BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft

EANS-News: BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft
Consolidated Interim Report H1 2016 (with document)

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6-month report


o Net profit of EUR 284 million, +25% versus prior year
o Return on equity of 19.3%, +1.2pts
o Return on tangible equity of 21.8%, +2.9pts
o Core revenues of EUR 473 million, +2%
o Net interest margin stable at 2.1%
o Operating expenses down 3%
o Cost-income ratio improved to 42.6%, -2.3pts
o Fully loaded CET1 ratio of 15.1%, +2.2pts versus year-end 2015

VIENNA, Austria - August 10, 2016 - BAWAG P.S.K. today reports a strong net
profit of EUR 284 million for the first half 2016, up 25% versus the prior year.
The increase was driven by higher core revenues, lower operating expenses and
reduced risk costs. The return on equity was 19.3% and the return on tangible
equity 21.8%, up 1.2pts and 2.9pts, respectively. The net interest margin
remained stable at 2.1%. Operating expenses were down 3% and the cost-income
ratio down 2.3pts to 42.6%. Risk costs decreased by 36% to EUR 15.9 million.

"BAWAG P.S.K. delivered a strong first half 2016, reporting a net profit of EUR
284 million. With a return on tangible equity of 22%, a cost-income ratio below
43% and a fully loaded CET1 ratio over 15%, BAWAG P.S.K. ranks among the most
profitable, efficient and best capitalized banks across Europe. The continued
strong results reiterate that BAWAG P.S.K. is well positioned to win in this
competitive and evolving European banking landscape. We will continue to
maintain our Austria and developed market-focused low-risk strategy while
providing our customers with simple, transparent and best-in-class products and
services. All our 2016 financial targets are expected to be outperformed from
today's perspective," said Chief Executive Officer Byron Haynes.

"Over the past four years, we have simplified our business model by focusing on
core products, cost efficiency, low leverage and a conservative risk profile. We
will continue to execute on a variety of operational and strategic initiatives
during the second half 2016 that will continue to drive efficiency, operational
excellence and profitable growth," said Chief Financial Officer Anas Abuzaakouk.

Strong capital ratios and favorable stress test results

The fully loaded CET1 ratio further improved by 2.2pts to 15.1% (Dec 2015:
12.9%) and the fully loaded total capital ratio by 2.3pts to 18.1% (Dec 2015:
15.8%). These ratios already take into account the deduction of a EUR 325
million dividend for 2015 which has not yet been fully distributed. At the same
time, we maintained an RWA density of 45%, a conservative ratio relative to our
European peers. BAWAG P.S.K. was part of the recent ECB Banking Supervision SREP
stress test exercise and delivered favorable results. The Bank's CET1 ratio in
the adverse scenario stands at 9.7% and is not only well above the ECB's minimum
expectation but also above the 2016 SREP requirement of 9.0% for BAWAG P.S.K. In
addition, the impact on the CET1 ratio in the adverse scenario is only 330bps.

Acquisition of start:bausparkasse and IMMO-Bank

In June 2016, BAWAG P.S.K. announced to acquire start:bausparkasse (formerly
ABV), a large Austrian savings & loan association, as well as IMMO-Bank from
Volksbanken Group. Both banks combine the expertise and longstanding tradition
of housing and real estate financing. This transaction will grow BAWAG P.S.K.'s
domestic retail footprint, extend its expertise in building society savings &
loans, and result in a significant increase in the financing volume with real
estate companies and social housing associations. The transaction is expected to
close in the fourth quarter 2016 and is still subject to customary closing
conditions and regulatory approvals.

BAWAG P.S.K. upgraded by Moody's

In April 2016, Moody's further upgraded BAWAG P.S.K.'s long-term deposit, senior
unsecured and issuer ratings by one notch to A3 and the outlook was maintained
as "positive." The current rating upgrades make BAWAG P.S.K. the highest rated
bank in Austria by Moody's as well as one of the few "A" rated banks across

BAWAG P.S.K. awarded "Austria's Best Bank 2016" by Euromoney

BAWAG P.S.K. was awarded "Austria's Best Bank 2016" by Euromoney, one of the
world's leading special interest magazines for banking, finance and capital
market issues, in July 2016. This award underlines BAWAG P.S.K.'s successful
strategic transformation in recent years and is the second important
international recognition for the Bank after The Banker's "Bank of the Year
2015" award for Austria in December 2015.

Key business highlights H1 2016

BAWAG P.S.K. successfully executed on its business plans in the first half 2016,
delivering another period of strong results.

Core revenues increased by 2% to EUR 473 million, driven by strength in net
interest income. Despite the continued low-interest rate environment, net
interest income increased by 2% versus the first half 2015, driven by core
product growth, pricing initiatives and lower funding costs. Net interest margin
remained stable at 2.1%, reflecting the Bank's dedicated focus on risk-adjusted
pricing and balance sheet efficiency.

Operating expenses decreased by 3% to EUR 215 million, driven by sustainable
long-term measures in personnel and non-personnel expenses. The cost-income
ratio further decreased by 2.3pts to 42.6%.

Risk costs decreased by 36% to EUR 16 million in the first half 2016, resulting
from the improved credit quality of the individual business segments and
positive effects from the prior years' de-risking activities. The Bank continues
to maintain a conservative risk profile with disciplined underwriting and a
focus on developed markets in Austria, Western Europe and the United States.
This is best reflected in a low risk cost ratio of 12bps and a stable NPL ratio
of 2.3%.

Profit before tax was EUR 244 million in the first half 2016, up 5% versus prior
year. Net profit increased by 25% to EUR 284 million, driven by higher operating
income, lower operating expenses and risk costs as well as tax income resulting
from the recognition of deferred tax assets on tax loss carryforwards. These
positive developments offset the doubling of regulatory charges.

Loans and receivables with customers decreased by 4% to EUR 23.7 billion
compared to year-end 2015. The total new origination volume in the first half
2016 was EUR 2.0 billion. The overall customer loan book continued to be
comprised of two-thirds exposure to Austria and one-third to Western Europe and
the United States. The investments in the Bank's Austrian retail franchise
continue to pay off. The market share in consumer loans, one of the Bank's core
retail products, grew to 11.0%, up 80bps from year-end 2015, representing net
asset growth of 8.4%.

Deposits from customers increased by 2% to EUR 22.1 billion compared to year-end
2015, mainly resulting from higher deposit account balances. Funding costs
continued to decrease as the product mix, volume and pricing were optimized. At
the end of the first half 2016, the blended overall retail deposit rate stood at
0.27% versus 0.39% in year-on-year comparison.

Segment reporting

As of June 2016, the business segmentation and the related reporting have been
changed to provide greater insight and transparency and to better reflect our
strategic focus and the progress of the business units going forward. The former
Retail Banking and Small Business segment was split into two segments, BAWAG
P.S.K. Retail and easygroup. Similarly, the former Corporate Lending and
Investments segment was split into DACH Corporates & Public Sector and
International Business.

The BAWAG P.S.K. Retail segment, consisting of the Bank's retail and small
business lending to domestic customers, social housing activities as well as
real estate leasing, achieved a net profit of EUR 80 million in the first half
2016, down 3.4% compared to the same period last year, while also delivering a
return on equity of 18.8% and a cost-income ratio of 55.3%. Stable core revenues
and lower operating expenses offset the increased regulatory charges stemming
from the deposit guarantee scheme, which represented full-year expenses even
though they were booked in the first half. Accounting for regulatory charges on
a pro-rata basis throughout the year would have resulted in a net profit of EUR
86.3 million, or an 8.4% increase compared to the same period last year, with a
return on equity of 20.3%. New loan originations were EUR 560 million, while
moderately increasing margins and maintaining the disciplined underwriting
standards. Overall risk metrics reflect the high credit quality of the retail
business, with a risk cost ratio of 0.38% and an NPL ratio of 2.2%.

The easygroup segment, comprising Austria's leading direct bank easybank, our
auto and mobile leasing platforms as well as our international residential
mortgage portfolio, showed strong results by more than doubling net profit to
EUR 45 million compared to the first half 2015, with a return on equity of 27.3%
and a cost-income ratio of 24.2%. The underlying performance reflects the
acquisition of the Volksbank Leasing business as well as the purchase of a
high-quality performing residential mortgage portfolio during the fourth quarter
2015. During the first half 2016, the segment recorded new business originations
of EUR 240 million, thereof EUR 187 million in consumer auto leasing (up 15%
from the first half 2015). In July, we entered into a partnership with
"Autogott", Austria's leading online car sales channel, which will increase
easybank's brand awareness and further grow the segment's current customer base
of approximately 380,000 clients in Austria. Overall, easygroup is well
positioned to further build out its asset origination capabilities in auto
leasing and consumer loans both domestically and internationally.

The DACH Corporates & Public Sector segment includes corporate and public
lending activities and other fee driven financial services for mainly Austrian
customers and select client relationships in Germany and Switzerland. The
segment contributed EUR 36 million to the Bank's net profit in the first half
2016, a decrease of 19% compared to the same period last year, but still
delivered a return on equity of 13.5%. Core revenues were down 16%, driven by
early redemptions, margin pressures and low new business volume. This was offset
by the improvement in operating expenses (down 8%) and positive risks costs. In
the first half 2016, the business segment recorded EUR 170 million of new
lending in addition to regular renewals. The overall quality of the portfolio
remained stable with an NPL ratio of 1.0%, being a reflection of prior years'
de-risking activities.

The International Business segment comprises international corporate, real
estate and portfolio lending outside the DACH region primarily in Western Europe
and the United States. In the first half 2016, the Bank continued to focus on
loan origination opportunities in select developed Western countries, generating
new business volume of EUR 1.0 billion. The segment contributed EUR 56 million
to the Bank's net profit in the first half 2016, up 1.6% from the same period
last year, and delivered a return on equity of 19.5% despite higher than
anticipated early redemptions. Operating income was down 2.7%, offset by
positive risk costs. Similar to the DACH business, the international business is
characterized by high credit quality assets, with no nonperforming loans.

Treasury Services & Markets manages the Bank's investment portfolio of financial
securities in the amount of EUR 5.1 billion as well as the liquidity reserve of
EUR 1.2 billion at the end of June 2016. The investment strategy continues to
focus on investment grade securities primarily representing secured and
unsecured bonds of financial institutions in Western Europe and the United
States as well as select sovereign bond exposures in order to maintain a solid
diversification. The investment portfolio's average maturity was 3.9 years,
comprising 98% investment grade-rated securities, of which 78% were rated in the
single "A" category or higher. The segment contributed EUR 20.9 million to the
Bank's net profit in the first half 2016, down 1.4% versus the first half 2015,
and delivered a return on equity of 11.9%. Overall core revenues were flat, with
lower gains and losses from financial instruments offset by lower operating

About BAWAG P.S.K.

With more than 1.7 million customers, BAWAG P.S.K. is one of Austria's largest,
most profitable and best capitalized banks operating under a well-recognized
national brand. We apply a low-risk, highly efficient, simple and transparent
business model focused on Austria and other developed markets - with two-thirds
of our customer loans and receivables within Austria. The remaining customer
loans are predominantly in Western Europe and the United States. We serve
Austrian retail, small business and corporate customers across the country,
offering comprehensive savings, payment, lending, leasing, investment and
insurance services. Our Austrian business is complemented by international
activities focused on retail, corporate, commercial real estate and portfolio
lending in Western economies. This strategy provides us with earnings
diversification and growth opportunities while maintaining a conservative risk
profile with disciplined underwriting.

We run the Bank in a safe and secure manner with a strong balance sheet, low
leverage and solid capitalization. Delivering simple, transparent and
best-in-class products and services that meet our customers' needs is our
consistent strategy across all business units. BAWAG P.S.K.'s Investor Relations
website contains further information about the Bank,
including financial and other information for investors.

BAWAG P.S.K. contact:
Financial Community:
Benjamin del Fabro (Head of Investor Relations & Communications)
Tel: +43 (0) 5 99 05-22456

This text can also be downloaded from our website:

For charts please refer to the attached PDF-press release.
Attachments with Announcement:

Further inquiry note:
T: 43 (0)59905 - 31210
F: 43 (0)59905 - 22007

end of announcement                               euro adhoc 

Attachments with Announcement:

company:     BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft
             Georg-Coch-Platz  2
             A-1018 Wien
phone:       +43 (0) 59905
sector:      Banking
ISIN:        -
stockmarkets: stock market: Luxembourg Stock Exchange, Euronext Amsterdam,
             Frankfurt, Wien, SIX Swiss Exchange 
language:   English

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