- Record full-year profit before tax (PBT) of EUR 573 million (+14% vs. prior year) with Q4 PBT of EUR 143 million
- Outperformed all 2018 targets
- Fully loaded CET1 ratio of 15.6% pre-dividend and 14.5% post-dividend
- Capital distribution plans: Dividend of EUR 2.18 per share (EUR 215 million) to be proposed to AGM while actively evaluating share buyback options
- Very good progress in executing on our strategy
- Revised Group targets upward for 2019 & 2020 following strong 2018 operating performance
BAWAG Group today releases its preliminary results for 2018, reporting a strong profit before tax of EUR 573 million, up 14% versus the prior year. The increase was primarily driven by higher core revenues as well as lower risk costs, the latter reflecting the benign credit environment and the focus on developed markets. The return on tangible equity (@12% CET1) came in at 17.1%. The cost-income ratio of 44.2% remained well below the target of <46%. The fully loaded CET1 ratio increased by net 210 basis points to 15.6% versus year-end 2017, absorbing approximately 50 basis points capital impact from the 2018 share buyback program and Tier 2 capital redemption as well as organic growth. Considering dividend, the fully loaded CET1 ratio was 14.5%.
"2018 marked yet another successful year for BAWAG Group, delivering record pre-tax profits of EUR 573 million (+14% versus prior year). We outperformed all of our targets, focused on the things we control, and delivered on our promise of being good stewards of capital all while continuing to shape the BAWAG Group of tomorrow. It's a real testimony to the Bank and the quality of our team that we were able to complete multiple acquisitions and make progress on integrations; all while never losing sight of executing on our day-to-day operational and strategic initiatives. We will propose to the AGM a dividend payment of EUR 2.18 per share (equivalent to a gross payout of EUR 215 million) and are in addition actively evaluating stock buyback options. Based on the strong business performance in 2018, we revised our targets upward. Expectations for 2019 and beyond are high, but I'm convinced that with our team we will continue to deliver value to our customers and shareholders," commented Chief Executive Officer Anas Abuzaakouk.
Delivering record results in 2018
Core revenues increased by EUR 113 million, or 11%, to EUR 1,123 million. Net interest income rose by 6% to EUR 841 million. Net fee and commission income increased by EUR 66 million, or 30%, to EUR 283 million mainly due to the acquisition of PayLife and Südwestbank as well as lower commission expenses paid to Austrian Post. Operating expenses decreased by 2% compared to 2017, despite the acquisition of PayLife and Südwestbank in 2017 and the acquisition of Deutscher Ring Bausparkasse in September 2018.
The cost-income ratio was down 3pts versus the prior year to 44.2% and remained well below our 2018 target of <46%. We maintained a strong capital position with a fully loaded CET1 ratio of 14.5% post dividend at year-end 2018 (December 2017: 13.5%).
Loans and advances with customers remained largely stable compared to December 2017. 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
Execution on our strategy
Our business model is based on four pillars:
This past year, we made good progress in regards to growth in our core markets. Our focus is, and will continue to be, in growing in developed markets with Austria as our core and foundation. Besides growth in our core products across our Austrian Retail & SME businesses, we've planted the seeds with new customer acquisition channels, signing three retail partnerships in 2018. Furthermore, we released new digital products and expanded our broker platforms. We also successfully integrated PayLife, which provides us with a comprehensive credit card offering across BAWAG Group. In the corporate lending space, we experienced very strong growth in our International Lending segment, offsetting softness in the DACH Corporates & Public Sector business.
In 2018 we made great progress with our expansion into Germany, setting the foundation for growing our German retail platform by integrating Südwestbank and closing Deutscher Ring Bausparkasse. These acquisitions were strategic in helping grow our customer franchise, enter new markets, offer new products, leverage talented teams and continue to improve our operating performance. In December, we signed two bolt-on acquisitions in Germany and one in Switzerland, which paved the path to expand our footprint into Switzerland. We continue to assess M&A opportunities, but will remain disciplined in following our underwriting guidelines on both strategic fit and value.
In terms of making our customers' lives easier, we have made tremendous progress on our network transformation, known both internally and externally as Concept 21, which stands for a re-imagined, right-sized branch network of up to 100 branches by the end of 2019. Our goal is to provide our customers with a truly differentiated high-quality customer experience, high-quality advisory and substantive engagement as well as leveraging technology to be able to address administrative and transactional activities. By the end of 2018, we completed 85% of the branch transition with a customer retention rate of over 95%. We're excited about the many opportunities ahead as we manage our own independent right-sized branch network, digital channels and salesforce.
The focus on efficiency and operational excellence is part of our DNA. With a cost-income ratio in the low 40s and a Return on Tangible Equity (@12% CET1) north 17%, BAWAG Group remains one of the most efficient and profitable banks in Europe.
We run the bank in a safe and secure manner. The NPL ratio stood at 1.7% and the risk cost ratio of 12 basis points in 2018 reflects our continued focus on proactive risk management, conservative risk profile, focusing on developed markets and benefiting from a benign credit environment.
Customer business segment performance in 2018
|Segment||PBT (in EUR million)||Pre-tax RoTE(@12% CET1)||Cost-income ratio|
|BAWAG P.S.K. Retail||243/+25%||41.2%||44.9%|
|DACH Corporates & Public Sector||46/+7%||15.1%||53.3%|
|Profit before tax growth||>6%||>6%|
|Profit before tax (absolute)||>EUR 600m||>EUR 640m|
|Return on tangible equity||15-20%||15-20%|
|Common Equity Tier 1 capital ratio (fully loaded)||12-13%||12-13%|
|Pre-tax earnings per share (in EUR)||>6.00||>6.40|
|Post-tax earnings per share (in EUR)||>4.50||>4.80|
BAWAG Group AG
Wiedner Gürtel 11
|Contact Person:||BAWAG Group Investor Relations|
|Stock Exchange(s):||Official Trade in Vienna|