BAWAG GROUP REPORTS FY 2022 ADJUSTED NET PROFIT OF € 509 MILLION, EPS € 5.81, AND ROTCE OF 18.6%
- Q4 ’22 net profit of € 132 million, EPS of € 1.51, and RoTCE of 19.6%
- FY ’22 incorporates full write-off of City of Linz receivable of € 254 million in risk costs
- FY ’22 (including City of Linz): Net profit of € 318 million, EPS of € 3.64, and RoTCE of 11.6%
- Adjusted FY ’22 (excluding City of Linz): Net profit of € 509 million, EPS of € 5.81, and RoTCE of 18.6%
- Pre-provision profit of € 849 million (+14% vPY) and CIR at 35.9%
- Adjusted risk costs of € 122 million … continued to build up our ECL management overlay to € 100 million
- Completed € 325 million share buyback program and cancelled 6.6 million shares
- CET1 ratio of 13.5% post-deduction of dividend accrual of € 305 million for FY ‘22
- Targets for 2023: Profit before tax > € 825 million, EPS > € 7.50, DPS > € 4.10, RoTCE >20%, and CIR < 34%; Accelerating all 2025 financial targets to 2023
VIENNA, Austria – February 13, 2023 – BAWAG Group today released its preliminary results for the financial year 2022, reporting a net profit (excluding City of Linz) of € 509 million, € 5.81 earnings per share, and a RoTCE of 18.6%. For the fourth quarter 2022, BAWAG Group reported a net profit of € 132 million, € 1.51 earnings per share, and a RoTCE of 19.6%.
The third quarter 2022 incorporated the full write-off of the City of Linz receivable. In August, the Austrian Supreme Court ruled that the swap contract entered between BAWAG and the City of Linz 15 years ago was invalid. As a result of the ruling, we took a pre-tax write-off of € 254 million, equal to € 190 million impact after tax. Including this write-off, net profit for the financial year 2022 was € 318 million with an RoTCE of 11.6%.
The operating performance of our business was strong during 2022 with pre-provision profits of € 849 million and a cost-income ratio of 35.9%. Total risk costs (excluding City of Linz write-off) were € 122 million, of which € 39 million related to increasing our management overlay. Despite our low NPL ratio of 0.9% and robust credit performance across our business, we decided to remain prudent in our provisioning given the uncertain market environment and potential headwinds, increasing our management overlay provisions by € 39 million during 2022 to a total of € 100 million, equal to almost one-year of normalized risk costs.
Average customer loans were +4% versus prior year. At the end of December 2022, the CET1 ratio was at 13.5%. We generated approximately 250 basis points of gross capital from earnings during 2022. The CET1 ratio considers the deduction of € 305 million dividend, equal to € 3.70 per share for the financial year 2022. In addition, we executed a share buyback of € 325 million in the second half 2022 and cancelled 6,642,237 treasury shares, equal to 7% of share capital, with effectiveness as of 6 December 2022. Our share capital after the cancelation is now at € 82,500,000.
Anas Abuzaakouk, CEO, commented on the financial results: “This past year has confirmed one key tenet we have always embraced, the only constant is change. Despite headwinds building up, volatile capital markets and a slowdown in the second half of the year, 2022 was another record year for the Group in which we exceeded all our targets. On an adjusted basis (excluding the City of Linz legal case) we delivered Net Profit of € 509 million, EPS of € 5.81, a return on tangible common equity (RoTCE) 18.6%, and a cost-income ratio (CIR) 35.9%.
We also distributed € 592 million of capital in the form of € 267 million dividends, or € 3.00 per share, and completed a € 325 million share buyback during 2022. We will be proposing a dividend of € 3.70 per share, equal to € 305 million, for approval at our AGM in March. We ended the year with a CET1 ratio of 13.5% (post dividend accrual) and excess capital of € 261 million versus our CET1 target of 12.25%, with an additional management overlay provision of € 100 million to address any macro uncertainty.
We are purposely maintaining dry powder for potential organic opportunities and M&A in the coming quarters. If specific opportunities do not materialize, any buyback will be under 100 basis points of CET1% (subject to regulatory approval) as we remain prudent and conservative. Despite our strong record of performance over the past decade with an average RoTCE ~15%, we have underearned over this period defined by negative interest rates. We have an opportunity to deliver more normalized returns in the years ahead. Going forward, we are targeting an RoTCE > 20% and a cost-income ratio < 34%. However, we should never confuse the benefits from a normalized interest rate environment with the daily execution of our strategy. Our focus on managing costs and maintaining a conservative and disciplined risk appetite are more important than ever.
Our senior leadership team is incredibly thankful for the support from all our stakeholders. We have an amazing team and resilient business that will deliver results across all cycles allowing us to consistently support our customers, local communities, team members and shareholders.”
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