BAWAG Group Delivers Strong Performance in Q3 Results, Focused on Growth

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BAWAG Group Delivers Strong Performance in Q3 Results, Focused on Growth

Leading banking group BAWAG Group (BAWAG) has announced its Q3 2024 results. The group reported a net profit of €178 million, an earnings per share (EPS) of €2.25, and a strong return on tangible equity (ROTE) of 24%. The tangible book value per share increased by 16% year-on-year, reaching €38.48.

Following the European Central Bank's approval of the acquisition of Knab, BAWAG raised its full-year pre-tax profit target to over €950 million, including a two-month contribution from Knab. The company also increased its CET1 ratio target to 12.5%, expecting a pro forma CET1 ratio of over 14% by year-end.

Key Points:

  • BAWAG Group reported a net profit of €178 million, €2.25 EPS, and 24% ROTE in Q3.
  • The ECB's approval of the Knab acquisition led to the increase in the full-year pre-tax profit target to over €950 million.
  • The CET1 target was raised to 12.5%, with an expected pro forma CET1 ratio of over 14% by year-end.
  • Net interest income decreased by 1% to €304 million, while net commission income increased by 1%.
  • The US office portfolio shrank by 30%, focusing on asset recovery and strategic management.

Company Outlook: BAWAG maintains a cautious outlook amidst rising interest rates but anticipates profit growth from solid operational performance. An Investor Day is planned for March 4, 2025, to discuss potential capital distributions and strategic developments. The company expects growth in net interest income for the remainder of 2023 and into 2025, despite a slight contraction in net interest margin (NIM).

Negative Aspects:

  • Net profit for the retail and SME segments decreased by 4% year-on-year.
  • Net profit for the corporate, real estate, and public sector segments also fell by 6%.
  • Net interest income experienced a slight dip due to low transaction volumes and increased deposit rates.

Positive Aspects:

  • Pre-provision profit reached €265 million, with a cost-to-income ratio of 32%.
  • Total risk costs remained low at €25 million, with a risk cost ratio of 25 basis points.
  • The company maintains a stable liquidity position with €46.2 billion in customer funding and €15.6 billion in cash.

Performance Below Expectations: The company reported a slight decline in net interest income due to low transaction volumes and an increase in deposit rates from 32% to 35%.

Q&A Highlights: Management discussed future lending opportunities, maintaining a conservative credit approach, and a strong business pipeline in the corporate and public sector segments. Executives expressed confidence in stable cash flows and a recovery in the US office market. Enver Sirucic addressed the impact of ECB interest rate cuts and the company's M&A outlook regarding its significant cash position. Chris Hallam from Goldman Sachs inquired about the increase in rates, which was clarified to stem from reference rates rather than customer returns.

In conclusion, BAWAG Group's Q3 earnings call reflected a company that is pursuing strategic growth opportunities while managing its assets cautiously. With the approval of the Knab acquisition and a cautiously optimistic outlook for the future, BAWAG positions itself for continued success in the banking sector.