wide distribution. The issuer is responsible for the content of this announcement.

Annual Result

Vienna -

  • Operating result tripled to EUR 23.2m
  • New business volume grew by 89.2% to EUR 1,201.8m
  • Placements rose by 52.7% to EUR 569.7m
  • Product range broadened through addition of asset management: Fidelio KA Debt Fund
  • Strengthening capital basis for further growth: 2018 profit will be fully retained, a capital increase is planned

Kommunalkredit Group today announces its FY 2018 results under IFRS. The bank performed strongly in 2018, tripling its operating result to EUR 23.2m (2017:
EUR 7.6m). The marked improvement in earnings reflects the strong growth in infrastructure and energy financing, which accounted for 42.3% of revenues in the banking business.

Kommunalkredit CEO Bernd Fislage: "Kommunalkredit delivered a strong performance in 2018. We continued on the trajectory established in 2017, substantially strengthening our operating earnings power. We have vigorously implemented our growth strategy, based on the two pillars of selective origination of new business transactions and disciplined placement with investors. Together with our team, we look forward to seizing the opportunities of today's infrastructure as well as public sector market, helping our clients to improve the quality of people´s lives. Our work focuses on delivering tangible benefits to smaller and larger communities by impacting key issues including economic growth, job creation, social cohesion and climate improvement."

Major achievements in 2018

* New business growth: Kommunalkredit increased new business volume by 89.2% to EUR 1,201.8m (2017: EUR 635.2m) taking a leading role as mandated lead arranger or co-arranger in over half of the transaction it closed. The bank was mandated lead arranger and sole lender for the Lower Austria Fibre Optic Infrastructure Company (noeGIG) in the EUR 46.5m financing for a broadband network in rural areas and mandated lead arranger in the EUR 650m refinancing for the German fibre optics network broadband expansion. Kommunalkredit acted as mandated lead arranger for the EUR 540m refinancing of a section of the A2 motorway in Poland and for the EUR 165m refinancing of a tram line in Zaragoza, Spain. It also played a significant role in the financing for the takeover of the Nikola Tesla Airport concession in Belgrade by VINCI Airports.

  • Successful placements: The bank placed a total of EUR 569.7m of own commitments with a wide range of international investors, a 52.7 % increase compared to the prior year (2017: EUR 373.2m). The successful placement activities confirm market conformity of new business transactions in terms of structure, pricing and risk management.
  • Asset management: Kommunalkredit successfully launched its own infrastructure debt platform with the first close of its debut fund "Fidelio KA Infrastructure Debt Fund Europe 1" in the third quarter of 2018. Through this platform Kommunalkredit is able to offer business partners access to infrastructure financing via an asset management solution. Two more funds are planned for 2019.
  • Funding position strengthened: During 2018, the bank succeeded in further strengthening its funding structure and broadening its investor base. 54.0% of the bank's funding stems from sources not available at the time of Kommunalkredit's privatisation in autumn 2015. This was mainly driven by the increase in customer deposits by 55.6% to EUR 1,002.5m (31/12/2017: EUR 644.4m), while at the same time extending the average term of deposits. The direct investment product for municipalities "KOMMUNALKREDIT DIREKT" (+29.7% to EUR 319m) and the online investment platform for private customers "KOMMUNALKREDIT INVEST" (+148% to EUR 287m) performed particularly well.
  • High quality of the loan portfolio: The bank holds a loan portfolio of high asset quality with an average rating of "A-". The non-performing-loan ratio (NPL) was maintained at 0.0%.
  • Dividend policy: Kommunalkredit has a solid capital base that will be further strengthened to support future growth. The 2018 profit of EUR 30.4m (according to local GAAP) will be retained and a capital increase in the amount of EUR 20m is planned for the second quarter of 2019. In total, this results in a strengthening of the capital base by EUR 50.4m. As of 31 December 2018, the CET 1 ratio amounted to 19.9% and the total capital ratio to 24.3%

Key financials 2018 of Kommunalkredit Group according to IFRS

  • Net interest income: Net interest income rose by 45.9% to EUR 52.7m (2017: EUR 36.1m), of which EUR 22.7m was generated by new business (2017: EUR 8.4m) and EUR 20.4m by Kommunalkredit's existing, predominately public sector portfolio (2017: EUR 27.8m). Additionally, the first-time adoption of IFRS 9 had a positive impact of EUR 9.5m on net interest income.
  • Net fee and commission income: As a result of the emphasis on its advisory and structuring activities, Kommunalkredit increased its risk-free net fee and commission income by 6.9% to EUR 18.5m (2017: EUR 17.3m), thereby further improving its earnings quality.
  • Net provisioning for impairment losses: The non-performing loan ratio remained at 0.0% in 2018. There were no credit defaults in 2018. The EUR -0.7m loan impairment charge reported (2017: EUR -0.3m) reflected the change in the statistically calculated provision for expected credit losses under IFRS 9.
  • General administrative expenses: General administrative expenses decreased by 3.2% to EUR 54.1m (2017: EUR 55.9m) due to disciplined cost management.
  • Other operating result: The other operating result accounted for EUR 8.3m (2017: EUR 11.2m), primarily comprising income of EUR 8.6m from the provision of operational services to KA Finanz AG (2017: EUR 12.1m).
  • Operating result: The operating result (profit for the year before tax, excluding net valuation result and restructuring costs) tripled to EUR 23.2m (2017: EUR 7.6m).
  • Restructuring expenditure: The service agreement with KA Finanz AG expires on 1 April 2019. This will result in the discontinuation of the services previously provided to KA Finanz AG and the associated reimbursement of costs. It has been consequently necessary to adjust capacity in the bank's middle and back office areas, for which a provision of EUR 2.5m has been recognised.
  • Net result of asset valuation and realised gains and losses: The net result of asset valuation and realised gains and losses amounted to EUR 11.9m (2017: EUR 15.7m) in 2018. It contained a positive EUR 11.3m one-off effect from the buyback of own bonds.
  • Pre-tax annual result: The pre-tax annual result rose to EUR 32.6m (2017: EUR 7.1m) reflecting Kommunalkredit's strong performance in 2018.
  • Taxes on income: Taxes on income of EUR 18.3m for 2018 resulted mainly from EUR 7.6m non-utilised loss carryforward under local GAAP, and EUR 9.5m represents a depreciation of capitalised tax loss carryforward under IFRS in the past. In 2017, a positive tax effect of EUR 11.0m was reported under taxes on income.
  • After-tax annual result: This significant change in taxes on income led to a decrease of the after-tax annual result to EUR 14.3 million. (2017: EUR 18.0 Mio.).
  • The significant improvement of the operating result was reflected in a reduction of the cost/income ratio (excl. restructuring expense/asset valuation result) to 71.0% (2017: 88.4%). Return on equity after tax decreased to 6.1% (2017: 8.0%) with a CET 1 ratio of 19.9%

The FY 2018 Financial Report of Kommunalkredit Group is available at https:// www.kommunalkredit.at/investor-relations/financial-reports.

end of announcement euro adhoc

Attachments with Announcement:

issuer: Kommunalkredit Austria AG
Türkenstraße 9
A-1092 Wien
phone: +43 1 31 6 31
FAX: +43 1 31 6 31 105
mail: info@kommunalkredit.at
WWW: www.kommunalkredit.at
stockmarkets: Luxembourg Stock Exchange, Wien, SIX Swiss Exchange language: English

Digital press kit: http://www.ots.at/pressemappe/409/aom

Rückfragen & Kontakt:

Kommunalkredit Austria AG
Martin Hehemann (Corporate Communications)
Tel.: +43 (0)1/31 6 31-532 oder +43 (0)664/80 31631 532
m.hehemann@kommunalkredit.at; www.kommunalkredit.at