VIENNA, Austria – October 29, 2019 – BAWAG Group today reports a strong profit before tax of € 451 million and net profit of € 343 million, both up 5% versus the prior year, for the first three quarters 2019. The increase was primarily driven by higher operating income. The Bank delivered a return on tangible common equity of 14.2%, a cost-income ratio of 42.7% and a CET1 ratio of 15.7%. On a pro forma basis the return on tangible common equity was 17.7%, with a CET1 ratio of 13.0%.
“BAWAG Group continued to generate strong results in the third quarter, delivering a profit before tax of € 164 million and € 451 million for the first nine months of 2019. Additionally, we received approval from the ECB for our share buyback program in the amount of € 400 million and have launched a tender offer in the full amount that we hope to complete by the end of November. In addition to making progress executing on our strategic capital actions, we continue to execute across a number of operational initiatives from Concept 21 to integrating our recent acquisitions in Germany and Switzerland. 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 three quarters 2019
Core revenues increased by 4%, to € 869 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 5% to € 655 million. Net fee and commission income remained flat at € 214 million. Operating expenses were up 4% compared to the first three quarters 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 0.5pts versus the prior year to 42.7%, in line with our 2019 target of under 43%. Our fully loaded CET1 ratio increased to 15.7% (15.1% in Q2 2019), reflecting the highly capital accretive business model.
Customer loans increased by 1% 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 three quarters 2019, the NPL ratio stood at 1.9% with a risk cost ratio of 15 basis points, which reflects our continued focus on proactive risk management, maintaining a conservative risk profile, and focus on developed markets.
“Pro forma” takes into account normalized regulatory charges, the share buyback of € 400 million as well as the dividend accrual for Q1-3 2019. (Pre-tax) Earnings per share (EPS) before deduction of AT1 dividend.
Customer business segment performance in the first three quarters 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 € 288 million during the first three quarters 2019. Core revenues increased by 6% versus the first three quarters 2018 reflecting our acquisitions and growth in our core products. Operating expenses increased by 9% due to the consolidation of the acquisitions and the gradual increase related to the new branch network. 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 retail partnerships launched in 2019 represent important new customer acquisition channels and will drive core product growth in the future.
The Corporates & Public segment delivered a profit before tax of € 140 million during the first three quarters 2019. Core revenues decreased by 1% as we continue to 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 three quarters 2019 and we are on track to meet all of our full year targets.
Our targets for 2019-2020 are as follows:
|Profit before tax growth|
|Profit before tax (absolute)|
|Return on tangible equity|
15% to 20%
15% to 20%
|Common Equity Tier 1 capital ratio (fully loaded)|
12% to 13%
12% to 13%
|Pre-tax earnings per share (in €)1)|
|Post-tax earnings per share (in €)1)|
1) Before deduction of AT1 dividend; before capital measures.
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. On October 18, 2019, the ECB approved a share buyback of up to € 400 million, which is expected to be executed by the end of November. Additionally, we paid a dividend of € 215 million (50% of 2018 attributable net profit) for 2018 on May 10, 2019. In total, the capital distribution in 2019 amounted to a payout ratio of approximately 140% (against 2018 attributable net profit).
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