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“2020 was not a normal year for us either,” said Wolfgang Viehauser, CEO of HYPO NOE, on Thursday in St. Pölten when the report was released to the press. However, one could score points with a low risk business model, because around half of HYPO’s business is financing for the public sector and public infrastructure.
The bank is 100% owned by the State of Lower Austria. HYPO NOE was founded in 1888 and is the oldest and largest Landesbank in Austria. It operates 27 branches and has 714 employees. HYPO NOE clients include 520 municipalities.
Real estate financing has “really boomed”
In addition, the focus is mainly on real estate financing. According to Viehauser, the area had a big boom last year. “Clients want to invest in their own four walls,” the board spokesman said. Since the coronavirus pandemic, home offices have increased significantly, while at the same time it has become more difficult to go on vacation. Consequently, more emphasis is placed on owning a home.
By contrast, the mood among corporate clients is cloudy. Due to the current uncertainty, they were much more reluctant to invest. Instead, the bank’s financing advisers were asked to provide companies with information on potential federal and state aid.
Of course, there are also concerns about the possible increase in bad debt rates in 2021. Viehauser expects, however, that there will be a slight increase in bankruptcies. A conservative approach to risk provision was chosen. In 2020, the bank created around € 20.4 million in provisions.
“The uncertainty has not abated”
It is not yet possible to predict exactly how the situation will develop in the current financial year. “The uncertainty has not diminished,” Viehauser said. The most important thing will be how things go with support, especially with short-term work, but also with tax deferrals. For private and corporate clients in total, HYPO NOE had around 1,000 deferrals in the previous year, most of which were private clients.
Although the bank no longer issues paper savings books, there is still a strong influx of savings products, Viehauser said. However, this is not perceived as a burden given the constant negative interest rate environment. “They may be a little more expensive, but we are already waiting for deposits from savers,” Viehauser said. To satisfy the simultaneous desire for greater sustainability, there is now a green savings account at the bank.
Total balance: 16.4 billion euros, dividend: 3.8 million euros
The bottom line is that HYPO NOE made a profit of around € 31.9 million in fiscal 2020, 4.9 percent more than the previous year. Both net interest income (plus 9.5 percent to € 129.2 million) and fee income (plus 2 percent to € 17.4 million) increased. The total balance increased from € 14.6 billion to € 16.4 billion.
Despite the increase in risk provisions, the rate of so-called non-performing loans (NPL) fell from 0.96 percent to 0.78 percent in 2020. Expense ratio, cost-income ratio of the bank, improved from 59.15 percent to 53.29 percent. The Common Equity Tier 1 (CET1) ratio was 17.92 percent, down from 19.19 percent in 2019. The rating agency Standard & Poor’s confirmed the bank’s unique A rating. “Furthermore, HYPO NOE is one of only two Austrian banks whose outlook has not been reduced to ‘negative’,” said Udo Birkner, a member of the board.
In consultation with the Austrian Financial Market Authority, HYPO NOE will also distribute a dividend to the owner, the state of Lower Austria, for the financial year 2020. The total increases from 3.5 million euros in prior years to 3.8 million of euros.
