BAWAG Group AG

Strong profit before tax of EUR 382 million for Q1-3 2017 - Seite 2

Strong capital ratios

The management team continues to run BAWAG Group on a fully loaded basis from a capital standpoint. The fully loaded CET1 ratio has further improved by 260bps to 16.2% (Dec 2016: 13.6%). Due to the acquisitions this year, BAWAG Group maintains a capital position significantly above both regulatory requirements and the management's CET1 target ratio of 12%.

PayLife acquisition completed

In October 2017, the acquisition of the commercial card issuing business of SIX Payment Services Austria, better known as PayLife, was successfully completed. This acquisition adds over half a million new customers and makes us a leading credit card issuer in Austria. Integrating and growing this business will be one of the core focuses for the remainder of 2017 and beyond.

Acquisition of Südwestbank

In July 2017, we signed an agreement to acquire Südwestbank, a regional bank with over EUR 7 billion assets and approximately 100,000 retail and corporate customers headquartered in Stuttgart, Germany. The expertise and long-standing tradition of Südwestbank in Baden-Württemberg, an economically strong region, make the bank an ideal partner to help the Group expand its footprint and customer base in Germany. This transaction is part of BAWAG Group's larger DACH regional strategy and will provide the Group access to excellent customers in a highly attractive market. The transaction is expected to close in the fourth quarter 2017.

Key business highlights in the first three quarters 2017

BAWAG Group successfully executed on its business plans in the first three quarters 2017, delivering another quarter of strong results.

Core revenues increased by 7% to EUR 744 million. Despite a continued low-interest rate environment, net interest income rose 8% to EUR 594 million in the first three quarters 2017, primarily driven by net asset growth and lower funding costs. Net commission income increased by 3% to EUR 151 million. The net interest margin in the third quarter 2017 increased by 6bps to 2.29% compared to the second quarter, reflecting BAWAG Group's dedicated focus on risk-adjusted pricing and optimizing the liability structure.

Operating expenses in the first three quarters 2017 remained flat compared to the first three quarters 2016 despite integration costs related to the acquisitions completed during the fourth quarter 2016. The cost-income ratio further improved by 140bps to 41.4% (Q3: 40.8%).

BAWAG Group continues to maintain a conservative risk profile characterized by disciplined underwriting, low leverage and a business model focused on developed markets in Austria and Western Europe. This is best reflected in a risk cost ratio of 19bps and an NPL ratio of 2.0% as of September 2017 (excluding the legal case with the City of Linz: 1.3%). Since year-end 2016, our fully loaded regulatory leverage ratio has increased by 110bps to 7.5% while the balance sheet leverage was 11.3 times as of September 2017.