Looking at the Austrian banks under our coverage, Q2 results have reaffirmed oreven strengthened our positive view on the stocks driven by good operatingperformance backed by much lower than expected cost of risk. Nevertheless, we lookat the potential risks from the Austrian mortgage book due to rising house prices inAustria as well as sliding mortgage margins, albeit product profitability remains high.Furthermore, we analyse the cost of risk trends of Austrian banks through the COVID-19 pandemic crisis. Finally, we look the capital situations of the Austrian banks and seethree well capitalised banks that should be able to pay good dividends in the future.Austrian banks’ capital situation has improved over the last decade to become in ourview one of the strongest in the European banking industry.