HVB Group results for the first quarter of 2004; the favorable operating trend continues

HVB Group generated an operating profit of 290 million Euro in the first three months of the current fiscal year, more than doubling its performance compared to the adjusted year earlier level (130 million Euro), despite a persistently sluggish macroeconomic environment. Against the background of a slight increase in operating revenues, this trend is due to significantly lower risk provisioning accompanied by stable administrative expenses.

Dieter Rampl, Spokesman of the Board of Managing Directors of HVB Group, comments: 'Business trends in the first three months were largely in line with our ambitious goals. We are confident that we will continue to noticeably boost our revenues in the remainder of the year and achieve the targets we have announced for 2004. To this end, we will further step up our revenue-increasing measures.'

To enhance comparability, the previous year´s figures have been adjusted for the current income and expenses of the disposed companies norisbank, Bank von Ernst and Bankhaus BethmannMaffei as well as for the effects of the contractual trust agreement (CTA). In addition, the results for the first quarter of 2003 do not include the disposal gains for norisbank and Bank von Ernst.

Detailed breakdown of the results
Net interest income amounted to 1,285 million Euro in the first quarter, which was 3.7 percent below the previous year´s figure of 1,335 million Euro. This figure was not only influenced by the sale of the US real estate portfolio, but also by currency effects resulting from the appreciation of the euro and lower income from our equity holdings after the disposals in the first quarter. In addition, it reflects volume decreases resulting from the reduction in risk assets within the context of the 2003 transformation program, which, however, were offset by margin improvements in the lending business. It should also be noted that net interest income for the first quarter of 2004 does not yet any include any proceeds from the capital increase, which was not completed until early April.

At 701 million Euro, net commission income recorded a significant increase of 9.9 percent compared to the year-earlier level of 638 million Euro. This mainly results from higher income in the securities and custody business. The sustained high sales of innovative financial products to retail customers made a particularly strong contribution in this context. Trading profit developed particularly satisfactorily: despite the turbulences in the capital market in the wake of the Madrid terrorist attacks, it rose considerably, to 262 million Euro. This corresponds to an increase of 8.7 percent compared to the already high prior-year level of 241 million Euro.

Total operating revenues increased 2.8 percent, to 2,317 million Euro, in the first quarter of 2004 (previous year: 2,254 million Euro). Administrative expenses were stable compared to the first quarter of 2003 (1,549 million Euro), edging down 0.5 percent to 1,542 million Euro. The cost-income ratio improved to 66.6 percent at the end of March 2004 (previous year: 68.7 percent). Risk provisioning declined by 15.7 percent, to 485 million Euro, compared to the prior-year level (575 million Euro).

Operating profit more than doubled and came to 290 million Euro (previous year: 130 million Euro). This means that the sustained earnings improvement recorded in fiscal 2003 has continued. At 199 million Euro, pre-tax profit nearly quadrupled after the first three months (previous year: 54 million Euro). Earnings after taxes came to 111 million Euro (previous year: -5 million Euro). The increase in minority interests in earnings to 58 million Euro is largely attributable to last year´s IPO of Bank Austria Creditanstalt. In the first three months, HVB Group generated a net profit of 53 million Euro, compared
to a loss of 25 million Euro in the same period of the previous year.

2004 target ranges
HVB Group has defined clear target ranges for 2004. The expected first-quarter figures deviate slightly from the pro-rata annual target

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