Fiscal year 2021

Good winding-up progress has been made

Fiscal year 2021 went well for the EAA in operational terms. As in previous years, the winding-up activities were focused on measures for reducing the portfolio ahead of schedule and active participation. The corona pandemic has hardly affected the EAA’s winding-up activities and has not had any serious negative financial impact to date. The portfolio of loans and securities was reduced by EUR 2.1 billion to EUR 10.6 billion as of 31 December 2021, and the notional volume of the trading portfolio declined by 30.8% to EUR 65.5 billion.

In contrast to the two previous years, the EAA reported a positive net result for the year of EUR 1.7 million. The positive result is largely due to the capital repatriation of Erste EAA Ireland plc, the former EAA CBB. This one-off effect does not alter the fact that the EAA’s earnings are bound to decline at the well-advanced stage of the portfolio wind-up.

The EAA can continue to draw on a solid risk buffer to wind up the remaining portfolio. Its equity as of 31 December 2021 amounted to over EUR 655 million. The buffer of equity, equity capital drawing limit and risk provisions in relation to the remaining portfolio has increased further by 1.6 percentage points to 13.9% compared to year-end 2020. The portfolio’s investment grade share remains stable at around 75%.

During the reporting period, the judgement was delivered by the Regional Court of Frankfurt am Main, whereby Portigon’s claim against the EAA in connection with WestLB’s dividend arbitrage trades was granted by the court of first instance. The EAA considers this decision to be legally erroneous and believes it has a very good chance of success in an appeal. Accordingly, it has filed an appeal against the judgement within the time allowed. In light of this, the EAA continues to see no need to create provisions for the event of ultimate defeat in this legal dispute.

The EAA continues to optimise and variabilise administrative expenses as part of its efficient further development. This also means that the EAA will rely on a flexible servicer landscape in the medium term. Awards for four new servicers were made in the second half of the fiscal year. The transition to the new servicer structure is planned for the first quarter of 2023, and the EAA will then focus on its key monitoring, managing and decision-making functions.

On the basis of current information, the EAA does not expect the war in Ukraine to have any significant overall impact on credit risk and liquidity. As a result of the successful reduction in recent years, its direct net exposure to Russia is currently in the low single-digit millions.