VIENNA, Austria – November 8, 2018 – BAWAG Group today reports a strong profit before tax of € 429 million for the first three quarters 2018, up 14% versus the prior year. The increase was primarily driven by higher net fee and commission income as well as net interest income. The return on tangible equity (@12% CET1) came in at 16.8%. The cost-income ratio was up 1.5pts versus the prior year to 43.3%, reflecting the impact of the acquisitions closed in the fourth quarter 2017. The fully loaded CET1 ratio increased by 180bps to 15.3% versus year-end 2017, including the interim profit.
“Besides having delivered strong results in the first three quarters 2018, we made very good progress on the execution of our key strategic initiatives. The integration and transformation of PayLife and Südwestbank is on track and we closed the acquisition of Deutscher Ring Bausparkasse in the third quarter. Concept 21, our stand-alone strategy in BAWAG P.S.K., is progressing well and we signed another retail partnership agreement. We are continuing our work on the M&A front, assessing a number of opportunities while staying disciplined in following our underwriting guidelines on both strategic fit and value. Our focus remains on driving operational excellence and profitable growth, and we are confident in exceeding all of our 2018 targets,” commented Chief Executive Officer Anas Abuzaakouk.
Delivering strong results in the first three quarters 2018
Core revenues increased by € 97 million, or 13%, to € 836 million. Net interest income rose by 6% to € 623 million, primarily driven by the acquisition of Südwestbank we closed in the fourth quarter 2017, growth in our core products as well as balance sheet optimization measures. Net fee and commission income increased by € 62 million, or 41%, to € 213 million mainly due to the acquisition of PayLife and Südwestbank as well as lower commission expenses paid to Austrian Post. The net interest margin of 2.28% (Q3 2018) improved by 13bps compared to the second quarter 2018.
Operating expenses in the first three quarters 2018 increased by 19% compared to the first three quarters 2017, which was mainly due to the acquisition of PayLife and Südwestbank. The cost-income ratio increased by 1.5pts to 43.3%, which remains well ahead of our 2018 target of <46%.
The risk cost ratio of 11bps in the first three quarters 2018 reflects our continued focus on proactive risk management and a conservative risk profile in a persistently benign credit environment. The NPL ratio stood at 1.7%.
Loans and advances with customers remained largely stable compared to December 2017. The overall customer loan book continued to be comprised of approximately 75% exposure to the DACH region and approximately 25% exposure to Western Europe and the United States. The total new origination volume in the first three quarters 2018 was € 4.7 billion, up 28% versus the prior-year period.
We maintained a strong capital position. At the end of the first three quarters 2018, our fully loaded CET1 ratio was 15.3% (December 2017: 13.5%). The increase of 180bps compared to year-end 2017 reflects earnings accretion as well as lower RWAs, while absorbing negative impacts resulting from the Tier 2 buyback, the share buyback program and the first-time application of IFRS 9.
Customer business performance in the first three quarters 2018
|Segment||PBT (€ million)||Pre-tax RoTE (@12% CET1)||Cost-income ratio|
|BAWAG P.S.K. Retail|
|International Business |
|DACH Corporates & Public Sector|
The BAWAG P.S.K. Retail segment achieved a profit before tax of € 177 million in the first three quarters 2018, up 17% compared to the same period last year. The increase was primarily driven by higher net interest income as well as increased net fee and commission income. The latter also includes lower commission expenses paid to Austrian Post following the separation agreement. Lower operating expenses also contributed to the increase in profit before tax.
The easygroup segment generated a profit before tax of € 106 million in the first three quarters 2018, up 1% compared to the first three quarters 2017. We made significant progress with the PayLife integration, where positive net credit card growth was achieved for the first time since 2013 and only one year after the acquisition. In September 2018, we successfully completed the acquisition of Deutscher Ring Bausparkasse.
The International Business segment’s profit before tax was € 88 million in the first three quarters 2018, up 45% compared to the same period last year. This was mainly due to lower risk costs and a low NPL ratio of 0.2%.
The DACH Corporates & Public Sector segment contributed € 33 million to BAWAG Group’s profit before tax. Our focus continues to be on underwriting business with appropriate risk-adjusted returns.
The Südwestbank segment contributed € 33 million to BAWAG Group’s profit before tax. In the first three quarters 2018, the integration and transformation process was fully launched and is progressing ahead of plan. Our transformation plan is set up to improve operating performance across all products and channels with a focus on profitability, efficiency and capital with a goal to deliver results in line with the overall BAWAG Group targets.
Outlook and targets
BAWAG Group delivered strong results in the first three quarters 2018 and anticipates that this performance will continue throughout the remainder of the year.
Our targets for 2018 are as follows:
In addition, we have the following 3-year targets from 2018 through 2020 in place:
In terms of capital generation and return, we target an annual dividend payout of 50% of net profit attributable to shareholders and will deploy additional excess capital (above 12% CET1) through 2020 to invest in organic growth and pursue earnings-accretive M&A at returns consistent with our RoTE group targets. To the extent excess capital is not deployed via such organic growth and M&A, we are committed to distributing excess capital to shareholders, based on a yearly assessment in the form of stock buybacks.
Jutta Wimmer (Head of Investor Relations)
Tel: +43 (0) 5 99 05-22474
Manfred Rapolter (Head of Communications, Spokesperson)
Tel: +43 (0) 5 99 05-31210