Vienna (pta008/27.04.2020/07:00) - -
- Net profit of EUR 61 million, EPS of EUR 0.69 and RoTCE of 9.1%
- Net profit of EUR 81 million and RoTCE of 11.9% after normalizing front-loaded regulatory charges
- Q1 2020 includes incremental reserve build-up of approximately EUR 25 million related to COVID-19 effects
- Pre-provision profit of EUR 171 million broadly in line with prior year and cost-income ratio of 42.3%
- Fully loaded CET1 ratio of 12.7%
- Mid-term targets of ROTCE > 15% and CIR < 40%
BAWAG Group today released its first quarter 2020 results, reporting a net profit of EUR 61 million, earnings per share of EUR 0.69 and a RoTCE of 9.1%. Normalizing for the front-loaded regulatory charges, net profit was EUR 81 million with an RoTCE of 11.9%.
Since early March, when the World Health Organization (WHO) characterized the outbreak of the COVID-19 as a global pandemic, we have witnessed unprecedented market volatility and uncertainty not seen since the financial crisis. Despite this, the underlying operating performance of the business remained strong in the first quarter with pre-provision profits of EUR 171 million and a cost-income ratio of 42.3%. To address the deteriorating macroeconomic environment as well prudently provision against the observed build-up of customer payment deferrals due to COVID-19, an incremental general reserve of EUR 25 million was posted in the first quarter 2020, leading to total risk costs of EUR 55 million. The bank's capital position remained strong, with a fully loaded CET1 ratio of 12.7%. The Bank continues to deduct the full year 2019 and first quarter 2020 dividends from capital and will wait for further guidance from our regulators regarding capital distributions later in the year.
"Our thoughts and prayers are with all the individuals, families, healthcare workers and front-line employees most impacted by the COVID-19 crisis in our local markets and across the globe. Our company entered into the crisis from a position of strength, having transformed the business over the years to be able to withstand economic downturns. We have strong capital levels, solid funding and liquidity, and an efficient platform that was generating mid-teen returns pre-COVID-19. This gives us room to play our part in supporting our customers and our local economies while protecting our franchise. During the first quarter, we demonstrated the strength of our franchise delivering a strong operating performance with pre-provision profits of EUR 171 million. This allowed us to be prudent and conservative in building up an incremental EUR 25 million general reserve to proactively address the macroeconomic deterioration and potential impact to our customers from the COVID-19 crisis. While it's too early to tell how this will all unfold, I'm confident our team will be able to navigate these unchartered waters. I could not be prouder of how the company has come together over the past two months, in particular our branch employees who represent the best of the banking community, to continue executing and delivering for our customers and communities during these challenging times", commented Chief Executive Officer Anas Abuzaakouk .
Delivering strong operating performance in Q1 2020 versus prior year
Core revenues increased by EUR 5 million, or 2%, to EUR 292 million. Net interest income rose by 3% to EUR 220 million reflecting growth in our core retail products as well as the acquisitions closed during the course of 2019. Net fee and commission income remained broadly stable at EUR 72 million. Operating expenses decreased by 1% as a result of ongoing efficiency measures. The cost-income ratio was stable at 42.3%. This resulted in a pre-provision profit of EUR 171 million, stable versus prior year and a reflection of the strong underlying operating performance of the business.
The first quarter 2020 also included regulatory charges of EUR 36 million, which represent 85% of full-year-charges that are required to be booked in the first quarter.
were EUR 55 million in the first quarter 2020, an increase of EUR 43 million, or 362% compared to Q1 2019. To address the deteriorating macroeconomic environment as well prudently provision against the observed build-up of customer payment deferrals due to COVID-19, an incremental general reserve of EUR 25 million was posted in the Retail & SME business. Additionally, we took a specific provision of EUR 10 million for an exposure in the Oil & Gas sector in our Corporates business.
BAWAG Group ended the first quarter 2020 with a fully loaded CET1 ratio of 12.7% (December 2019: 13.3%). This considers the earmarked 2019 dividend of EUR ~ 230 million and the Q1 '20 dividend accrual of EUR ~ 30 million. In line with the ECB recommendation regarding capital distributions being postponed until further guidance is provided prior to October 1, 2020, we have postponed the AGM to the fourth quarter 2020. This postponement will enable us to have more clarity on the consequences of COVID-19 and allow for the proper assessment of any further formal guidance or recommendations from the ECB or governmental bodies.
Customer loans increased by 2% compared to December 2019. 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. We focus on developed markets as we believe in doing business in countries with stable legal systems, sound macroeconomic fundamentals, and solid finances. We will continue to maintain our conservative risk appetite and focus on our core markets.
Our goal was, and will always be, maintaining a strong balance sheet, solid capitalization levels and conservative underwriting, a cornerstone of how we run the Bank. The NPL ratio stood at 1.6% (excluding the City of Linz case: 1.1%), representing the historically low NPL levels pre-COVID-19. Over two-thirds of the balance sheet is funded via customer deposits and if capital markets remain volatile, there are no funding requirements in 2020. Furthermore, the Bank has a short-term liquidity buffer of EUR 7.3 billion as of March 2020, including other marketable securities, the buffer increases to EUR 9.6 billion.
Dealing with an unprecedented crisis
In dealing with an unprecedented crisis we have established measures to take care of our employees, to support our customers and local communities, and protect our franchise.
Employees : Near the end of February, we established a task force which evaluated the developments of the spread of COVID-19 and related measures on an ongoing basis. As a result, over 75% of our employees are working from home without any issues. While no one could plan for such a situation, the infrastructure was prepared for extended home office work, in terms of equipment, applications and flexible working arrangements agreed in partnership with our workers council.
Customers & local communities : 100% of our branches have remained open during this crisis without any changes in servicing hours, while enhancing our safety standards and protocols. At the same time, we enhanced our services for risk groups, our online functionalities, established new online processes for e.g. payment holiday, in order to reduce branch visits to a minimum. We proactively reached out to customers to inform them of the various stimulus packages implemented by the Austrian and German government as well as supporting them through "take care" calls from our sales force and enhanced support from our call center and collections teams.
We want to play our role in supporting the real economy in Austria, Germany, Switzerland and other markets we operate in. Before the pandemic, the DACH region had strong macro fundamentals with an annual GDP of EUR 4.5 trillion and an average unemployment rate of less than 4%. The governments in the region committed to support the economy and have put in place extensive stimulus packages and support measures, demonstrating their fiscal strength and capabilities. We see our role in proactively informing our customers, providing transparency and ensuring the resources can be picked up quickly by the ones who need them most.
"Across our Austrian franchise, our utmost priority is to support our customers in such an unprecedented situation and respond real-time to their needs. Our investments over the last years in our digital capabilities and multi-channel banking services made it possible to adjust quickly our processes and enhance our online functionalities to adapt to the new environment ensuring to protect the health of our customers and employees. A special thanks to our branch employees, who ensured that 100% of our branches are open, for their untiring commitment that service and financial security for our customers is guaranteed. In addition, our customer service center also managed large call volumes from the onset and made "Customer Care" out-reach calls throughout the restriction period to discuss financial needs, e-capabilities and options for servicing," commented David O'Leary , member of the Managing Board of BAWAG Group and responsible for Retail & SME in Austria.
Furthermore, in the light of the current environment and the hardships faced by many, the Managing Board waived any potential bonuses for 2020, in addition to having already waived all bonuses for 2019. A special rewards-program for front-line employees working in the branches has been instituted.
Customer Business performance in Q1 2020 versus Q1 2019
|Segment||PBT (in EUR million)||Net profit (in EUR million)||RoTCE||Cost-income ratio|
|Retail & SME||75 / (10%)||56 / (10%)||18.3%||38.8%|
|Corporates & Public||31 / (34%)||23 / (34%)||11.1%||30.1%|
Retail & SME delivered a profit before tax of EUR 75 million, down 10% versus the first quarter 2019. The decrease relates to an increase in risk costs, as a general reserve of approximately EUR 25 million was taken to address COVID-19-related effects. Pre-provision profit increased to EUR 142 million, up 17% compared to the prior year, reflecting primarily an increase in net interest income. While responding real-time to the changed customer needs during the pandemic, we continued executing on our business initiatives. During the first quarter, easybank was merged in BAWAG P.S.K. While the brand easybank will remain and there is no change for customers, this will bring efficiencies in processes and product offerings. In Germany, we continued the centralization of middle-and-back-office activities. The integration of the businesses acquired in 2019 is complete and the focus will now be on growth and profitability initiatives.
Corporates & Public contributed a profit before tax of EUR 31 million in the first quarter 2020, down 34% versus the previous year quarter. In the first quarter 2020 risk costs were EUR 12 million, primarily related to the booking of a specific reserve of EUR 10 million for an exposure in the Oil & Gas sector. We see good opportunities across asset backed lending transactions. Pricing levels have widened for both new issue and secondary transactions, however, transaction levels have reduced as the market adjusts to the current environment.
Outlook and targets
The outbreak of COVID-19 has triggered varying responses, and at varying speeds, from governments across the globe. It is important to note that this is, first and foremost, a healthcare crisis afflicting the global community. A great deal depends on the effectiveness of the public health, fiscal, monetary and regulatory measures that have been put in place. Given the fluid nature of events and the uncertainties in both scope and length, this may result in an overall challenged and volatile market environment over the coming months.
In light of these uncertainties, the Managing Board of BAWAG Group has decided to withdraw the previously communicated 2020 targets. Forecasting any concrete targets this year would be unreliable given the market uncertainty and deterioration in the macroeconomic environment.
Given the strategic focus, strength of the franchise, and transformation that has taken place over the years, the Managing Board also commits to medium-term targets of a return on tangible common equity >15% and cost-income ratio <40% in a normalized environment. In light of the ECB recommendation of 27 March 2020, we have decided to postpone our Annual General Meeting, initially scheduled for May 4, 2020, to the fourth quarter 2020. This postponement will enable us to have more clarity on the consequences of the coronavirus and allow for the proper assessment of any further formal guidance or recommendations from the ECB or governmental bodies.
Furthermore, our Capital Markets Day will be postponed to the H1 2021.
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 brands and subsidiaries easybank, easyleasing and start:bausparkasse in Austria. In Germany, Bawag Group operates under the Südwestbank, BFL Leasing GmbH, Health Coevo AG and start:bausparkasse brands and subsidiaries with Zahnärztekasse AG in Switzerland as well. 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.
Jutta Wimmer (Head of Investor Relations)
Tel: +43 (0) 5 99 05-22474
IR Hotline: +43 (0) 5 99 05-34444
Manfred Rapolter (Head of Communications, Spokesman)
Tel: +43 (0) 5 99 05-31210
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