Vienna
(pta/26.07.2021/07:00 UTC+2)
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-Net profit of EUR 193 million, EPS of EUR 2.17 and RoTCE of 13.2% for H1 2021
-Risk costs of EUR 53 million with no reserves released ... total customer payment holidays at 0.2%
-Proposing to AGM EUR 420 million dividends (EUR 4.72 per share) relating to 2019/2020 profits
-CET1 ratio of 14.4% post-deduction of earmarked/accrued dividends of EUR 515 million
-Upgraded full year 2021 targets to RoTCE of ~15% and CIR ~40%
-AGM brought forward to 27 August '21 ... Investor Day to be held on 20 September '21
BAWAG Group today released its results for the first half 2021, reporting a net profit of EUR 193 million, EUR 2.17 earnings per share, and a RoTCE of 13.2%. The first six months include front-loaded regulatory charges of EUR 56 million, representing approximately 93% of full-year charges. For the second quarter 2021 BAWAG Group reported a net profit of EUR 119 million, EUR 1.34 earnings per share, and a RoTCE of 16.3%.
The underlying operating performance of our business was strong during the first half 2021 with pre-provision profits of EUR 361 million and a cost-income ratio of 40.3%. Total risk costs returned to more normalized levels of EUR 53 million, with the management overlay now at EUR 70 million. Management decided not to release any reserves, although we see both an improved macroeconomic environment and continued positive developments across our customer base, in particular observing payment holidays falling to 0.2% across all customer loans. We will reassess the management overlay during the second half of the year once we've seen greater normalization of economic activity in a post-lockdown environment, the impacts of potential variants and hopefully a continued successful vaccine rollout across Continental Europe.
In terms of loan growth and capital, we grew average customer loans by 3% versus prior year. We continued to accrete CET1 capital, generating approximately 100 basis points of gross capital during the first half of the year. Our CET1 ratio was 14.4%, up 40 basis points from year-end 2020 after deducting the first half 2021 dividend accrual of EUR 95 million and prior earmarked dividends for distribution of EUR 420 million. Following the initial down-payment of EUR 40 million on the total EUR 460 million earmarked dividends from 2019 and 2020 profits in March 2021, we will propose the remaining EUR 420 million for distribution to the Annual General Meeting on 27 August 2021.
"We started the first half of the year with a strong set of operating results delivering net profit of EUR 193 million, RoTCE of 13.2% and cost-income ratio of 40.3%. Although we've experienced rolling and partial lockdowns in our core markets during the first few months of 2021, we expect the gradual normalization of economic activity to carry into the second half of the year and have increased our targets to an RoTCE ~15% and CIR ~40% for the full year. However, despite the improvement in the overall macroeconomic environment from last year and the continued positive developments across our customer base, we decided not to release any credit reserves. In terms of operational developments, we continue to reposition our business and adapt to a post-COVID-19 world. We will focus on the things that we can control, be proactive and decisive, and not be deterred by the changes ahead as we continue to transform our business and deliver sustainable profitable growth. Following the most recent communication of the European Central Bank lifting the recommended dividend ban from last year, we decided to bring forward our Annual General Meeting as well as our Investor Day, where we will communicate our new targets and 4-year Plan through 2025," commented Chief Executive Officer Anas Abuzaakouk.
Delivering strong operating results in H1 2021 versus prior year
Core revenues increased by 4% to EUR 599 million in the first half 2021. Net interest income rose by 3% to EUR 461 million driven by higher interest-bearing assets. Net fee and commission income increased by 8% to EUR 138 million. While all branches remained open during the partial lockdowns in the first months of 2021, customer activity was still impacted by COVID-19 restrictions. Operating expenses decreased by 3% to EUR 243 million due to ongoing efficiency and productivity measures. The cost-income ratio decreased by 2.6 points to 40.3%. This resulted in a pre-provision profit of EUR 361 million, up 9% versus prior year.
The first half also included regulatory charges of EUR 56 million, up 45% versus prior year, due to the additional deposit insurance charge following the Commerzialbank fraud in Austria in 2020 as well as increased deposits. These represent approximately 93% of the full-year charges that are expected to be required during 2021, frontloading most of this year's regulatory charges in the first quarter.
Risk costs were EUR 53 million in H1 2021, a decrease of EUR 77 million, or 59% compared to the previous year. 2020 risk costs included a general reserve of approximately EUR 65 million which was taken to address COVID19-related effects. Payment deferrals came down further during the first half 2021 to 0.3% in the Retail & SME business (December 2020: 1.2%) and to 0.1% in the Corporates & Public business (December 2020: 0.2%). Despite the improved macroeconomic environment and continued positive developments across our customer base, we did not release any reserves and expect a continued normalization of risk costs throughout the year.
BAWAG Group ended the first half 2021 with a CET1 ratio of 14.4% (December 2020: 14.0%) already considering the EUR 40 million dividends paid out during the first quarter. The CET1 ratio of 14.4% also deducts the remaining earmarked dividends of EUR 420 million from 2019/2020 profits and the dividend accrual for the first half 2021 of EUR 95 million based on our dividend policy. Based on the ECB recommendation from December 2020, a dividend of EUR 40 million was paid in Q1 2021 following the extraordinary general meeting on 3 March 2021. On 23 July 2021, the European Central Bank lifted the recommended dividend ban from last year. Therefore, we will propose the remaining EUR 420 million dividends from 2019/2020 profits for distribution to the Annual General Meeting on 27 August 2021.
Average customer loans increased by 3% versus prior year. The overall customer loan book continued to be comprised of 76% exposure to the DACH/NL region (Germany, Austria, Switzerland, Netherlands) and 24% exposure to Western Europe and the United States. We focus on developed and mature markets with stable legal systems, sound macroeconomic fundamentals, and solid finances. We will continue to maintain our conservative risk appetite and focus on our core developed markets.
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 NPL ratio stood at 1.5% (excluding the City of Linz case: 1.1%), representing our focus on quality underwriting and portfolio management.
Customer Business performance in H1 2021 versus H1 2020
Segment | PBT (in EUR million) | Net profit (in EUR million) | RoTCE | Cost-income ratio |
Retail & SME | 214 / +31% | 161 / +31% | 25% | 39% |
Corporates & Public | 81 / +62% | 61 / +62% | 14% | 24% |
Targets | 2021 originally | 2021 updated |
Return on tangible common equity | >13% | ~15% |
Cost-income ratio | <41% | ~40% |
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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) |