BAWAG Group AG: Strong year-to-date profit before tax of EUR 451 million, +5% vs. prior year

Vienna (pta006/29.10.2019/07:00 UTC+1) -

-Profit before tax (PBT) of EUR 451 million in Q1-3 2019, +5% vs. Q1-3 2018; pre-tax EPS EUR 4.56
-Net profit of EUR 343 million, +5% vs. Q1-3 2018; EPS of EUR 3.47
-Fully loaded CET1 ratio of 15.7%
-ECB approved share buyback program of EUR 400 million; Tender process launched
-On track to meet full year targets

BAWAG Group today reports a strong profit before tax of EUR 451 million and net profit of EUR 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 EUR 164 million and EUR 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 EUR 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 EUR 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 EUR 655 million. Net fee and commission income remained flat at EUR 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.

Note: "Pro forma" takes into account normalized regulatory charges, the share buyback of EUR 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 EUR million)	288	140
Net profit (in EUR million)	216	105
RoTCE	20.8%	12.1%
Cost-income ratio	43.7%	35.5%
Risk cost ratio	0.39%	(0.08%)
NPL ratio	2.0%	1.6%

The Retail & SME segment delivered a profit before tax of EUR 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 EUR 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.

Additional highlights

- ECB approved share buyback program of EUR 400 million; Tender process launched
On October 18, 2019, the European Central Bank approved a share buyback of up to EUR 400 million. The Management Board announced the intention to launch a voluntary partial tender offer of EUR 400 million on October 18, 2019, which was - following the approval by the Austrian Takeover Commission - launched on October 25, 2019 and ending on November 22, 2019.

- 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
BAWAG Group completed its total capital optimization. In March 2019, BAWAG Group issued EUR 400 million Tier 2 capital. BAWAG P.S.K. successfully returned to the covered bond market by issuing a EUR 500 million mortgage covered bond with a tenor of 15 years in June 2019, EUR 500 million senior non preferred notes in August 2019 and a further EUR 500 million 10 years mortgage covered bond in September 2019 (settlement October 2019).

- 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 GmbH and Health Coevo AG. BFL Leasing GmbH, headquartered in Eschborn near Frankfurt, Germany, is a specialist financing provider offering technology and equipment leasing products and services. Health Coevo AG, headquartered in Hamburg, Germany, is a leading dental factoring market player offering dental financing products and settlement services.

- BAWAG P.S.K. acquires 49% of Finventum GmbH - the creator of Savity
In June 2019, BAWAG P.S.K. acquired a 49% stake in the fintech Finventum GmbH, the creator of Savity Vermögensverwaltung GmbH (Savity). easybank has started a partnership with Savity to offer access to Savity's services to easybank customers. The Savity service provides easybank customers access to professional wealth management at initial investment levels of EUR 10,000.

- Awards:
"Austria's Best Bank 2019" by Global Finance
"Best Retail Bank Austria 2019" by World Finance
"Best Banking Group Governance - DACH 2019" by Capital Finance International

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:

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)1)	>6.00	>6.40
Post-tax earnings per share (in EUR)1)	>4.50	>4.80

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 EUR 400 million, which is expected to be executed by the end of November. Additionally, we paid a dividend of EUR 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).

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 subsidiaries easybank, easyleasing and start:bausparkasse in Austria, Südwestbank, BFL Leasing GmbH, Health Coevo AG and start:bausparkasse in Germany as well as Zahnärztekasse AG 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, 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/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 05-32011
E-mail: communications@bawaggroup.com

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

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