Bawag Group Ag · VIE:BG
Bawag — Investor Day (September 2021)
58 slides from Bawag's investor day presentation, Sep 20, 2021
Slide 1: BAWAG Group Investor Day
BAWAG Group INVESTOR DAY 20 September 2021 20 September August 2021 | BAWAG 2021 | Group BAWAGAGGroup AG
Slide 2: Our Agenda
Our Agenda 1 Business overview 2 Financials update 3 Business units update 4 Risk management & compliance 5 Recap 20 September 2021 | BAWAG Group AG 2
Slide 3: BAWAG Group franchise
BAWAG Group franchise FRANCHISE Multi-brand and multi-channel commercial bank with over 2.3 million customers across our core markets DELIVERING Mid-teens Return on Tangible Common Equity (RoTCE) ~14% versus sector of ~5% since 2012 RESULTS BEST-IN-CLASS Cost-income ratio (CIR) ~40% driven by simpli
Slide 4: Delivering results since our IPO
Delivering results since our IPO Distributed ✓ ✓ 5 Acquisitions ✓ Expanded footprint ✓ Completed ✓ Investment in €1.13 billion of completed & to new markets separation from platforms and capital fully integrated Austrian Post partnerships €734 million in dividends and Germany, Switzerland, Netherlan
Slide 5: Operating performance and share price development
Operating performance and share price development 2017 2018 2019 2020 2021 Share price development since IPO in € million Forecast Indexed as of 24 October 2017; BAWAG Group 6% as of 17 September 2021 EuroStoxx Banks Index (SX7E) (29%) Profit before tax 500 573 604 371 ~575 Stoxx 600 Banks Index (SX
Slide 6: Outperforming the sector over the last decade
Outperforming the sector over the last decade 2.4x growth of Significant improvement of Return on tangible pre-provision profits (PPP) cost-income ratio (CIR) common equity (RoTCE) Pre-impairment profit indexed as of 1 Jan 2012 Average since 2012 3 300 70% BAWAG ~14% 2 Group 200 60% European 1 100 5
Slide 7: BAWAG transformation over the past decade
BAWAG transformation over the past decade CAGR >10% PRINCIPLES OF OUR TRANSFORMATION 711 ~735 653 653 Pre-provision profit 592 526 FIRM CULTURE: Our company values and culture are defined by accountability, (€ million) 429 502 meritocracy, and embracing change 323 279 2.35 2.32 2.24 2.30 2.29 ~2.25
Slide 8: Strategy focused on execution and continuous improvement
Strategy focused on execution and continuous improvement Our focus is on Austria, Germany, Switzerland, Netherlands (DACH/NL region), Western Europe and United States GROWTH IN 1 CORE MARKETS Criteria for core markets: Fiscal position (single A or better sovereign rating), legal infrastructure, and
Slide 9: Growth in core markets & customer focus
Growth in core markets & customer focus 2012 FY 2021 Forecast Key focus areas through 2025 Core markets 1 market 7 markets • Continue to focus on growth and expand footprint in core markets into Core revenues ~€0.8 billion ~ €1.2 billion Western Europe and United States • Continue to identify bolt-o
Slide 10: Driving efficiency through operational excellence
Driving efficiency through operational excellence 2012 FY 2021 Forecast Key focus areas through 2025 Cost-income ratio 70% ~40% • Continue to optimize physical footprint reflecting customer needs • Further improve efficiency and integration speed through a platform approach: Real estate footprint ~9
Slide 11: Maintaining a safe & secure risk profile
Maintaining a safe & secure risk profile 2012 FY 2021 Forecast Key focus areas through 2025 CET1 Ratio 6.2% >14.5% • Continue to maintain low risk profile across core markets Leverage ratio ~3% >6.5% • Disciplined, prudent growth through market cycles, always focused on appropriate risk-adjusted ret
Slide 12: New Targets & 4-Year Plan through 2025
New Targets & 4-Year Plan through 2025 MEDIUM TERM 2025 ESG TARGETS RETURN TARGETS RoTCE ~15% >17% >+2pts BASELINE TARGETS CIR ~40% <38% >(2pts) CO2 ~2,900 tCO2 >50% emission in 2020 reduction 2025 FINANCIAL TARGETS (own scope 1-2) 2021 Women quota 17% SB FORECAST TARGETS 33% CAGR (Supervisory Board
Slide 13: Updating capital distribution policy
Updating capital distribution policy €1.13 billion ~€2.6 billion of capital available thru 2025 capital returned to shareholders Additional capital since IPO in 20171) Dividend policy Share Buyback 2022 thru 2025 €400 million Organic growth, M&A, share buyback 35% 1 minority and/or platform 50% for
Slide 14: M&A Recap … Strategic Optionality
M&A Recap … Strategic Optionality M&A HISTORY SINCE 2015 M&A TARGETS & UNDERWRITING CRITERIA MARKETS CUSTOMER FRANCHISE EFFICIENCY 11 total acquisitions: Closed 9 deals ✓ with 2 new deals signed in 2021 • Focus on core markets … • Focus towards retail • Operational turn-around DACH/NL region, Wester
Slide 15: The BAWAG culture
The BAWAG culture Leadership & Embracing Change Accountability, Meritocracy & Inclusion • Actions speak louder than words • Our greatest asset is our human capital • We value integrity, character and work ethic • Investing in developing and empowering our people • Experienced Senior Leadership Team
Slide 16: Our Agenda
Our Agenda 1 Business overview 2 Financials update 3 Business units update 4 Risk management & Compliance 5 Recap 20 September 2021 | BAWAG Group AG 16
Slide 17: Starting Point 2021 and new targets
Starting Point 2021 and new targets 2021 FORECAST MEDIUM TERM RETURN TARGETS Core revenues RoTCE >17% FY ’20: €1,170m ~2% growth RoTCE ~15% CIR <38% Other income FY ’20: €3m ~€10m CIR ~40% TARGETS 2025 Operating expenses: below €485m Profit FY ’20: €520m ~€575m Profit before tax +€175m before tax >€
Slide 18: +€175 million Profit before tax from 2021 to 2025
+€175 million Profit before tax from 2021 to 2025 Pre provision profit >€125 million … >4%p.a. Net Interest Income: +2% p.a. Net commission income: +3% p.a. Operating Expenses: (2%) p.a. • Retail & SME growing to ~70% of total customer book • Focus on advisory business and banking customers • Furthe
Slide 19: ~10% annual EPS growth through 2025
~10% annual EPS growth through 2025 2021 2025 2021-2025 2012 Forecast Plan CAGR Growing high quality earnings in € million Net interest income 582 ~930 >1,000 2% • Net interest income +2% p.a. mainly from retail loan growth • Net commission +3% p.a. mainly from advisory business Net commission incom
Slide 20: Asset mix shift towards Retail continues
Asset mix shift towards Retail continues 2012 H1 2021 2025 2012 H1 2021 2025 Plan in € billion Plan Customer Lending 25.4 33.5 ++ Growing Retail & SME 9.0 20.3 ++ 1 customer lending ~60% ~80% ~90% Customer lending / Interest bearing assets Housing loans 5.7 15.2 ++ Consumer & SME 3.3 5.1 + Corporate
Slide 21: Business Segments
Business Segments Retail & SME (in € million) 2021 2025 2012 Forecast Plan Net interest Income 360 >650 ++ Net commission income 142 >245 ++ Share of core revenues Core Revenues 502 ~900 ++ 2012 2012 2021 2021 2025 Plan 2025 Corporates, Real Estate & 2012 2021 2025 Public Sector (in € million) Forec
Slide 22: Funding mix
Funding mix 2021 2025 2012 Forecast Plan “Self-funded” customer business … 95% of funding > €30 billion > €40 billion > €50 billion 1 comes from customer deposits and covered bonds, mostly collateralized by retail mortgages ~5% 25% ~ 5% ~15% 2 Lower cost of funding thru improved funding mix 21% 8% ~
Slide 23: Specifics on capital distribution policy
Specifics on capital distribution policy Dividend policy Financial year 2021 2022 Dividend per share (DPS) ~€2.60 >€3.00 50% for 2021 Payout date Q2 2022 Q2 2023 55% for 2022-2025 Payout ratio 50% 55% Share Buyback 2022 Timing Size (max.) Format Target >12.25% CET1 % Application to be > 12.25% Targe
Slide 24: Opportunities not captured in our targets
Opportunities not captured in our targets 1 Interest rate environment and sensitivities 2 M&A / platforms / minority investments No rate increase assumed No M&A or platform investments assumed 100bps parallel increase of the interest rate curve leads market consolidation or individual situations cou
Slide 25: Our Agenda
Our Agenda 1 Business overview 2 Financials update 3 Business units update 4 Risk management and compliance 5 Recap 20 September 2021 | BAWAG Group AG 25
Slide 26: Retail & SME Overview
Retail & SME Overview Key Stats Product Offerings Retail & SME 73% of Group profits Current Accounts Cards & Payments Secured Lending Corporates, Real • Comprehensive offering across various • Leading card issuer in Austria with cross- • Housing loans, auto & moveable leasing, Estate & Public 27% br
Slide 27: Disciplined lender in a large addressable market
Disciplined lender in a large addressable market MARKET SIZE (DACH/NL REGION) 2012 June 2021 2025 Plan BAWAG share 0.6% 1.0% 1.1% ASSETS (in € billion) 9.0 20.3 ++ Housing loans 5.7 15.2 ++ STOCK 2.0 0.2 2.9 € TRILLION trillion trillion Consumer & SME 3.3 5.1 + trillion FUNDING Deposits 19.5 27.2 st
Slide 28: Strategic growth pillars
Strategic growth pillars 1 A multi-brand and multi-channel lending & advisory platform across core markets • Leveraging various distribution channels including branches, digital channels, dealers, strategic partners, brokers & platforms 900 sales staff • Repositioned organization with 80% of Retail
Slide 29: Creating a multi-brand & multi-channel lending & advisory platform across core markets
Creating a multi-brand & multi-channel lending & advisory platform across core markets Digital Products with Key Highlights Central Support/Operations Advanced Analytics • Risk appetite, pricing & capital allocation centrally steered • Preapproved offers for existing customers 11 different brands •
Slide 30: High-quality advisory & advanced analytics as an enabler for banking our customers
High-quality advisory & advanced analytics as an enabler for banking our customers Retail Banking How we serve our customers… 1. Invested into data analytics to create centralized customer view with predictive behavior Auto Leasing Cards and trigger-based leads using more enhanced propensity models
Slide 31: Continuous investments driving growth and efficiency
Continuous investments driving growth and efficiency Optimized branch footprint + Continuous shift to digital platforms = Further growth & efficiency Branch transformation Continuous enhancement of app-functions, like • Reduced network infrastructure personal finance manager & cash flow analysis, co
Slide 32: Continued focus on growth and expansion
Continued focus on growth and expansion Targeting new markets Expanding product Reassess existing New strategic reach & greenfield partnerships partnerships opportunities Platform/minority investments and bolt- Specialty finance, brokerage, specialty Insurance and asset management Customer acquisiti
Slide 33: Overview of Corporates, Real Estate and Public Sector
Overview of Corporates, Real Estate and Public Sector PRINCIPLES OF LENDING BUSINESS DEVELOPMENT 2012 June 2021 2025 Plan • Focus on risk-adjusted returns and maintain disciplined underwriting with margin of safety ASSETS (in € billion) 16.4 13.2 + • Focus on core markets with stable legal systems a
Slide 34: Real Estate
Real Estate LENDING FOCUS AREAS & UNDERWRITING KEY PORTFOLIO STATISTICS • Focus on lending to real estate companies/properties • Weighted average portfolio LTV <60% By underlying that produce strong cash flow with reasonable leverage 8% Residential • NPL ratio of 1.4% … RWA density 67% 7% Mixed • Co
Slide 35: Corporate Lending
Corporate Lending LENDING FOCUS AREAS & UNDERWRITING KEY PORTFOLIO STATISTICS By industry • Focus on corporates that produce strong cash flow in • Portfolio average net leverage of <4.0 defensive industries with reasonable leverage Services • NPL ratio of 2.1% … conservative RWA density 75% 19% Food
Slide 36: Public Sector
Public Sector LENDING FOCUS AREAS & UNDERWRITING KEY PORTFOLIO STATISTICS Customer types • Focus on sovereign, federal state, and municipalities in • 0 non-performing loans … RWA density of 8% Austria and Germany • Weighted average life of the loan portfolio of 13 years • Strong market share and pre
Slide 37: Our Agenda
Our Agenda 1 Business overview 2 Financials update 3 Business units update 4 Risk management and compliance 5 Recap 20 September 2021 | BAWAG Group AG 37
Slide 38: BAWAG's low-risk profile
BAWAG’s low-risk profile ✓ High asset quality ✓ ✓ Proactive risk ✓ Focus on retail and ✓ Minimized market ✓ Centralized risk driven by disciplined management secured lending in risk with no trading management and underwriting core markets activities simplified operations 1.5% NPL ratio 60% retail Lo
Slide 39: How we manage risk
How we manage risk RISK PROFILE FOUNDATION Customer segment assets 2012 June 2021 Segment 1 Maintain low risk profile Retail & SME • Led by risk culture and front-end alignment €25.4 35% 40% €33.5 • Risk / return discipline billion billion Corporates, in % in % 60% Real Estate 65% • Low operational
Slide 40: Portfolio Overview – Retail & SME
Portfolio Overview – Retail & SME Customer Book Retail & • 83% housing or secured exposures (leasing products) • 2.0% NPL ratio SME Overview • Consumer lending to primary customers • Total reserve ratio 1.5% 40% €33.5 Retail & SME billion Corporate & 60% in % Public Statistics Underwriting • 92% DAC
Slide 41: Portfolio overview: Corporates, Real Estate & Public Sector
Portfolio overview: Corporates, Real Estate & Public Sector Asset Type Corporates, Real Estate & Public • Long-term credit standards maintained • 1.1% NPL ratio Sector • Highly collateralized, high cash flow first lien exposures • Total reserve ratio 1.0% (€13.2 billion) 28% Real Estate 37% €13.2 Pu
Slide 42: Resilient portfolio
Resilient portfolio ECB stress test results validate strength of underwriting and conservative balance sheet BAWAG 3-Year CET1 impact of -198bps vs ECB avg. of -520bps SEGMENT ANALYSIS 14% Main Exposure* Assets* portfolios (in €b) (in €b) Credit losses (198)bps 12% (adverse case, 3-year cumulative)
Slide 43: ESG as a part of proactive risk management
ESG as a part of proactive risk management Overview: Operationalizing ESG with a low ESG risk starting point LENDING PORTFOLIO REDUCING OUR OWN EMISSIONS • Low exposure to industries with significant ESG risk • Several initiatives in the past to reduce own scope 1 and scope 2 CO2 emissions …. near 1
Slide 44: Portfolio management
Portfolio management Consistent strategy and discipline as risk performance continues to differentiate PROACTIVE RISK MANAGEMENT Continued mix shift to secured and public sector lending 1• Mix shift: secured lending continues to favorably impact loss levels 2012 June 2021 11% • Secured & Public Sect
Slide 45: Maintaining a robust compliance culture
Maintaining a robust compliance culture STRATEGIC RATIONALE NEW MANAGEMENT BOARD FUNCTION CONSOLIDATION & FUNCTIONAL CENTRALIZATION Chief governance topics continuously combined and centralized across the group Administrative Officer (CAO) BUSINESS GROWTH key to review and assess local laws and regu
Slide 46: Strategy and business inherently supports governance
Strategy and business inherently supports governance … and is in addition strengthened by a clear governance approach through … BAWAG GROUP’s business model and strategy limit certain risk-areas through focus on … CENTRALIZATION of FUNCTIONS and SETTING STANDARDS of group wide responsibilities for g
Slide 47: Example: Simplification of group structure as driver to enhance governance and efficiency
Example: Simplification of group structure as driver to enhance governance and efficiency SIMPLIFICATION OF GROUP AND CULTURE INDUCEMENT IN NEWLY ACQUIRED BUSINESSES… MAIN OPERATING ENTITIES BAWAG Group (Holding) 1 Simplification by way of intra-group mergers (enhances group oversight - reduce overh
Slide 48: Our Agenda
Our Agenda 1 Business overview 2 Financials update 3 Business units update 4 Risk management and compliance 5 Recap 20 September 2021 | BAWAG Group AG 48
Slide 49: Recapping targets & capital distribution
Recapping targets & capital distribution MEDIUM TERM ESG TARGETS CAPITAL DISTRIBUTION RETURN TARGETS 2025 RoTCE >17% Dividends ~€1.4 billion CIR <38% CO2 >50% emission reduction (own scope 1 & 2 vs. 2020) FINANCIAL TARGETS 2025 Share buyback >12.25% CET1 % Women quota 2022 €436 million (Supervisory
Slide 50: BAWAG Group franchise
BAWAG Group franchise FRANCHISE Multi-brand and multi-channel commercial bank with over 2.3 million customers across our core markets DELIVERING Mid-teens Return on Tangible Common Equity (RoTCE) ~14% versus sector of ~5% since 2012 RESULTS BEST-IN-CLASS Cost-income ratio (CIR) ~40% driven by simpli
Slide 51: Supplemental pages
Supplemental pages Supplemental pages 20 September 2021 | BAWAG Group AG 51
Slide 52: Management Board & Supervisory Board
Management Board & Supervisory Board MANAGEMENT BOARD SUPERVISORY BOARD Anas Abuzaakouk David O‘Leary Egbert Fleischer Frederick Haddad Verena Spitz Chief Executive Officer Chief Risk Officer Chairperson Chairperson of Works‘ council delegate Risk & Credit committee Enver Sirucic Andrew Wise Kim Fen
Slide 53: Further embedding ESG into our strategy
Further embedding ESG into our strategy ESG governance Initiatives Environment • Reduce own Scope 1-2 CO2 emissions by >50% by 2025 vs. 2020 … closed to 100% green electricity • Increasing green lending volume over time … annual green lending new business target of Supervisory >€1.6 billion by 2025
Slide 54: M&A track record
M&A track record .. 11 acquisitions completed or signed since 2015 EXPERIENCED WITH BOLT-ON ACQUISITIONS TO BUILD OUT CUSTOMER FRANCHISE 2015 2016 2017 2018 2019 2021 commercial 2) 1) DEPFA BANK PLC card issuing business Bausparkasse AG Signed deal to acquire €0.7 billion ASSETS €1.6 billion ASSETS
Slide 55: City of Linz overview
City of Linz overview Scenario Analysis for potential outcomes of interim decision of Supreme Court Receivable of €254 million on balance sheet as of 30 June 2021 Valid contract Invalid contract Receivable fully provisioned in CET1 through prudential filter in 2020, i.e. no impact on capital regardl
Slide 56: Investor relations calendar
Investor relations calendar UPCOMING ROADSHOWS AND CONFERENCES 21 September UK roadshow SHAREHOLDER STRUCTURE 22 September BAML conference Managing Board 2.5 23 September 18th Bernstein Strategic Decision Conference 78.2% Free Float 27 September Scandinavia roadshow GoldenTree 21.8 27 September Bene
Slide 57: Important Disclaimer
IMPORTANT DISCLAIMER: This presentation is prepared solely for the purpose of providing general information about BAWAG Group, Wiedner Gürtel 11, 1100 Wien. The information does not constitute investment or other advice or any solicitation to participate in investment business. This presentation doe
Slide 58: Definitions
Definitions B/S leverage Reserve ratio Total assets / IFRS equity Total reserves / Asset volume of customer segments excluding public lending Book value per share Return on common equity (RoCE) Common equity (excluding AT1 capital and dividends) / number of shares outstanding Net profit / average IF