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MarketScreener Homepage  >  Equities  >  Wiener Boerse  >  BAWAG Group AG    BG   AT0000BAWAG2

BAWAG GROUP AG

(BG)
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BAWAG : reports net profit of € 122 million, or € 1.39 per share

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07/28/2020 | 03:50am EDT

PRESS RELEASE

VIENNA, July 28, 2020

BAWAG GROUP REPORTS H1 '20 NET PROFIT OF

  • 122 MILLION, OR € 1.39 PER SHARE
    • H1 '20 net profit of € 122 million, EPS of € 1.39 and RoTCE of 8.8%
    • H1 '20 includes general reserves of approximately € 65 million related to COVID-19 effects after applying the ECB's most adverse economic scenarios for the Euro area of -12.6% GDP decline in 2020 and a recovery of +3.3% in 2021
    • Fully loaded CET1 ratio of 13.4% post-deduction of FY 2019 and H1 '20 dividends
    • Fully committed to distributing earmarked dividends related to FY '19 and H1 '20, subject to regulatory approval
    • Targeting RoTCE ~10% for FY 2020 and reiterating mid-term targets of RoTCE >15% and CIR <40% in a normalized environment

VIENNA, Austria - July 28, 2020 - BAWAG Group today released its results for the first half 2020, reporting a net profit of € 122 million, earnings per share of € 1.39 and a RoTCE of 8.8%.

The first half 2020 was marked by the outbreak of COVID-19, which was characterized as a global pandemic by the World Health Organization (WHO) in early March. Austria, which is the core and foundation of our business, implemented a lockdown affecting all businesses with the exception of critical infrastructure earlier than most countries in mid-March. Austria has also been one of the early movers in gradually easing restrictions and beginning to open the economy only a month after the initial lockdown.

The underlying operating performance of our business remained solid in the first half 2020 with pre-provision profits of € 330 million and a cost-income ratio of 43%. To address the deteriorating macroeconomic environment as well prudently provision against the observed build-up of customer payment deferrals due to COVID-19, a general reserve of approximately € 65 million was posted in the first half 2020, leading to total risk costs of € 130 million. This assumes the most severe economic scenarios published by the ECB for the Euro area of -12.6% GDP decline in 2020, followed by a recovery of 3.3% in 2021. The bank's capital position remained strong, with a fully loaded CET1 ratio of 13.4% post deduction of dividends. The Bank continues to deduct the full year 2019 (€ 230 million) and first half 2020 (€ 61 million) dividends from capital and will wait for further guidance from our regulators regarding capital distributions.

"The first half 2020 was marked by the outbreak of COVID-19. In dealing with an unprecedented health crisis we have established measures to take care of our employees, to support our customers and local communities, and protect and grow our franchise. We demonstrated the strength of our franchise delivering a solid operating performance with pre-provision profits of € 330 million, a cost-income ratio of 43% and a return on tangible common equity of 8.8%. We are acting out of an abundance of caution in our provisioning, planning for the worst and hoping for the best. Therefore, we have taken a general reserve of approximately € 65 million to proactively address the macroeconomic deterioration and potential impact to our customers from the COVID-19 crisis. It goes without saying, our business will forever be changed by the events of the past few months. This is the future and the changes we've experienced will serve as catalyst for accelerated changes across our organization in terms of customer engagement, adoption of digital end-to-end processes, more data-driven decision making and being laser focused on driving simplicity and standardization across the Group. Our leadership team has worked together for the better part of the past decade, having driven the transformation of the Group, embracing constant change, and never growing complacent. We will continue to focus on the things that we can control, be proactive and decisive, and not be deterred by the change ahead. I could not be prouder of how the company has come together over the past few months, ensuring smooth operations, staying focused on execution and most importantly delivering for our customers and local communities", commented Chief Executive Officer Anas Abuzaakouk.

1

PRESS RELEASE

VIENNA, July 28, 2020

Delivering solid underlying operating performance in H1 2020 versus prior year

Core revenues remained broadly stable at € 575 million in the first half 2020 despite the impact from lockdown measures. Net interest income rose by 3% to € 448 million driven by higher interest-bearing assets. Net fee and commission income decreased by 10% to € 128 million. While all branches remained open during the pandemic, the lockdown measures resulted in less advisory and transaction business, with the second quarter representing a trough of activity. Operating expenses decreased by 5% as a result of ongoing efficiency measures. The cost- income ratio remained flat at 43.0%. This resulted in a pre-provisionprofit of € 330 million, down 5% versus prior year.

The first half 2020 also included regulatory charges of € 39 million, which represents approximately 90% of full-year-charges (with the majority required to be booked in the first quarter).

Risk costs were € 130 million in the first half 2020, an increase of € 102 million, or 376% compared to the first half 2019. To address the deteriorating macroeconomic environment as well prudently provision against the observed build-up of customer payment deferrals due to COVID-19, a general reserve of approximately € 65 million was posted across all segments. Additionally, we took a specific provision of € 16 million for an exposure in the Oil & Gas sector in our Corporates business.

BAWAG Group ended the first half 2020 with a fully loaded CET1 ratio of 13.4% (December 2019: 13.3%). This considers the earmarked 2019 dividend of € 230 million and the H1 '20 dividend accrual of € 61 million. In line with the ECB recommendation regarding capital distributions being postponed until further guidance is provided, we have postponed the AGM to October 30, 2020. This postponement will enable us to have more clarity on the consequences of COVID-19 and allow for the proper assessment of any further formal guidance or recommendations from the ECB or governmental bodies.

Customer loans increased by 3% compared to December 2019. The overall customer loan book continued to be comprised of approximately 70% exposure to the DACH region and approximately 30% exposure to Western Europe and the United States. We focus on developed markets as we believe in doing business in countries with stable legal systems, sound macroeconomic fundamentals, and solid finances. We will continue to maintain our conservative risk appetite and focus on our core markets.

Our goal was, and will always be, maintaining a strong balance sheet, solid capitalization levels and conservative underwriting, a cornerstone of how we run the Bank. The NPL ratio stood at 1.6% (excluding the City of Linz case: 1.1%), representing the ongoing low NPL levels. Approximately 60% of the balance sheet is funded via customer deposits and if capital markets turn volatile, there are no funding requirements in 2020. Furthermore, the Bank has a short-term liquidity buffer of € 8.6 billion as of June 2020, including other marketable securities, the buffer increases to € 11.4 billion.

2

PRESS RELEASE

VIENNA, July 28, 2020

Customer Business performance in H1 2020 versus H1 2019

PBT

Net profit

RoTCE

Cost-income ratio

Segment

(in € million)

(in € million)

Retail & SME

164 / (11%)

123 / (11%)

19.8%

40.2%

Corporates & Public

50 / (47%)

37 / (47%)

8.7%

30.0%

Retail & SME delivered a profit before tax of € 164 million, down 11% versus the first half 2019. The decrease relates to an increase in risk costs, as a general reserve was taken to address COVID-19-related effects. Pre- provision profit increased to € 268 million, up 11% compared to the prior year, with an increase in net interest income more than compensating for COVID-19-related lower net fee and commission income. With the outbreak of COVID-19, we refocused our efforts on the well-being and full service of our customer base during these difficult times and circumstances. However, we also continued executing on our business initiatives. During the first half, we completed an important step in the simplification of our operations, by consolidating our Austrian banking channels and brands under one organization. In Germany, we continued executing on our growth and profitability initiatives by building a strong front-end sales organization across key products and channels, while leveraging central functions in order to provide customers with a frictionless experience while driving synergies across the Group. Overall, we see customers acting out of an abundance of caution, no different than how companies have reacted. This has impacted consumer loan demand and depressed overall consumer spending levels, however, we are already seeing customer activity beginning to normalize.

"The first half 2020 was a time of significant transition as we emerged into our new and redesigned branch footprint. We now see the positive effects of our retail transformation, with overall sales force productivity having increased year over year. The efficiency created by this transition allows us to reinvest in our network with an enhanced branch experience, digital products and key partnerships for new customer growth. At the same time, the outbreak of COVID-19 required us to adapt to the new environment quickly and actually advanced the transformation of our franchise in Austria to a high tech, high touch advisory. The signs of resilience in the customer base and the flexibility of our business model were encouraging. We have seen trends of customer's focus on building financial cushion for the future, managing risk, finding options for returns on savings, as well as investment in home ownership. These trends have accelerated as we emerge from the health crisis in the second quarter, and we believe that our focus on financial well-being, our commitment to advisory and alternative channels has positioned us well for the future", commented David O'Leary, member of the Managing Board of BAWAG Group and responsible for Retail & SME in Austria.

Corporates & Public contributed a profit before tax of € 50 million in the first half 2020, down 47% versus the previous year. In the first half 2020 risk costs were € 40 million, primarily related to the application of the updated macro-economic assumptions as well as the booking of a specific reserve of € 16 million for exposures in the Oil

  • Gas sector. We continue to see a solid pipeline with diversified opportunities in 2020, including a positive development in the public sector business. However, competition for defensive, high-quality transactions will remain high. Our focus will continue to be on risk-adjusted returns, disciplined underwriting and being patient without ever chasing volume.

3

PRESS RELEASE

VIENNA, July 28, 2020

Outlook and targets

The underlying operating performance of the business remained solid in the first six months of 2020 with strong pre-provision profits. To address the deteriorating macroeconomic environment as well prudently provision against the observed build-up of customer payment deferrals due to COVID-19, general reserves were taken reflecting the most adverse economic forecasts for the Euro area published by the European Central Bank.

It is expected that the underlying operating performance remains solid for the remainder of the year, while we will remain prudent on provisioning. The fiscal measures taken by Austria and Germany have supported the real economy and to date softened the impact of COVID-19 on the broader market. While all branches remained open during the pandemic, the lockdown measures resulted in less advisory and transactional business, with the second quarter representing a trough of activity. Overall, there is still uncertainty around the scope and length of the impact of COVID-19 on the markets which we operate and ultimately on our business. We will closely monitor the developments and will work to address to the best of our ability during the course of the year. The outlook for 2020 is based on the ECB's adverse macroeconomic scenario published in June, which assumes a GDP decline of -12.6% in 2020 and a recovery of +3.3% in an adverse scenario in 2021.

Outlook 2020

Net interest income

Net fee and commission income

Other income

Operational expenses

Risk costs

Return on tangible common equity

Our medium-termtargets (in a normalized environment) are as follows:

Medium-term targets

Return on tangible common equity

Cost-income ratio

Increasing by up to 3%

Decreasing 10 to 15%

Flat to H1 '20

Decreasing by ~5%

H2 '20 lower than H1 '20

Targeting ~ 10%

>15%

<40%

In terms of capital generation and distributions, we target an annual dividend payout of 50% of net profit 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 a yearly assessment, in the form of stock buybacks and/or special dividends.

The Managing Board continued to deduct the earmarked full year 2019 dividend of € 230 million and the

H1 '20 dividend accrual of € 61 million. Therefore, a total of € 291 million has been deducted from our CET1 capital. In line with the ECB recommendation regarding capital distributions being postponed until further guidance is provided, we have postponed the AGM to October 30, 2020. This postponement will enable us to have more clarity on the consequences of COVID-19 and allow for the proper assessment of any further formal guidance or recommendations from the ECB or governmental bodies.

4

PRESS RELEASE

VIENNA, July 28, 2020

About BAWAG Group

BAWAG Group AG is the listed holding company of BAWAG P.S.K., which is headquartered in Vienna, Austria, with the main brands and subsidiaries easybank, easyleasing and start:bausparkasse in Austria. In Germany, BAWAG Group operates under the Südwestbank, BFL Leasing GmbH, Health Coevo AG and start:bausparkasse brands and subsidiaries with Zahnärztekasse AG in Switzerland as well. With 2.4 million customers, BAWAG P.S.K. is one of Austria's largest banks operating under a well-recognized national brand and applies a low-risk, efficient, simple and transparent business model focused on Austria, Germany and developed markets. The Bank serves retail, small business and corporate customers offering comprehensive savings, payment, lending, leasing, investment, building society, factoring and insurance products and services through various online and offline channels. Delivering simple, transparent and best-in-class products and services that meet our customers' needs is the consistent strategy across all business units.

BAWAG Group's Investor Relations website https://www.bawaggroup.com/ircontains further information, including financial and other information for investors.

Contact:

Financial Community:

Jutta Wimmer (Head of Investor Relations)

Tel: +43 (0) 5 99 05-22474

IR Hotline: +43 (0) 5 99 05-34444

E-mail: investor.relations@bawaggroup.com

Media:

Manfred Rapolter (Head of Corporate Communications, Spokesman)

Tel: +43 (0) 5 99 05-31210

E-mail: communications@bawaggroup.com

This text can also be downloaded from our website: https://www.bawaggroup.com

5

PRESS RELEASE

VIENNA, July 28, 2020

Profit or loss statement

Q2

Q2

Change (%)

Jan-Jun

Jan-Jun

Change (%)

in € million

2020

2019

2020

2019

Interest income

275.0

286.3

(3.9)

559.0

575.3

(2.8)

Interest expense

(49.4)

(67.8)

(27.1)

(113.5)

(142.6)

(20.4)

Dividend income

2.2

2.1

4.8

2.2

2.4

(8.3)

Net interest income

227.8

220.6

3.3

447.7

435.1

2.9

Fee and commission income

73.2

93.0

(21.3)

165.3

186.6

(11.4)

Fee and commission expenses

(17.4)

(23.0)

(24.3)

(37.6)

(44.0)

(14.5)

Net fee and commission income

55.8

70.0

(20.3)

127.7

142.6

(10.4)

Core revenues

283.6

290.6

(2.4)

575.4

577.7

(0.4)

Gains and losses on financial

4.4

instruments and other operating

0.6

22.4

(97.3)

33.6

(86.9)

income and expenses1)

Operating income

284.2

313.0

(9.2)

579.8

611.3

(5.2)

Operating expenses1)

(124.7)

(136.0)

(8.3)

(249.6)

(262.3)

(4.8)

Pre-provision profit

159.5

177.0

(9.9)

330.2

349.0

(5.4)

Regulatory charges

(2.5)

(2.9)

(13.8)

(38.8)

(37.1)

4.6

Operating profit

157.0

174.1

(9.8)

291.3

311.9

(6.6)

Total risk costs

(74.6)

(15.3)

>100

(129.6)

(27.2)

>100

Share of the profit or loss of

associates accounted for using

(1.6)

1.2

-

(0.4)

2.4

-

the equity method

Profit before tax

80.8

160.0

(49.5)

161.3

287.1

(43.8)

Income taxes

(19.3)

(38.3)

(49.6)

(38.6)

(68.5)

(43.6)

Profit after tax

61.5

121.7

(49.5)

122.7

218.6

(43.9)

Non-controlling interests

(0.3)

0.0

>(100)

(0.3)

0.0

>(100)

Net profit

61.2

121.7

(49.7)

122.3

218.6

(44.1)

  1. In accordance with IFRS, the item Other operating income and expenses also includes regulatory charges in the amount of € 3 6.3 million for the first half 2020. The item Operating expenses includes regulatory charges in the amount of € 2.5 million for the first half 2020 as well. However, BAWAG Group's management considers regulatory charges as a separate expense. Accordingly, they are shown in a separate ex pense line.

6

PRESS RELEASE

VIENNA, July 28, 2020

Total assets

Jun

Dec

Change (%)

Jun

Change (%)

in € million

2020

2019

2019

Cash reserves

843

1,424

(40.8)

803

5.0

Financial assets

Held for trading

375

353

6.2

409

(8.3)

Fair value through profit or loss

811

740

9.6

537

51.0

Fair value through OCI

5,140

3,631

41.6

3,069

67.5

At amortized cost

42,135

37,556

12.2

37,631

12.0

Customers

31,372

30,467

3.0

31,062

1.0

Debt instruments

2,500

1,369

82.6

2,955

(15.4)

Credit institutions

8,263

5,720

44.5

3,614

>100

Valuation adjustment on interest rate risk

17

5

>100

4

>100

hedged portfolios

Hedging derivatives

423

397

6.5

494

(14.4)

Tangible non-current assets

501

707

(29.1)

637

(21.4)

Intangible non-current assets

555

569

(2.5)

569

(2.5)

Tax assets for current taxes

13

15

(13.3)

12

8.3

Tax assets for deferred taxes

7

8

(12.5)

26

(73.1)

Other assets

260

257

1.2

272

(4.4)

Non-current assets held for sale

198

-

-

-

-

Total assets

51,278

45,662

12.3

44,463

15.3

7

PRESS RELEASE

VIENNA, July 28, 2020

Total liabilities and equity

Jun

Dec

Change (%)

Jun

Change (%)

in € million

2020

2019

2019

Total liabilities

47,319

41,834

13.1

40,477

16.9

Financial liabilities

Fair value through profit or loss

332

369

(10.0)

515

(35.5)

Held for trading

355

334

6.3

348

2.0

At amortized cost

43,504

38,543

12.9

37,696

15.4

Customers

30,249

30,378

(0.4)

30,089

0.5

Issued securities

5,277

5,080

3.9

4,682

12.7

Credit institutions

7,978

3,085

>100

2,925

>100

Financial liabilities associated with transferred

918

729

25.9

99

>100

assets

Valuation adjustment on interest rate risk hedged

387

337

14.8

390

(0.8)

portfolios

Hedging derivatives

61

116

(47.4)

39

56.4

Provisions

457

480

(4.8)

476

(4.0)

Tax liabilities for current taxes

44

34

29.4

18

>100

Tax liabilities for deferred taxes

78

54

44.4

16

>100

Other obligations

1,183

838

41.2

880

34.4

Total equity

3,959

3,828

3.4

3,986

(0.7)

Common equity

3,657

3,527

3.7

3,688

(0.8)

AT1 capital

297

297

-

297

-

Non-controlling interests

4

4

0.0

1

>100

Total liabilities and equity

51,278

45,662

12.3

44,463

15.3

8

PRESS RELEASE

VIENNA, July 28, 2020

Business segment performance

Jan-Jun 2020

Retail & SME

Corporates &

Treasury

Corporate

Total

in € million

Public

Center

Net interest income

334.3

117.9

24.1

(28.6)

447.7

Net fee and commission income

109.4

19.6

0.1

(1.4)

127.7

Core revenues

443.7

137.5

24.2

(30.0)

575.4

Gains and losses on financial instruments

3.3

1.8

(0.7)

(26.3)

(21.9)

Other operating income and expenses

0.9

0.0

0.0

25.4

26.3

Operating income

447.9

139.3

23.5

(30.9)

579.8

Operating expenses

(180.1)

(41.8)

(14.2)

(13.5)

(249.6)

Pre-provision profit

267.8

97.5

9.3

(44.4)

330.2

Regulatory charges

(25.9)

(7.5)

(5.4)

0.0

(38.8)

Total risk costs

(77.9)

(40.2)

(2.0)

(9.5)

(129.6)

Share of the profit or loss of associates accounted for

-

-

-

(0.4)

(0.4)

using the equity method

Profit before tax

164.0

49.9

1.9

(54.5)

161.3

Income taxes

(41.0)

(12.5)

(0.5)

15.4

(38.6)

Profit after tax

123.0

37.4

1.4

(39.1)

122.7

Non-controlling interests

-

-

-

(0.3)

(0.3)

Net profit

123.0

37.4

1.4

(39.5)

122.3

Business volumes

Assets

18,493

13,902

16,184

2,699

51,278

Liabilities

28,475

12,182

4,559

6,062

51,278

Risk-weighted assets

8,409

7,652

2,681

2,008

20,750

9

PRESS RELEASE

VIENNA, July 28, 2020

Jan-Jun 2019

Retail & SME

Corporates &

Treasury

Corporate

Total

in € million

Public

Center

Net interest income

303.7

126.0

23.6

(18.2)

435.1

Net fee and commission income

122.0

21.6

0.1

(1.1)

142.6

Core revenues

425.8

147.7

23.7

(19.5)

577.7

Gains and losses on financial instruments

0.0

0.0

42.0

(13.8)

28.2

Other operating income and expenses

0.7

0.0

0.0

4.7

5.4

Operating income

426.4

147.7

65.7

(28.5)

611.3

Operating expenses

(185.3)

(52.8)

(17.2)

(7.0)

(262.3)

Pre-provision profit

241.1

94.9

48.5

(35.5)

349.0

Regulatory charges

(24.0)

(8.5)

(4.6)

0.0

(37.1)

Total risk costs

(32.2)

8.4

0.3

(3.7)

(27.2)

Share of the profit or loss of associates

-

-

-

2.4

2.4

accounted for using the equity method

Profit before tax

184.9

94.8

44.3

(36.9)

287.1

Income taxes

(46.2)

(23.7)

(11.1)

12.5

(68.5)

Profit after tax

138.7

71.1

33.2

(24.4)

218.6

Non-controlling interests

-

-

-

0.0

0.0

Net profit

138.7

71.1

33.2

(24.4)

218.6

Business volumes

Assets

17,446

14,196

9,177

3,644

44,463

Liabilities

27,678

7,375

3,501

5,909

44,463

Risk-weighted assets

8,235

8,523

1,748

2,221

20,727

10

Disclaimer

BAWAG Group AG published this content on 28 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 July 2020 07:50:14 UTC


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Financials
Sales 2020 1 171 M 1 389 M 1 389 M
Net income 2020 296 M 351 M 351 M
Net Debt 2020 - - -
P/E ratio 2020 9,87x
Yield 2020 4,86%
Capitalization 2 981 M 3 538 M 3 537 M
Capi. / Sales 2020 2,55x
Capi. / Sales 2021 2,47x
Nbr of Employees 3 696
Free-Float 76,8%
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Mean consensus OUTPERFORM
Number of Analysts 9
Average target price 41,38 €
Last Close Price 33,90 €
Spread / Highest target 38,6%
Spread / Average Target 22,1%
Spread / Lowest Target -14,5%
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Managers
NameTitle
Anas Abuzaakouk Chief Executive Officer
Egbert Fleischer Chairman-Supervisory Board
Satyen Shah Chief Operating Officer
Enver Sirucic Chief Financial Officer
Christopher Scott Brody First Deputy Chairman-Supervisory Board
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