BAWAG Group AG: Q1 2019: Strong profit before tax of EUR 127 million (+9%), normalized profit before tax of EUR 151 million (+6%)

Vienna (pta005/14.05.2019/07:00 UTC+2) -

- Profit before tax (PBT) of EUR 127 million, +9% vs. Q1 2018; normalized PBT of EUR 151 million after accounting for front-loaded regulatory charges
- Net Profit of EUR 97 million, +12% vs. Q1 2018 and normalized Net Profit of EUR 116 million, +8% vs. Q1 2018
- Fully loaded CET1 ratio of 14.9% after IFRS 16 impact and Swiss M&A
- Capital distribution plans on track
- Executing on our strategy and on track to meet full year targets

BAWAG Group today reports a strong profit before tax of EUR 127 million and net profit of EUR 97 million, up 9% and 12% respectively versus the prior year, for the first quarter 2019. Normalizing for the front-loaded regulatory charges, profit before tax was EUR 151 million and net profit EUR 116 million, up 6% and 8% respectively versus the prior year. The increase was primarily driven by higher core revenues as well as lower operating expenses and risk costs. The cost-income ratio of 42.4% remained below the target for 2019 of under 43%. The return on tangible common equity came in at 12.0%. The fully loaded CET1 ratio increased to 14.9%, up 40 basis points versus year-end 2018 after absorbing the impact of IFRS 16 implementation as well as the Swiss M&A. Taking into account normalized regulatory charges, the proposed share buyback of up to EUR 400 million, the recently paid 2018 dividend of EUR 215 million as well as the dividend accrual for Q1 2019, the pro forma return on tangible common equity would be at 17.8% and the CET1 ratio at 12.7%, in line with our stated targets.

"On the back of a strong 2018, BAWAG Group started the first quarter 2019 with a strong set of results delivering a normalized pre-tax profit of EUR 151 million and net profit of EUR 116 million. In terms of our strategic initiatives, it was another busy start to the year: We launched multiple retail partnerships, released our new digital banking app "klar", and continued to execute on Concept 21, our retail network transformation. We've closed all three acquisitions that we signed in December 2018 and continue to build out our DACH platform. Our capital return plans are on track, with the AGM having given approval for a share buyback of up to EUR 400 million (pending regulatory approvals) and recently paying a dividend for 2018 of EUR 215 million. It's a real testimony to the Bank and the quality of our team that we delivered another quarter of strong operating performance while executing on a variety of operational and strategic initiatives," commented Chief Executive Officer Anas Abuzaakouk.

Delivering strong results in the first quarter 2019
Core revenues increased by 2%, to EUR 287 million compared to the prior year reflecting core product net asset growth. Net interest income rose by 3% to EUR 215 million. Net fee and commission income decreased by 3%, to EUR 73 million. Operating expenses decreased by 3% compared to the first quarter 2018, despite the acquisition of Deutscher Ring Bausparkasse in September 2018 and of Zahnärztekasse in March 2019. The decrease reflects the integration of Südwestbank and a continued focus on driving operational efficiencies across the Group.

The cost-income ratio was down 1.2pts versus the prior year to 42.4% and remained below our 2019 target of under 43%. We maintained a strong capital position with a fully loaded CET1 ratio of 14.9%. Gross capital generation of approximately 70 basis points more than absorbed the impacts of the IFRS 16 first-time application as well as the Swiss M&A. This led to a 40bps net increase versus year-end 2018 (December 2018: 14.5%).

Customer loans slightly decreased by 1% compared to December 2018. The overall customer loan book continued to be comprised of approximately 73% exposure to the DACH region and approximately 27% exposure to Western Europe and the United States.

In the first quarter 2019 the NPL ratio stood at 1.8% and the risk cost ratio of 13 basis points reflects our continued focus on proactive risk management, maintaining a conservative risk profile, focusing on developed markets and benefiting from a benign credit environment.

Customer business segment performance in the first quarter 2019
As of 1 January 2019 the segmentation of BAWAG Group was changed to simplify our reporting structure as well as to make more visible our strategic focus towards Retail & SME in the DACH region complemented by disciplined and conservative corporate and public sector lending across developed markets.

Segment	Retail & SME	Corporates & Public
PBT (in EUR million)	84 / (1%)	47 / +16%
Net profit (in EUR million)	63 / (1%)	35 / +16%
RoTCE	18.5%	11.8%
Cost-income ratio	41.7%	35.4%
Risk cost ratio	36bps	(13bps)
NPL ratio	2.0%	1.3%

The Retail & SME segment delivered a PBT of EUR 84 million, down 1% versus the first quarter 2018. Core revenues were up 2% versus the first quarter 2018 reflecting net asset growth in housing, consumer and SME lending, while our mortgage portfolios continued to run off as anticipated. Operating expenses remained stable versus the prior year. The focus in the first quarter 2019 was on executing on our strategic and operational initiatives. In Austria, our stand-alone strategy, Concept 21, is progressing on plan, we launched multiple retail partnerships and in May we released our new digital banking app "klar". In Germany the transformation momentum continued. We closed all three deals signed in the fourth quarter 2018 by May 2019, which complement BAWAG Group's business model by providing a bolt-on opportunity for growth in Germany and Switzerland.

The Corporates & Public segment delivered a PBT of EUR 47 million, up 16% versus the first quarter 2018. The increased contribution primarily reflect lower operating expenses, down 14% versus the first quarter 2018, following the integration of Südwestbank as well as positive risk costs. Revenues remained broadly stable with the focus on risk-adjusted returns. We see continued pricing pressure across the Corporate lending space and will remain disciplined and patient.

Additional highlights

- BAWAG Group awarded "Austria's Best Bank 2018" by Global Finance
Global Finance, one of the leading magazines for finance and capital market issues, awarded BAWAG Group as "Austria's Best Bank" for the third consecutive year. We are honored to be recognized again for the successful development of the Bank.

- jö Bonus Club
In February 2019, Rewe Group in Austria and other leading retail partners established Austria's largest customer club: the jö Bonus Club. We are excited to be the launch partner for the jö Bonus Club in the financial services sector. The bonus club was launched in May 2019.

- Initiatives for total capital optimization
In March 2019, BAWAG Group issued EUR 400 million Tier 2 capital. This was another important step in the optimization of BAWAG Group's total capital position.

- Launch of new digital banking app "klar"
In May 2019, BAWAG P.S.K. launched its new digital banking app "klar". We have redesigned our digital banking to provide customers with a completely new, digital customer experience. The new app "klar" includes various new and improved banking functions. New features such as the personal finance manager "klar sehen" and the "klarPIN" for bank transfers lead to a simplification of online self-service.

- Closing of all 3 acquisitions signed in 2018
In March 2019 we closed the acquisition of Zahnärztekasse AG in Switzerland and in May 2019, we announced the successful completion of the acquisition of BFL Leasing and Health AG. BFL Leasing GmbH, headquartered in Eschborn near Frankfurt, Germany, is a specialist financing provider offering technology and equipment leasing products and services. Health AG, headquartered in Hamburg, Germany, is a leading dental factoring market player offering dental financing products and settlement services.

Outlook and targets

BAWAG Group delivered strong results in the first quarter 2019 and are on track to meet full year targets.

Our targets for 2019-2020 are as follows:

Targets	2019	2020
Profit before tax growth	>6%	>6%
Profit before tax (absolute)	>EUR 600m	>EUR 640m
Cost-income ratio	<43%	<40%
Return on tangible common 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 EUR)	>6.00	>6.40
Post-tax earnings per share (in EUR)	>4.50	>4.80

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 RoTCE 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. The Managing Board is actively evaluating share buyback options. On 30 April 2019 the AGM approved our proposed share buy-back program of up to EUR 400 million (pending regulatory approvals) and we paid a dividend of EUR 215 million (50% of 2018 attributable net profit) for 2018 on 10 May 2019.

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 banking subsidiaries easybank and start:bausparkasse in Austria, Südwestbank, BFL Leasing, Health AG and start:bausparkasse in Germany as well as Zahnärztekasse in Switzerland. With 2.5 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 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/ir contains 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 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

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