EANS-News: BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft / Consolidated Interim Report Q1 2016 (with document)

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quarterly report

BAWAG P.S.K. REPORTS STRONG QUARTERLY NET PROFIT OF EUR 182 MILLION

o Net profit EUR 182 million, +51% versus prior year
o Annualized return on equity of 25.2%, +5.6pts
o Core revenues EUR 233 million, +1%
o Net interest margin stable at 2.05%
o Operating expenses down 11%
o Cost-income ratio improved to 41.7%, -2.7pts
o Fully loaded CET1 ratio of 14%, +90bps versus year-end 2015

VIENNA, Austria - May 10, 2016 - BAWAG P.S.K. today reported a record
net profit of EUR 182 million for the first quarter 2016, up 51%
versus prior year. The increase was driven by higher core revenues,
reduced operating expenses, lower risk costs and a positive one-time
net tax benefit of EUR 61 million booked in the first quarter. The
annualized return on equity was 25.2%, up 5.6pts. Net interest margin
remained stable at 2.05%. Operating expenses were down 11% and the
cost-income ratio down 2.7pts to 41.7%. Risk costs decreased by 26%
to EUR 8.7 million.

"BAWAG P.S.K. delivered a strong first quarter reporting a net profit
of EUR 182 million. With a return on equity of 25% and a cost-income
ratio of 42%, BAWAG P.S.K. ranks amongst the most profitable and
efficient banks across Europe. We will continue to maintain our
Austria and developed market focused low-risk strategy while
providing our customers with simple, transparent and best-in-class
products and services. We are well on track to achieve or exceed our
2016 goals," said Chief Executive Officer Byron Haynes.

"Over the past four years we have simplified our business model by
focusing on core products, cost efficiency, low leverage and a
conservative risk profile. We will continue to execute on a variety
of operational and strategic initiatives in 2016 that will continue
to drive efficiency, operational excellence and profitable growth,"
said Chief Financial Officer Anas Abuzaakouk.

Strong capital ratios

The fully loaded CET1 ratio further improved to 14.0% (Dec 2015:
13.1%) and the fully loaded total capital ratio to 16.9% (Dec 2015:
16.0%). These ratios already take into account the deduction of a EUR
325 million dividend for 2015 which has not yet been fully
distributed. The SREP requirement of the regulated parent company for
December 2015 and 2016 is 8.75%. At the same time, we maintained an
RWA density of 46%, a conservative ratio relative to our European
peers.

BAWAG P.S.K. upgraded by Moody's

In April 2016, Moody's again upgraded BAWAG P.S.K.'s long-term
deposit, senior unsecured and issuer ratings by one notch to A3 and
the outlook was maintained as "positive". In addition, the Bank's
standalone rating (baseline credit assessment) as well as its senior
subordinate rating were upgraded to baa2 and Baa3 (investment grade
for the first time), respectively. This rating action, which is the
second rating upgrade over the past year, is further validation of
the successful transformation of BAWAG P.S.K. in recent years.

The current rating upgrades make BAWAG P.S.K. the highest rated bank
in Austria by Moody's as well as one of the few "A" rated banks
across Europe. According to Moody's, the rating upgrades reflect the
stronger-thananticipated recovery in profitability, the continued
de-risking of the Bank's balance sheet as well as the continued
build-up of its capital adequacy ratios. The rating assessment
indicates further upside potential for the stand-alone rating over a
12-18 month outlook horizon.

Key business highlights Q1 2016

BAWAG P.S.K. successfully executed on its business plans in the first
quarter 2016 delivering another quarter of strong results.

Core revenues increased by 1% to EUR 233 million, driven by strength
in net interest income. Despite the continued low-interest rate
environment, net interest income increased by 1% versus the first
quarter 2015, driven by core product growth, pricing initiatives and
lower funding costs. Net interest margin remained stable at 2.05%,
reflecting the Bank's dedicated focus on risk-adjusted pricing and
optimizing the liability structure.

Operating expenses decreased by 11% to EUR 104 million, driven by
sustainable long-term measures in personnel and non-personnel
expenses. The cost-income ratio further improved by 2.7pts to 41.7%.

Total risk costs decreased by 26% to EUR 9 million in the first
quarter 2016, resulting from the improved credit quality of the core
businesses and positive effects from the prior years' de-risking
activities. The Bank continues to maintain a conservative risk
profile with disciplined underwriting and a focus on developed
markets in Austria and Western Europe. This is best reflected in a
risk cost ratio of 13bps and an NPL ratio of 2.3%.

Net profit increased by EUR 62 million, or 51%, to EUR 182 million in
the first quarter 2016, driven by higher core revenues (+1%) as well
as lower operating expenses (-11%) and risk costs (-26%). In
addition, a positive one-time net tax benefit of EUR 61 million was
recorded during the first quarter, which is expected to reverse over
the course of the year.

Loans and receivables with customers remained stable at EUR 24.6
billion compared to year-end 2015. The total new origination volume
in the first quarter 2016 was EUR 1.1 billion. The overall customer
loan book continued to be comprised of two-thirds exposure to Austria
and one-third to Western Europe and the United States.

Segment reporting

The Retail Banking and Small Business segment showed strong results
by continuing to grow its domestic consumer loan franchise in
absolute terms while also capturing market share. Overall, the
segment achieved a EUR 69 million net profit, a 27% increase compared
to the first quarter 2015, driven by higher core revenues and lower
operating expenses. The core revenues benefited from the acquisition
of the Volksbank leasing business as well as the purchase of a
high-quality performing residential mortgage portfolio during the
fourth quarter 2015. The cost-income ratio improved to 49.5% and
overall risk costs reflect the high credit quality of the segment
assets with an NPL ratio of 2.2% and a risk cost ratio of 0.26%.

The investments in the Bank's retail franchise continue to pay off.
The market share in consumer lending grew to 10.7%, up 50bps from
year-end 2015 with new business volume of EUR 140 million and net
asset growth of 6%. On the funding side, retail deposits decreased by
2% to EUR 18.5 billion as the outflow of high-cost fixedrate,
non-core products was actively managed while further focusing on
variable-rate savings cards linked to current accounts as a basis for
growing long-term client relationships. Funding costs continued to
decrease as product mix, volume and pricing was optimized. At the end
of the first quarter 2016, the blended interest rate on retail
deposits stood at 0.29%.

easybank, our 100% direct banking subsidiary, grew its client base to
566,000 accounts, up 2% compared to December 2015. Deposits increased
to EUR 3.2 billion. The integration of the auto leasing businesses,
together with its strategic partnerships, enables easybank to expand
its market presence, brand awareness and best-in- class service
offering to a range of new customers and segments. easybank is well
positioned to build out its asset origination capabilities in auto
leasing and consumer loans both domestically and internationally.

Corporate Lending and Investments contributed EUR 40 million to the
Bank's net profit in the first quarter 2016, a 26% decrease compared
to the first quarter 2015, driven by lower core revenues due to
higher redemptions and deleveraging unprofitable exposures and lower
gains and losses on financial instruments. Low risk costs of EUR 0.3
million and an NPL ratio of 0.6% (down 40bps compared to the first
quarter 2015) reflect positive impacts from de-risking actions and
the overall high credit quality of the portfolio.

New business volume in the Austrian corporate business followed the
market trend. In the first quarter 2016 the business recorded EUR 50
million of new lending in addition to regular renewals. In the
international business, the Bank continued to focus on loan
origination opportunities primarily in Western Europe and the United
States, generating new business volume of EUR 730 million in the
first quarter 2016.

Treasury Services and Markets reported core revenues up 9% and
operating expenses down 18% due to increased operating efficiency.
The total investment portfolio stood at EUR 4.4 billion as of March
2016. The investment strategy continues to focus on investment grade
securities primarily representing secured and unsecured bonds of
financial institutions in core Europe and the United States as well
as select sovereign bond exposures in order to maintain a solid
diversification. The portfolio's average maturity was 3.8 years,
comprising 98% investment grade-rated securities, of which 78% were
rated in the single "A" category or higher.

Exposure to CEE in this segment represented less than 3% of the
portfolio and was limited to select bonds (80% rated in the single
"A" equivalent category or better). The Bank had no exposure to HETA
in its security portfolio and no direct exposure to China, Russia,
Hungary or South-Eastern Europe as of March 31, 2016.

Charts: please refer to the attached PDF of the press release

About BAWAG P.S.K.

BAWAG P.S.K. is one of Austria's largest banking institutions with
1.6 million customers and a well-recognized national brand. The Bank
focuses on three business segments: Retail Banking and Small Business
offers simple, fair and transparent products and services which
include lending, savings, payment, card, investment, insurance and
leasing products for private and small business customers. These
products and services are available through our branches all over
Austria which are complemented by our digital sales channels and 100%
owned direct bank easybank. The Austrian and international corporate
business is managed within the Corporate Lending and Investments
segment. The majority of the Bank's lending activities are within
Austria. The international business is focused on corporate,
commercial real estate and portfolio financing primarily in Western
Europe and the United States. Treasury Services and Markets includes
all activities associated with providing hedging and investment
services for the Group's treasury activities and the management of
the Bank's portfolio of financial securities. BAWAG P.S.K. focuses on
a capital efficient, low risk and low leverage business model while
targeting to be one of the most profitable and efficient banks across
Europe. Delivering simple, transparent and best-in-class products and
services to our customers is the core of our strategy.

This text can also be downloaded from our website:
https://www.bawagpsk.com

BAWAG P.S.K.'s Investor Relations website
https://www.bawagpsk.com/BAWAGPSK/IR/EN contains further information
about the Bank, including financial and other information for
investors.

BAWAG P.S.K. contacts:
Financial Community:
Benjamin del Fabro (Head of Investor Relations & Communications)
Tel: +43 (0) 5 99 05-22456
E-mail: investor.relations@bawagpsk.com

Attachments with Announcement:
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Further inquiry note:
Pressestelle
T: 43 (0)59905 - 31210
F: 43 (0)59905 - 22007
e-mail: presse@bawagpsk.com

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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