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BAWAG Group AG: Q3 2022 adjusted net profit of EUR 132 million, EPS of EUR 1.49, and RoTCE of 19.3%
Vienna (pta005/19.10.2022/07:00 UTC+2)
- Q3 '22 incorporates full write-off of City of Linz receivable of EUR 254 million in risk costs
- Q3 '22 (including City of Linz): Net loss of EUR (58) million and EPS of EUR (0.66)
- Adjusted Q3 '22 (excluding City of Linz): Net profit of EUR 132 million, EPS of EUR 1.49, and RoTCE of 19.3%
- Adjusted Q1 - Q3 '22: Net profit of EUR 377 million, EPS of EUR 4.24, RoTCE of 18.4%
- Pre-provision profit of EUR 636 million (+16% vPY) and CIR at 35.9%
- Adjusted risk costs of EUR 86 million … continued to build up our ECL management overlay to EUR 82 million
- Completed approximately 65% of EUR 325 million share buyback program as of October 18
- CET1 ratio of 13.0% post-deduction of Q1 - Q3 '22 dividend accrual and EUR 325 million share buyback
- 2022 targets (adjusted) reconfirmed: Profit before tax > EUR 675 million, RoTCE > 17%, and CIR < 38%
- Updating outlook for core revenue growth to ~9% in 2022
VIENNA, Austria – October 19, 2022 – BAWAG Group today released its results for the third quarter 2022, reporting a net profit (excluding City of Linz) of EUR 132 million, EUR 1.49 earnings per share, and a RoTCE of 19.3%. For the first nine months, BAWAG Group reported a net profit (excluding City of Linz) of EUR 377 million,
EUR 4.24 earnings per share, and a RoTCE of 18.4%.
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 EUR 254 million, equal to EUR 190 million impact after tax, related to the City of Linz receivable on the balance sheet. Including this write-off, net profit for the first nine months 2022 was EUR 186 million with an RoTCE of 9.1%.
The operating performance of our business was strong during the first nine months 2022 with pre-provision profits of EUR 636 million and a cost-income ratio of 35.9%. Total risk costs (excluding City of Linz write-off) were EUR 86 million. Despite our low NPL ratio of 1.0% and robust credit performance across our business to-date, we decided to remain prudent in our provisioning given the current market environment and potential headwinds building up, increasing our management overlay provisions by EUR 21 million to a total of EUR 82 million.
Average customer loans were flat versus prior quarter and up 9% versus prior year. At the end of September 2022, the CET1 ratio was at 13.0%. We generated approximately 180 basis points of gross capital from earnings during the first nine months 2022. The CET1 ratio considers the deduction of a share buyback of EUR 325 million (65% completed as of October 18) as well as EUR 207 million dividend for the first nine months 2022 (55% payout based on an adjusted net profit).
Anas Abuzaakouk, CEO, commented: "In the first nine months 2022 we delivered a strong set of results with adjusted net profit of EUR 377 million, EPS of EUR 4.24, an RoTCE of 18% and a cost-income ratio of 36%. Additionally, we remained prudent in our provisioning, increasing our management overlay by EUR 21 million during the first nine months, which currently stands at EUR 82 million, equal to almost one year of normalized risk costs. Our actions stem from an abundance of caution, which is the same prudence and conservatism that underpins how we've run our business over the past decade. We have an incredible team and resilient business that will deliver results across all cycles allowing us to consistently support our customers and local communities despite the potential headwinds building up."
Delivering strong results in Q1-Q3 2022
| in EUR million | Q1-Q3 2022 reported | Q1-Q3 2022 adjusted | Change versus prior year |
| Core revenues | 986 | 986 | 9% |
| Operating income | 993 | 993 | 9% |
| Operating expenses | (357) | (357) | (2%) |
| Pre-provision profit | 636 | 636 | 16% |
| Regulatory charges | (49) | (49) | (19%) |
| Risk costs | (340) | (86) | 15% |
| Profit before tax | 249 | 504 | 22% |
| Net profit | 186 | 377 | 19% |
| RoTCE | 9.1% | 18.4% | 4.2pts |
| CIR | 35.9% | 35.9% | (4.0pts) |
| EPS (EUR) | 2.10 | 4.24 | 20% |
Core revenues increased by 9% to EUR 986 million in the first nine months 2022. Net interest income rose by 8% to EUR 751 million primarily driven by higher average customer loans as well as an acquired portfolio. Net fee and commission income increased by 12% to EUR 234 million, driven by the contribution stemming from the acquisition of Hello bank! Austria (rebranded to easybank brand) in Q4 '21. While our advisory and brokerage business had a strong first quarter, it has been impacted from the market volatility experienced since the second quarter 2022. Operating expenses decreased by 2% as a result of multiple operational initiatives executed over the past two years, more than compensating significant inflationary pressures. The cost-income ratio decreased by 4.0 points to 35.9%. This resulted in a pre-provision profit of EUR 636 million, up 16% versus prior year.
The first nine months 2022 also included regulatory charges of EUR 49 million, down 19% versus prior year, reflecting recoveries from prior bank insolvencies, while the SRB contribution increased. The regulatory charges booked in the first nine months 2022 represent approximately 90% of the full-year charges that are expected to be required during 2022.
Risk costs (excluding the City of Linz write-off) were EUR 86 million in the first nine months, an increase of EUR 11 million, or 15%, compared to the previous year. While the underlying asset quality remains strong, we decided to remain prudent in our provisioning given the overall market environment. Therefore, we increased the ECL management overlay during the first nine months by EUR 21 million to EUR 82 million.
Our goal is, and will always be, maintaining a strong balance sheet, solid capitalization levels, low leverage and conservative underwriting, a cornerstone of how we run the Bank. The customer loan book is comprised of 72% exposure to the DACH/NL region (Germany, Austria, Switzerland, Netherlands) and 28% exposure to Western Europe and the United States. Our NPL ratio of 1.0% is one of the lowest across Europe, with a conservative reserve ratio of 1.42% on customer loans, an increase of 48 basis points on pre-pandemic levels, despite a decreasing NPL ratio.
Customer Business performance in Q1-Q3 2022 versus Q1-Q3 2021
| Segment | PBT (in EUR million) | Net profit (in EUR million) | RoTCE | Cost-income ratio |
| Retail & SME | 423 / +24% | 317 / +24% | 33.2% | 33.9% |
| Corporates, Real Estate & Public Sector | 154 / +14% | 115 / +14% | 18.2% | 22.4% |
Outlook
In our outlook for 2022, we see full year core revenues growing by ~9% and operating expenses down by approximately 2%. We expect regulatory charges to be around EUR 55 million and total underlying risk costs amounting to approximately 20 basis points risk cost ratio. In addition we will continue to build up the management overlay. We are targeting a profit before tax over EUR 675 million. In terms of return targets, we target a RoTCE over 17% and a CIR under 38% in 2022. All targets are excluding the write-off of the City of Linz receivable.
Our 2022 outlook is as follows:
| Financial targets* | 2022 Outlook updated | 2022 Outlook previous | 2021 |
| Core revenues | ~9% | >7% | EUR 1,220 million |
| Operating expenses | ~(2%) | ~(2%) | EUR 485 million |
| Regulatory charges | ~ EUR 55 million | ~ EUR 55 million | EUR 52 million |
| Risk cost ratio (underlying) | ~20 basis points | ~20 basis points | 23 basis points |
| Profit before tax | > EUR 675 million | > EUR 675 million | EUR 600 million |
| Return targets* | 2022 Outlook | 2022 Outlook | 2021 |
| Return on tangible common equity | >17% | >17% | 16.1% |
| Cost-income ratio | <38% | <38% | 39.5% |
*Note: Financial and return targets are excluding the write-off of the City of Linz receivable of EUR 254 million (EUR 190 million net of tax). Dividend payout will be based on net profit excluding City of Linz impact.
About BAWAG Group
BAWAG Group AG is a publicly listed holding company headquartered in Vienna, Austria, serving 2.1 million retail, small business, corporate, real estate and public sector customers across Austria, Germany, Switzerland, Netherlands, Western Europe, and the United States. The Group operates under various brands and across multiple channels offering comprehensive savings, payment, lending, leasing, investment, building society, factoring and insurance products and services. Our goal is to deliver simple, transparent, and affordable financial products and services that our customers need.
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 Corporate Affairs)
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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| Emitter: |
BAWAG Group AG Wiedner Gürtel 11 1100 Wien Austria |
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|---|---|---|
| Contact Person: | BAWAG Group Investor Relations | |
| Phone: | +43 (0)59905-34444 | |
| E-Mail: | investor.relations@bawaggroup.com | |
| Website: | www.bawaggroup.com | |
| ISIN(s): | AT0000BAWAG2 (Share) | |
| Stock Exchange(s): | Vienna Stock Exchange (Official Trade) |