EANS-News: BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft / Consolidated Interim Report H1 2016 (with document)

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6-month report

BAWAG P.S.K. REPORTS STRONG H1 2016 NET PROFIT OF EUR 284 MILLION

o Net profit of EUR 284 million, +25% versus prior year
o Return on equity of 19.3%, +1.2pts
o Return on tangible equity of 21.8%, +2.9pts
o Core revenues of EUR 473 million, +2%
o Net interest margin stable at 2.1%
o Operating expenses down 3%
o Cost-income ratio improved to 42.6%, -2.3pts
o Fully loaded CET1 ratio of 15.1%, +2.2pts versus year-end 2015

VIENNA, Austria - August 10, 2016 - BAWAG P.S.K. today reports a
strong net profit of EUR 284 million for the first half 2016, up 25%
versus the prior year. The increase was driven by higher core
revenues, lower operating expenses and reduced risk costs. The return
on equity was 19.3% and the return on tangible equity 21.8%, up
1.2pts and 2.9pts, respectively. The net interest margin remained
stable at 2.1%. Operating expenses were down 3% and the cost-income
ratio down 2.3pts to 42.6%. Risk costs decreased by 36% to EUR 15.9
million.

"BAWAG P.S.K. delivered a strong first half 2016, reporting a net
profit of EUR 284 million. With a return on tangible equity of 22%, a
cost-income ratio below 43% and a fully loaded CET1 ratio over 15%,
BAWAG P.S.K. ranks among the most profitable, efficient and best
capitalized banks across Europe. The continued strong results
reiterate that BAWAG P.S.K. is well positioned to win in this
competitive and evolving European banking landscape. 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. All our 2016 financial targets
are expected to be outperformed from today's perspective," 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 during the second half 2016
that will continue to drive efficiency, operational excellence and
profitable growth," said Chief Financial Officer Anas Abuzaakouk.

Strong capital ratios and favorable stress test results

The fully loaded CET1 ratio further improved by 2.2pts to 15.1% (Dec
2015: 12.9%) and the fully loaded total capital ratio by 2.3pts to
18.1% (Dec 2015: 15.8%). These ratios already take into account the
deduction of a EUR 325 million dividend for 2015 which has not yet
been fully distributed. At the same time, we maintained an RWA
density of 45%, a conservative ratio relative to our European peers.
BAWAG P.S.K. was part of the recent ECB Banking Supervision SREP
stress test exercise and delivered favorable results. The Bank's CET1
ratio in the adverse scenario stands at 9.7% and is not only well
above the ECB's minimum expectation but also above the 2016 SREP
requirement of 9.0% for BAWAG P.S.K. In addition, the impact on the
CET1 ratio in the adverse scenario is only 330bps.

Acquisition of start:bausparkasse and IMMO-Bank

In June 2016, BAWAG P.S.K. announced to acquire start:bausparkasse
(formerly ABV), a large Austrian savings & loan association, as well
as IMMO-Bank from Volksbanken Group. Both banks combine the expertise
and longstanding tradition of housing and real estate financing. This
transaction will grow BAWAG P.S.K.'s domestic retail footprint,
extend its expertise in building society savings & loans, and result
in a significant increase in the financing volume with real estate
companies and social housing associations. The transaction is
expected to close in the fourth quarter 2016 and is still subject to
customary closing conditions and regulatory approvals.

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

In April 2016, Moody's further 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." 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.

BAWAG P.S.K. awarded "Austria's Best Bank 2016" by Euromoney

BAWAG P.S.K. was awarded "Austria's Best Bank 2016" by Euromoney, one
of the world's leading special interest magazines for banking,
finance and capital market issues, in July 2016. This award
underlines BAWAG P.S.K.'s successful strategic transformation in
recent years and is the second important international recognition
for the Bank after The Banker's "Bank of the Year 2015" award for
Austria in December 2015.

Key business highlights H1 2016

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

Core revenues increased by 2% to EUR 473 million, driven by strength
in net interest income. Despite the continued low-interest rate
environment, net interest income increased by 2% versus the first
half 2015, driven by core product growth, pricing initiatives and
lower funding costs. Net interest margin remained stable at 2.1%,
reflecting the Bank's dedicated focus on risk-adjusted pricing and
balance sheet efficiency.

Operating expenses decreased by 3% to EUR 215 million, driven by
sustainable long-term measures in personnel and non-personnel
expenses. The cost-income ratio further decreased by 2.3pts to 42.6%.

Risk costs decreased by 36% to EUR 16 million in the first half 2016,
resulting from the improved credit quality of the individual business
segments 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, Western Europe and the United States. This is
best reflected in a low risk cost ratio of 12bps and a stable NPL
ratio of 2.3%.

Profit before tax was EUR 244 million in the first half 2016, up 5%
versus prior year. Net profit increased by 25% to EUR 284 million,
driven by higher operating income, lower operating expenses and risk
costs as well as tax income resulting from the recognition of
deferred tax assets on tax loss carryforwards. These positive
developments offset the doubling of regulatory charges.

Loans and receivables with customers decreased by 4% to EUR 23.7
billion compared to year-end 2015. The total new origination volume
in the first half 2016 was EUR 2.0 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. The investments in
the Bank's Austrian retail franchise continue to pay off. The market
share in consumer loans, one of the Bank's core retail products, grew
to 11.0%, up 80bps from year-end 2015, representing net asset growth
of 8.4%.

Deposits from customers increased by 2% to EUR 22.1 billion compared
to year-end 2015, mainly resulting from higher deposit account
balances. Funding costs continued to decrease as the product mix,
volume and pricing were optimized. At the end of the first half 2016,
the blended overall retail deposit rate stood at 0.27% versus 0.39%
in year-on-year comparison.

Segment reporting

As of June 2016, the business segmentation and the related reporting
have been changed to provide greater insight and transparency and to
better reflect our strategic focus and the progress of the business
units going forward. The former Retail Banking and Small Business
segment was split into two segments, BAWAG P.S.K. Retail and
easygroup. Similarly, the former Corporate Lending and Investments
segment was split into DACH Corporates & Public Sector and
International Business.

The BAWAG P.S.K. Retail segment, consisting of the Bank's retail and
small business lending to domestic customers, social housing
activities as well as real estate leasing, achieved a net profit of
EUR 80 million in the first half 2016, down 3.4% compared to the same
period last year, while also delivering a return on equity of 18.8%
and a cost-income ratio of 55.3%. Stable core revenues and lower
operating expenses offset the increased regulatory charges stemming
from the deposit guarantee scheme, which represented full-year
expenses even though they were booked in the first half. Accounting
for regulatory charges on a pro-rata basis throughout the year would
have resulted in a net profit of EUR 86.3 million, or an 8.4%
increase compared to the same period last year, with a return on
equity of 20.3%. New loan originations were EUR 560 million, while
moderately increasing margins and maintaining the disciplined
underwriting standards. Overall risk metrics reflect the high credit
quality of the retail business, with a risk cost ratio of 0.38% and
an NPL ratio of 2.2%.

The easygroup segment, comprising Austria's leading direct bank
easybank, our auto and mobile leasing platforms as well as our
international residential mortgage portfolio, showed strong results
by more than doubling net profit to EUR 45 million compared to the
first half 2015, with a return on equity of 27.3% and a cost-income
ratio of 24.2%. The underlying performance reflects 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. During the first half 2016, the segment recorded
new business originations of EUR 240 million, thereof EUR 187 million
in consumer auto leasing (up 15% from the first half 2015). In July,
we entered into a partnership with "Autogott", Austria's leading
online car sales channel, which will increase easybank's brand
awareness and further grow the segment's current customer base of
approximately 380,000 clients in Austria. Overall, easygroup is well
positioned to further build out its asset origination capabilities in
auto leasing and consumer loans both domestically and
internationally.

The DACH Corporates & Public Sector segment includes corporate and
public lending activities and other fee driven financial services for
mainly Austrian customers and select client relationships in Germany
and Switzerland. The segment contributed EUR 36 million to the Bank's
net profit in the first half 2016, a decrease of 19% compared to the
same period last year, but still delivered a return on equity of
13.5%. Core revenues were down 16%, driven by early redemptions,
margin pressures and low new business volume. This was offset by the
improvement in operating expenses (down 8%) and positive risks costs.
In the first half 2016, the business segment recorded EUR 170 million
of new lending in addition to regular renewals. The overall quality
of the portfolio remained stable with an NPL ratio of 1.0%, being a
reflection of prior years' de-risking activities.

The International Business segment comprises international corporate,
real estate and portfolio lending outside the DACH region primarily
in Western Europe and the United States. In the first half 2016, the
Bank continued to focus on loan origination opportunities in select
developed Western countries, generating new business volume of EUR
1.0 billion. The segment contributed EUR 56 million to the Bank's net
profit in the first half 2016, up 1.6% from the same period last
year, and delivered a return on equity of 19.5% despite higher than
anticipated early redemptions. Operating income was down 2.7%, offset
by positive risk costs. Similar to the DACH business, the
international business is characterized by high credit quality
assets, with no nonperforming loans.

Treasury Services & Markets manages the Bank's investment portfolio
of financial securities in the amount of EUR 5.1 billion as well as
the liquidity reserve of EUR 1.2 billion at the end of June 2016. The
investment strategy continues to focus on investment grade securities
primarily representing secured and unsecured bonds of financial
institutions in Western Europe and the United States as well as
select sovereign bond exposures in order to maintain a solid
diversification. The investment portfolio's average maturity was 3.9
years, comprising 98% investment grade-rated securities, of which 78%
were rated in the single "A" category or higher. The segment
contributed EUR 20.9 million to the Bank's net profit in the first
half 2016, down 1.4% versus the first half 2015, and delivered a
return on equity of 11.9%. Overall core revenues were flat, with
lower gains and losses from financial instruments offset by lower
operating expenses.

About BAWAG P.S.K.

With more than 1.7 million customers, BAWAG P.S.K. is one of
Austria's largest, most profitable and best capitalized banks
operating under a well-recognized national brand. We apply a
low-risk, highly efficient, simple and transparent business model
focused on Austria and other developed markets - with two-thirds of
our customer loans and receivables within Austria. The remaining
customer loans are predominantly in Western Europe and the United
States. We serve Austrian retail, small business and corporate
customers across the country, offering comprehensive savings,
payment, lending, leasing, investment and insurance services. Our
Austrian business is complemented by international activities focused
on retail, corporate, commercial real estate and portfolio lending in
Western economies. This strategy provides us with earnings
diversification and growth opportunities while maintaining a
conservative risk profile with disciplined underwriting.

We run the Bank in a safe and secure manner with a strong balance
sheet, low leverage and solid capitalization. Delivering simple,
transparent and best-in-class products and services that meet our
customers' needs is our consistent strategy across all business
units. BAWAG P.S.K.'s Investor Relations website
https://www.bawagpsk.com/IR contains further information about the
Bank, including financial and other information for investors.

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

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

For charts please refer to the attached PDF-press release.

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