VIENNA, Austria – July 30, 2019 – BAWAG Group today reports a strong profit before tax of € 287 million and net profit of € 219 million, up 6% and 8% respectively versus the prior year, for the first half 2019. The increase was primarily driven by higher operating income. The Bank delivered a return on tangible common equity of 13.8%, a cost-income ratio of 42.9% and a CET1 ratio of 15.1%. On a pro forma basis the return on tangible common equity was 17.8%, with a CET1 ratio of 12.7%.
“BAWAG Group delivered strong results in the first half 2019 with a profit before tax of € 287 million and a net profit of € 219 million. In addition to our strong operating performance, we closed on our leasing and factoring acquisitions from 2018 and continued to make progress across various operational and strategic initiatives. The recently closed acquisitions complement our Retail & SME business in Germany and emphasize our focus on building out our Retail & SME business across the DACH region. We are on track to deliver on all of our targets in 2019 as we continue to adapt to the changing operating environment. While the market environment for European financials continues to be challenging, the fundamentals of the bank remain strong. We will continue to focus on the things that we control, driving operational excellence, and continuing to pursue disciplined and profitable growth,” commented Chief Executive Officer Anas Abuzaakouk.
Delivering strong results in the first half 2019
Core revenues increased by 4%, to € 578 million compared to the prior year reflecting core product net asset growth as well as the consolidation of the recent acquisitions. Net interest income rose by 6% to € 435 million. Net fee and commission income decreased by 2% to € 143 million. Operating expenses were up 3% compared to the first half 2018, reflecting the consolidation of the acquired businesses in 2018 and 2019. This was partly compensated for by the integration of Südwestbank and a continued focus on driving operational efficiencies across the Group.
The cost-income ratio was down 0.8pts versus the prior year to 42.9% and is in line with our 2019 target of under 43%. Our fully loaded CET1 ratio increased to 15.1% (14.9% in Q1 2019). Gross capital generation of approximately 60 basis points in the second quarter 2019 funded the closing of the latest acquisitions of BFL Leasing GmbH and Health Coevo AG in Germany.
Customer loans increased by 2% compared to December 2018. The overall customer loan book continued to be comprised of approximately 72% exposure to the DACH region and approximately 28% exposure to Western Europe and the United States.
In the first half 2019, the NPL ratio stood at 1.8% with a risk cost ratio of 14 basis points, which reflects our continued focus on proactive risk management, maintaining a conservative risk profile, and focus on developed markets.
Customer business segment performance in the first half 2019
|Segment||Retail & SME||Corporates & Public|
|PBT (in € million)|
|Net profit (in € million)|
|Risk cost ratio|
The Retail & SME segment delivered a profit before tax of € 185 million during the first half 2019. Core revenues increased by 5% versus the first half 2018 reflecting our German/Swiss acquisitions and growth in our core products. Operating expenses increased by 7% due to the consolidation of the acquisitions. Our stand-alone strategy in Austria, Concept 21, is progressing well with a full separation from the Austrian Post by end of 2019. At the same time, we enhanced our digital capabilities by launching our point-of-sale finance offering and releasing our new mobile banking app “klar”. Additionally, our recently launched retail partnerships represent important new customer acquisition channels. In the first half 2019, we launched our partnerships with MediaMarktSaturn Austria, METRO Cash & Carry Austria and the jö bonus loyalty club of REWE Group, of which we are the launch financial partner.
The Corporates & Public segment delivered a profit before tax of € 95 million during the first half 2019. Core revenues remained broadly stable with a focus on risk-adjusted returns. Operating expenses decreased by 14% reflecting ongoing efficiency measures. We see good opportunities across asset backed lending transactions. However, we continue to see pricing pressure across the Corporate lending space. Our focus will continue to be on risk-adjusted returns, disciplined underwriting and being patient without ever chasing volume.
Outlook and targets
BAWAG Group delivered strong results in the first half 2019 and are on track to meet full year targets.
Our targets for 2019-2020 are as follows:
|Profit before tax growth|
|Profit before tax (absolute)|
|Return on tangible equity|
|Common Equity Tier 1 capital ratio (fully loaded)|
|Pre-tax earnings per share (in €)|
|Post-tax earnings per share (in €)|
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 to invest in organic growth and pursue earnings-accretive M&A at returns consistent with our Group RoTCE 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 an annual assessment. The Managing Board is actively evaluating share buyback options. On 30 April 2019, the AGM approved our proposed resolutions to buy back and cancel own shares of up to € 400 million (pending regulatory approvals) and we paid a dividend of € 215 million (50% of 2018 attributable net profit) for 2018 on 10 May 2019.
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