EANS-News: BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft / Consolidated Annual Report 2014

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annual report

BAWAG P.S.K. REPORTS 2014 RECORD NET PROFIT OF EUR 333 MILLION, +45%

o Net profit EUR 333 million, +45% versus prior year
o Return on equity 14.9%, +3.3pts
o Core revenues EUR 890 million, +16%
o Operating expenses down 27% to EUR 499 million
o Cost-income ratio improved to 53.1%, down 12.7pts
o Net interest margin improved by 46bps to 1.95%
o CET1 ratio (fully loaded) at 12.1%, up 2.7pts
o Outperformed all 2014 goals published in 2013 annual report

VIENNA, Austria - March 5, 2015 - BAWAG P.S.K. today reported record net profit
of EUR 333 million for 2014, up 45% compared to the year before. The increase
was primarily driven by improvements in the Retail Banking and Small Business
segment. Return on equity was 14.9%, up 3.3pts from last year. Net interest
margin improved 46bps to 1.95% with business net interest margin up 27bps to
2.33%. Operating expenses were down 27% and the cost-income ratio down 12.7pts
to 53.1%. Risk costs decreased by 24% with no material impairments. These strong
results demonstrate the successful transformation of BAWAG P.S.K. over the last
years.

"The continued focus on our core businesses and prior year de-risking
activities drove outstanding financial results. De-spite a
low-interest rate and a slow-growth European macro environment, we
generated record-breaking results and exceeded of all our stated 2014
goals. Our Return on equity of 14.9% makes us the most profitable
major Austrian bank and one of the top players across Europe", said
Chief Executive Officer Byron Haynes. "We are proud of our
achieve-ments, which stems from BAWAG P.S.K's strong core franchise.
We expect another strong year in 2015, projecting a net profit of
over EUR 400 million with all key metrics improving." "We will
continue to execute on a variety of operational and strategic
initiatives during the course of 2015 that will further drive
operational excellence, greater efficiency and lead to continued
profitable growth. Given our current market positioning and focus,
BAWAG P.S.K.'s best years are still ahead," said Chief Financial
Officer Anas Abuzaakouk.

Strong Capital Ratios on a fully loaded basis From a capital
standpoint, the management of BAWAG P.S.K. runs the Bank on a fully
loaded basis (i.e. not relying on any transitional capital under the
CRR). In 2014, the Bank redeemed EUR 810 million of non-sustainable
capital comprised of the remaining EUR 350 million of participation
capital, minorities of approximately EUR 400 million and a remaining
EUR 60 million of non-sustainable Tier 1 as well as other Tier 2
instruments. In addition, our share-holders continued to show support
with a capital contribution of EUR 125 million as part of our final
redemption of participation capital. BAWAG P.S.K. reported a fully
loaded CET1 ratio of 12.1% (2013: 9.4%) and a total capital ratio of
15.8% (2013: 13.9%) as of 31 December 2014, positioning the Bank
among the top-tier banks when compared to both Austrian and European
peers. In addition, BAWAG P.S.K. was highly successful in passing the
ECB's stress test with capital ratios 50% higher than the minimum
targets. The Asset Quality Review (AQR) demonstrated results that
were best-in-class amongst the participating Austrian banks and
confirmed the Bank's prudent and low risk profile and the
conservative nature of its international lending activities. Key
Business Highlights 2014 BAWAG P.S.K. successfully executed on its
business plans in 2014 and made substantial progress across all key
financial, business and operational initiatives positioning the Bank
well to support its retail and corporate customers over the long
term. Core revenues of EUR 890 million increased by 16% due to
strength in net interest income. Despite a continued low-interest
rate environment net interest income rose by 19% in 2014 due to a
strong focus on key lending prod-ucts, a disciplined approach to
pricing and liability optimization measures. The significant
improvements in both net interest margin and business net interest
margin, by 46bps and by 27bps respectively, were a testament to the
Bank's successful re-pricing efforts and focus on profitable
business. Operating expenses fell by 27% to EUR 499 million in 2014,
reducing the cost-income ratio by 12.7pts to 53.1% and demonstrating
the Bank's ability to address structural cost imbalances over the
past few years and continue to drive efficiency. Total risk costs
substantially decreased by 24% to EUR 74 million in 2014, resulting
from the improved credit quality of the core businesses and positive
effects from the prior year de-risking activities. Net profit
increased by 45% to EUR 333 million largely driven by improvements in
the Retail Banking and Small Business segment's net profit, which was
up over 100%. Loans and receivables from customers increased by EUR
799 million or 4%, to EUR 22 billion as of year-end 2014, primarily
driven by growth in core retail and international business assets.
BAWAG P.S.K. continued to proactively reduce its loan exposure to CEE
countries, down 70% to EUR 212 million or 0.6% of total assets.

Segment Reporting Retail Banking and Small Business was the key
driver for the Bank's strong results. Core revenues improved by 14%
driven by higher net interest income of 16% and increased net
commission income of 9%. Continued operating efficiency improvements
led to a decrease of 15% in operating expenses. The segment
contributed EUR 157 million or 47%, of the Bank's net profit in 2014,
more than doubling versus the prior year. The Bank's market share in
consumer loans increased to 9%, up 1pt since year-end 2013. Funding
costs continued to decrease as the Bank continued to manage the
outflow, re-pricing and cross-selling of customer volumes from
fixed-term deposits. Consumer loan volume grew 13% to EUR 1.6 billion
in a contracting Austrian market. The direct banking subsidiary
easybank continued its strong performance in 2014, growing deposits
by 7%, opening 47,000 (+10%) new customer accounts and reaching
507,000 client accounts at the end of the year. Corporate Lending and
Investments continued to improve its overall results in 2014 with a
focus on disciplined pricing and profitable growth. Deleveraging of
non-core assets, repricing and reallocation of capital to more
prof-itable and capital-efficient assets resulted in an increase of
net interest income of 6%. Operating expenses decreased by 12% and
risks costs significantly decreased by 36%. The segment contributed
EUR 143 million of net profit, up 23% from the prior year. Despite
muted loan demand, Austrian Corporate new lending volumes were up
11%. The International Business reported net investment growth of EUR
1.8 billion, ending the year at EUR 6.0 billion assets. The
international new business volume primarily reflected an increase in
investment grade loans in more defensive industries, diversification
across international commercial real estate lending, and portfolio
financing transactions. Proactive risk management and improving
credit quality of the portfolio resulted in an NPL ratio of 1.2%,
down 1.7pts from the prior year. There were no losses in the
international business at year-end 2014, reiterating our conservative
lending approach in this space. Treasury Services and Markets
reported net interest income up 6%, a decrease in operating expenses
of 39% and net profit of EUR 56 million, up 6% from prior year. The
investment strategy continues to focus on investment grade securities
of financial institutions in core Europe and the United States as
well as in select sovereign bonds. The total investment portfolio
amounted to EUR 5.7 billion with an average duration of 3.7 years
comprising 100% of investment grade securities of which 85% were
rated in the single "A" category or higher. Exposure to CEE
securities represented less than 5% of the portfolio limited to
select bonds (95% rated single "A" or better). The portfolio had no
direct exposure to Russia, Ukraine, Hungary or South-Eastern Europe
as of 31 December 2014.

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 which includes lending, savings, payment,
card, investment and insurance services for private and small
business customers. Austrian corporate lending activities and other
fee-driven financial services as well as international activities are
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 and commercial real
estate financing primarily in Western Europe. Treasury Services and
Markets includes all activities associated with providing trading 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 being the most efficient, centrally managed bank
across Austria. Delivering competitive, transparent and simple
products and services to our customers is the core of our strategy.
BAWAG P.S.K.'s Investor Relations website
http://www.bawagpsk.com/BAWAGPSK/IR/EN contains further infor-mation
about the Bank, including financial and other information for
investors. For charts please refer to the attached PDF press release

Further inquiry note:
Pressestelle
T: 43 1 534 53 - 31210
F: 43 1 534 53 - 33015
e-mail: presse@bawagpsk.com

end of announcement euro adhoc
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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