EANS-News: BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft / (with document)

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annual result/Financial Statement 2013

Wien (euro adhoc) - Vienna, 13 March 2014

BAWAG P.S.K. announces net profit of EUR 229.1 million in 2013

Strong operating momentum and improved capital position from
strategic initiatives

o Operating income increased by 11.0 % to EUR 1,034.0 million in a
very challenging environment with stronger core revenue momentum
developing in the second half 2013 o Core operating expenses
successfully reduced by EUR 30.6 million (-5.1%), demonstrating
early results from material cost reduction program o Capital
position substantially improved - fully-loaded Basel 3 CET I capital
ratio at 9.4% at year-end 2013 o Risk costs decreased to EUR 98.2
million for 2013 with a NPL ratio of 3.4% reflecting the material
de-risking activities from non-core assets and businesses o
Provisions taken for restructuring of EUR 75.3 million in 2013 in
order to achieve a lower cost base on a sustainable basis o
Redemption of EUR 200 million of Participation Capital from the
Republic of Austria in 2013 as part of plan for full redemption in
the near term

"2013 was a transformative year for BAWAG P.S.K. as the Bank
successfully executed on several strategic initiatives while
delivering strong financial results," commented CEO Byron Haynes.
"The Bank continued to reposition its balance sheet by exiting
non-core businesses and assets, executed aggressively to improve cost
efficiency, and materially increased its capital base.

BAWAG P.S.K. is well positioned in 2014 to take advantage of the
positive momentum of core earnings improvement particularly in the
second half of 2013 through the continued execution of its operating
plans. Further, the Bank's capital position should continue to
strengthen and BAWAG P.S.K. looks forward to the opportunity for the
potential full redemption of the remaining EUR 350 million of
Participation Capital in the near term. All of these actions and
results support our goal to be the most efficient centrally managed
bank in Austria focused on serving our retail, small business, and
corporate customers in all of our core markets."

The strong financial results in 2013 were driven from the Bank's
strategy which was based on four key pillars:

o Investing in the Bank's core businesses with focus on Austria o
Repositioning of the balance sheet while de-risking from non-core
assets o Improving the Bank's cost base through acceleration of the
efficiency and productivity program o Significantly strengthening
the capital base and maintaining strong liquidity

Continued focus on the Bank's core business in Austria

BAWAG P.S.K. is focused predominantly on customer relationships in
Austria and currently services 1.6 million private customers, 2,500
corporate and 39,000 small business customers. More than 78% of the
loans and receivables of the Bank represent exposures to customers in
Austria.

o Retail Banking and Small Business: Based on a multi-channel
approach the Bank's investments during 2013 focused on providing
its customers with enhanced products and services across all
physical as well as digital platforms.

BAWAG P.S.K.'s retail customer base increased by more than 21,000
current accounts (+1.7%) on a net basis during 2013 through its
full suite of "box" products that are understandable, fair, and
available "anytime and anywhere". The "Sparbox" variable savings
card increased deposits to EUR 3.2 billion after its launch at the
beginning of 2013, while new consumer loan volume through
"Kreditbox" increased the total consumer loan volume to EUR 1.4
billion in 2013, representing an 8% total market share in Austria.

The branch initiative "Filialoffensive", was also successfully
completed in 2013. The cooperation with Austrian Post, the
traditional partner of BAWAG P.S.K., allows the Bank to now
provide customers a network of 477 branches for bank and postal
services, based on a centrally managed flexible operating and cost
infrastructure.

The digital distribution channels e-banking (including the app for
iPad and tablet-user) and direct banking platforms were expanded
by a newly designed online platform at the end of 2013. It offers
an easy, modern, and interactive access to all products and
services of the Bank. E-banking and mobile transactions now
account for approximately 56% of all banking transactions and are
expected to further increase in 2014. Overall the bank invested
EUR 45 million in IT systems and other retail initiatives to
increase the product capabilities, services, and security within the
retail franchise.

The Bank's 100% subsidiary easybank, a leading direct bank in
Austria, is complimentary to the BAWAG P.S.K. franchise and has
its focus on simple and innovative products, lean processes and
high service quality. easybank shares the scale of a single
operating and technology platform with BAWAG P.S.K. Overall
customer deposits grew 23% to a record EUR 2.7 billion at year-end
2013.

Overall operating income in retail banking and small business
increased by 2.7% in 2013 to EUR 528.3 million despite very
challenging market conditions. Core revenues of net interest
income and net commission income were slightly down to EUR 490.7
million. Risk costs of EUR 23.5 million were significantly lower
compared to 2012 (25bps risk costs). The NPL ratio in the Retail
Banking and Small Business segment was reduced from 6.6% to 3.2%
and further demonstrates the improved credit quality of the business.
Profit before Tax therefore materially improved for year 2013 to
EUR 77.2 million compared to EUR 13.0 million for year 2012.
Customer deposits remained flat at EUR 19.6 billion and there was
an increase in variable rate savings to 70% of the overall
customer deposit base.

o Corporate Lending and Investments: BAWAG P.S.K. remains a strong
provider for Austrian corporate and public sector customers.
Although the business segment continues to face competitive margin
pressure, the Bank has maintained stable operating income within
its core client businesses. In addition to lending, BAWAG P.S.K.
primarily focuses on its payments and treasury services products.

The international business lending strategy focuses primarily on
Germany, the UK and selected areas of Western Europe. The
international platform has been a key driver of earnings
diversification and is focused on investments in both corporate
and commercial real estate transactions. Despite high redemptions
over the past twelve months, the outstanding asset balances of
this segment have remained stable, while volume has increased in the
International Commercial Real Estate segment.

During 2013 total new volume in Corporate Lending and Investments
totalled EUR 2.3 billion. Combined with proactive de-leveraging
and de-risking on non- core exposures led to total asset balances
of EUR 12.9 billion at year-end 2013, a reduction of EUR 2.1
billion from 2012. Risk-weighted assets were reduced by almost EUR
1.9 billion.

Overall, operating income amounted to EUR 251.8 million in 2013 (+1%
from EUR 249.9 million in 2012). Net interest income remained
quite stable despite early redemptions, tightening of new business
margins in the international segment and de-leveraging of certain
Austrian and CEE exposures. This strong result was based on strict
pricing discipline, re- pricing efforts and reduced funding costs
for the businesses.

Net fee and commission income fell from EUR 58.6 million to EUR 44.2
million primarily as a result of certain de-leveraging activities
but was stable in the core customer areas despite continued
competition in the payment business. Corporate Lending and
Investments realised a profit before tax of EUR 106.8 million for
2013.

The share of non-performing loans in the Corporate Lending and
Investments segment remained almost unchanged at 2.8%,
demonstrating stability and a good performance from a risk
perspective.

o Treasury Service and Markets: This segment was transformed in 2013
into an integrated centre for the Bank's customers, subsidiaries
and the Bank's asset/liability management team by providing market
advice and execution services. Further, this segment has
management responsibility for a substantial portion of the Bank's
portfolio of investment securities. The segment organization
allows the activities in the Treasury Services and Markets
division to be optimally tailored to the needs of the customers and
the Bank overall.

The investment portfolio, managed by Treasury Services and Markets,
is primarily comprised of high quality bank senior unsecured and
covered bonds, and select sovereign exposures. This portfolio
amounted to EUR 5.1 billion as of December 31, 2013. The average
maturity was 2.9 years, and 81% of the portfolio was rated single
"A" and above.

In 2013, the Bank actively sold and reinvested select positions of
its investment portfolio. These sales were executed to take
advantage of overall performance, maintain diversification
requirements and manage impacts of future fair value volatility in
the Bank's capital position. The segment team also executed the
strategic disposition of the Bank's legacy structured credit
portfolio.

Treasury Services and Markets realised a profit before tax of EUR
62.5 million for 2013.

Repositioning and de-risking the balance sheet

Part of the strategy for repositioning the balance sheet over the
last years has been deleveraging non-core activities as well as
low-yielding assets with higher risk. As a result, capital is free
for future investments and allocations will be made diligently across
businesses and assets which meet strict risk-adjusted return
requirements.

o CEE exposure: During 2013, the Bank further reduced its CEE loan
exposure to EUR 0.7 billion at year-end 2013, or less than 2% of
total assets. o MKB, Hungary: By February 2014, the Bank also
successfully sold its remaining shares in MKB, a Hungarian bank.
o Restructuring of leasing operations: BAWAG P.S.K. focuses on
consumer based vehicle financing in its strategic business
activities. The sale of the Polish leasing subsidiary and sale of
the Austrian fleet management subsidiary were completed during the
year. The Bank is currently under agreement for the sale of the
Hungarian lease subsidiary. o Legacy structured credit portfolio:
The sale of the legacy structured credit portfolio de-risked the
balance sheet credit exposure substantially, reduced risk-weighted
assets by EUR 1.2 billion, and resulted in a material profit upon
sale.

Portfolio Management Activities: Corporate and commercial real estate
exposures that did not meet risk-adjusted return requirements were
reviewed in detail and then optimized based on discussions with the
customer and completion of agreed appropriate measures (ie:
adjustment of terms including re-pricing and collateral management,
as well as refinancing). Through these disciplined processes, BAWAG
P.S.K. was able to decrease the risk-weighted asset consumption of
the target portfolio by 41% to EUR 1.2 billion. Impact on overall net
interest income was lowered by successful re-pricing measures and
reducing unprofitable positions.

Improving the Bank's cost base - efficiency and productivity program
largely completed

The comprehensive restructuring program has been accelerated over the
last years and largely completed by year-end 2013. Significantly,
investments tied to this program, will put the Bank in a position to
benefit from a material reduction in the core cost base in 2014. A
restructuring charge of EUR 75.3 million was recorded in 2013 for
these actions and the overall restructuring provisions taken since
year-end 2011 has been EUR 142 million.

As mentioned, the Bank in 2013 continued to invest in its core
businesses with EUR 45 million investments primarely made in IT
systems and other parts of the retail business with the focus on new
releases of the core banking system, product rollouts, and material
investment to expand and update the digital platform. Overall, this
investment supports increased operational excellence, maintained
system stability and increased data security.

Furthermore, the Bank's focus in 2013 remained on additional
initiatives to increase productivity by process optimisation and
leveraging end-to-end capabilities.

Personnel expenses were significantly reduced, showing a decrease of
EUR 24.3 million in 2013 (-7.0% versus 2012).

BAWAG P.S.K. sees developing opportunities to create an even more
flexible operating infrastructure as the Bank rationalizes its
products, services and operating locations in order to maintain
sustainable profitability in a further challenging economic
environment.

Significant strengthening of capital ratios

In addition to successful capital actions completed in 2012,
including the EUR 200 million common equity capital raise, the Bank
completed further aggressive measures to significantly improve its
capital ratios in 2013.

o In April 2013 the Bank was granted regulatory approval to use the
Internal Ratings-Based ("IRB") approach in the retail and
corporate businesses. o The reduction of non-core assets and further
de-risking of the balance sheet, in addition to the impact of IRB,
reduced risk-weighted assets by a further EUR 4.6 billion (-22%)
to EUR 16.0 billion . o Taking advantage of the strong market
conditions the Bank closed out or sold the entire remaining legacy
structured credit portfolio in October 2013. o In the 4th quarter
2013 the Bank successfully issued EUR 300 million of Basel 3
compliant Tier 2 capital to institutional investors and EUR 43
million to retail customers.

These measures led to a significant strengthening of the capital
position of BAWAG P.S.K. as of 31 December 2013:

o The Common Equity Tier I ratio (CET I capital ratio, Basel 3 fully
loaded) is reported at 9.4%. o This equates to a CET I capital
ratio (Basel 2.5) of 14.4% and shows an increase of 3.4 percentage
points compared to 11.0% as of 31 December 2012. o The Tier I
capital ratio (Basel 2.5) improved from 11.7% to 15.3%. o The total
capital ratio (Basel 2.5) increased from 13.8% to 18.7%.

The Bank has therefore delivered improved capital ratios by over 3.0
percentage points over the last 12 months and 5.0 percentage points
over the last 24 months.

Based on this strong capital position, the Bank redeemed EUR 200
million of participation capital held by the Republic of Austria in
March and December 2013. According to the current plans the Bank
intends the total redemption of the remaining EUR 350 million in
March 2014 including full payment of the outstanding dividend
payments for 2013 and 2014.

Solid liquidity position maintained

The liquidity position continues to be a source of strength for the
Bank. The regulatory surplus liquidity stands at EUR 6.3 billion as
of 31 December 2013. This position does result in some compression on
the overall net interest margins due to the very low interest rate
landscape. However, the Bank recognises the value to maintaining a
more robust liquidity position.

BAWAG P.S.K. will continue to maintain a high percentage of deposit
funding. The Bank's customer loan-to-deposit ratio was 95% at
year-end 2013. Further, the secured funding ratio at year-end was
under 10%, highlighting the very low level of encumbrance of the
asset base and low reliance on wholesale funding.

Strong Operating Results in a Challenged Market Environment

Due to the continued low interest rate landscape, increased negative
carry from select deleveraging, and reduced dividend income from
subsidiaries, net interest income decreased by EUR 17.2 million
(-2.9%) to EUR 580.2 million in 2013. Net interest income
demonstrated material improvement in the second half of the year as a
result of balance sheet repositioning and investment activities in
the strategic businesses as well as reduced impact from the reduction
or re-pricing of low yielding assets.

Net fee and commission income decreased by EUR 6.7 million (-3.4%)
compared with the prior year to EUR 188.0 million in 2013. The main
driver of the decline was due to the impact of certain positive
one-off items in 2012. The main component of net fee and commission
income is monetary transactions, which remained largely stable.

The item gains and losses on financial instruments was positively
influenced primarily by sales from securities and subsidiaries and
amounted to EUR 216.1 million, showing an increase of EUR 87.2
million (+67.6%). The sale of entire remaining legacy structured
credit portfolio resulted in a material profit for the Bank. In
addition, the Bank also sold select positions of its bond portfolio,
which generated a net profit of EUR 115.6 million. This item also
includes sales of non-core subsidiaries and a non-performing loan
portfolio, which resulted in one-time gains.

Other operating income and expenses increased mainly driven by the
profit from the sale and leaseback of the headquarters building in
Vienna to EUR 49.7 million (+EUR 38.9 million).

The Bank's disciplined cost management led to a favourable reduction
of core operating expenses by EUR 30.6 million (-5.1%) to EUR 573.9
million. This represents approximately 30% of the annual cost
reduction estimated from these efficiency improving measures going
forward.

Personnel expenses, the largest component in operating expenses, were
reduced by EUR 24.3 million (-7.0%) to EUR 320.9 million due to
headcount reduction.

The active employees' headcount was reduced by 478 staff members over
the course of 2013 and stands at 3,181 FTEs as of 1 January 2014
compared to 3,711 two years before.

Furthermore, the Bank invested EUR 75.3 million in restructuring
reserves in 2013 to continue to improve structural cost issues, which
supports the Bank's goal to achieve a core cost base under EUR 500
million in 2014 and to continue driving operating efficiencies across
the Bank in future years to come.

Risk costs (provisions and impairment losses) showed a continued
positive trend during the reporting period and were significantly
reduced by EUR 51.9 million (-34.6%) to EUR 98.2 million in 2013. In
the financial year 2013 individual loan loss provisions decreased
significantly. This resulted from improved credit quality of the
Bank's core businesses and the sale of non-performing loans. The NPL
ratio decreased from 4.9% to 3.4%.

The cost-income ratio improved from 69.5% to 65.8% in 2013.

Due to increased gains on financial instruments, lower core operating
expenses and substantially reduced risk costs, the Bank delivered a
net profit of EUR 229.1 million compared to EUR 107.3 million in 2012
- despite significantly higher restructuring expenses.

Balance sheet development

The Bank's total assets as of 31 December 2013 totalled EUR 36.4
billion, and were EUR 4.9 billion (-11.8%) lower than at the end of
2012. The main cause for this development is a decrease in financial
assets mainly due to non-core assets disposals as well as the
optimisation of risk-weighted assets.

Assets

Financial assets fell by EUR 2.3 billion to EUR 7.7 billion (-23.1%)
due to a decreased volume of derivatives as a result of a
discontinued proprietary trading activities and disposals of
available-for-sale bonds.

The item loans and receivables totalled EUR 27.3 billion and was EUR
2.5 billion (-8.4%) lower compared to last year. The reasons for this
decrease were high redemptions of corporate loans, overall reduced
corporate loans from non- core customers, an optimisation of
risk-weighted assets and - corresponding to items on the liability
side - decreased loans receivables from credit institutions.

The already mentioned sale of the entire remaining legacy structured
credit portfolio, carrying high capital requirements de-risked the
balance sheet credit exposure substantially and reduced risk-weighted
assets by EUR 1.2 billion.

The risk-weighted assets were reduced in total by EUR 4.6 billion
(-22.4%) to EUR 16.0 billion in 2013 due to the repositioning of the
balance sheet, sale of non-core assets, further de-risking actions
and approval to use the IRB approach in 2013.

During 2013, BAWAG P.S.K. further reduced its total CEE loan exposure
which amounted to EUR 0.7 billion of total assets at year-end, or
less than 2% of the total assets.

Liabilities

Liabilities to customers in the amount of EUR 22.0 billion remained
stable in the financial year, whereas financing volume via banks
decreased by EUR 2.1 billion (-56.1%) to EUR 1.6 billion due to the
full repayment (EUR 2.25 billion) of the tender facility offered by
the European Central Bank (LTRO program by ECB).

Redemptions of own issues led to a reduction in liabilities at
amortised cost by EUR 206 million (-4.3%) to EUR 4.6 billion.

IFRS equity excluding participation capital (EUR 550 million in 2012;
EUR 350 million in 2013) and non-controlling interests increased by
EUR 158 million to EUR 2,053 million as of 31 December 2013,
supported by the significant net profit achieved in 2013.

City of Linz

The legal case with the City of Linz continued in 2013. The Bank sees
itself having a strong legal position and is confident that it will
prevail in this litigation. If necessary, BAWAG P.S.K. will also
pursue the legal case through all court instances.

Outlook

Despite the economic, regulatory, and competitive challenges facing
both Austrian and European banks overall, BAWAG P.S.K. will continue
to position itself in the market with a business strategy aimed to be
the most efficient bank in Austria and focused in its core markets,
products, and services. This is all supported on the fundamental
requirements of maintaining strong and conservative capital and
liquidity positions. "The Bank's successful results and repositioning
in 2013 lays the groundwork for the execution of our strategic plans
in 2014 and beyond," commented Anas Abuzaakouk, Chief Financial
Officer. "As a result, we are pleased to begin communicating key
financial and operati ng goals for BAWAG P.S.K."

2014 Goals

o BAWAG P.S.K. will further develop and deliver its product and
service range for retail and corporate customers across digital
and physical channels - Key Targets 2014: retail consumer lending
share to 8.5% and variable savings deposit ratio of 73% of total
deposits.

o The Bank will continue to invest in core businesses and meet its
overall profitability targets - Target 2014: Bank-wide Return on
Equity of greater than 10% resulting primarily from increased core
revenues and reduced core expenses, with very low positive impact
from gains and losses or other one off items.

o The Bank will continue to increase its bank-wide operational
efficiency - Target 2014: core operating expenses less than EUR
500 million.

o The Bank will retain a prudent risk strategy and projects a stable
risk profile - Target 2014: projected risk costs as a percentage
of loans and receivables of less than 30bps.

o BAWAG P.S.K. will focus and maintain its strong capital position,
deposit funding, and solid liquidity position - Targets 2014: CET
I capital ratio in excess of 10% and a total capital ratio of 14%,
both under a full Basel 3 approach.

Attachments with Announcement:
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http://resources.euroadhoc.com/us/fTRYj2Vo

Further inquiry note:
Mag. Sabine Hacker, Konzernpressesprecherin
T: 05 99 05 - 31210
e-mail: sabine.hacker@bawagpsk.com

end of announcement euro adhoc
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Attachments with Announcement:
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http://resources.euroadhoc.com/us/fTRYj2Vo

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
mail: bawagpsk@bawagpsk.com
WWW: www.bawagpsk.com
sector: Banking
ISIN: -
indexes:
stockmarkets: stock market: Luxembourg Stock Exchange, Euronext Amsterdam,
Frankfurt, Wien, SIX Swiss Exchange
language: English