Q Earnings. 10 November November 2015 BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft

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1 Q Earnings 10 November 2015

2 Highlights first three quarters 2015 Financial & business highlights Net profit of 320m, up 22% vpy RoE of 16.9% Stable net interest income NIM up 28bps to 2.13% vpy Continued focus on efficiency cost-income ratio down 4.6pts to 46.7% vpy Solid risk profile risk costs down 40% to 31m CET1 ratio of 14.9% and total capital ratio of 17.9%, both on a fully loaded basis Taking market share consumer lending share up 100bps to 10% vye easybank rated #1 direct bank in Austria total accounts up 10% to 545,000 vpy Purchase of Volksbanken Leasing completed Performance vs. targets FY Targets Net profit > 400m YTD Performance 320.3m Return on equity > 14% 16.9% Cost-income ratio < 50% 46.7% NPL ratio < 2.5% 2.2% CET1 ratio (FF) > 12% 14.9% Total capital ratio (FF) > 16% 17.9% Leverage ratio (FF) > 6% 6.5% Liquidity coverage ratio > 100% 138% Consumer lending market share 9% 10% Delivering results well on track to outperform 2015 targets FF Fully fledged 2

3 Performance scorecard Strong results across all key indicators RoE NIM Cost-income 15.9% +1.0pts 16.9% 1.85% +0.28pts 2.13% 51.3% (4.6pts) 46.7% Q1-3 '14 Q1-3 '15 Q1-3 '14 Q1-3 '15 Q1-3 '14 Q1-3 '15 Leverage (FF) CET1 (FF) NPL 5.4% +1.1pts 6.5% 11.5% +3.4pts 14.9% 3.2% (1.0pts) 2.2% Sep '14 Sep '15 Sep '14 Sep '15 Sep '14 Sep '15 3

4 Business segments Retail Banking & Small Business Corporate Lending & Investments Treasury Services & Markets millions Profit before tax millions Profit before tax millions Profit before tax % % (37%) 28 Q1-3 '14 Q1-3 '15 V Q1-3 '14 Q1-3 '15 V Q1-3 '14 Q1-3 '15 V Core rev (3.5%) Opex (267) (238) (10.9%) C/I ratio 63.1% 58.5% (4.6pts) NPL ratio 3.4% 2.2% (1.2pts) Cov. ratio 83.7% 91.1% 7.4pts Retail net asset growth (+1% vye) led by new consumer lending of 372m market share up 100bps to 10% Fund sales 1b (+11% vpy) NCI of all investment products up 10% vpy easybank customer loans up to 232m (+26% vpy) and deposits up to 3.1b (+13% vpy) total customer assets after integration of BAWAG P.S.K. and Volksbanken auto leasing businesses approx. 1b Core rev % Opex (58) (62) 6.5% C/I ratio 31.2% 29.7% (1.5pts) NPL ratio 1.9% 0.7% (1.2pts) Cov. ratio 85.3% 99.2% 13.9pts International business originations of > 2.5b in Q driven by portfolio and real estate financing Strong credit profile across international assets average LTV of real estate assets < 60% and leverage of corporate assets < 4.0x Muted loan demand in Austria focusing on risk-adjusted returns and repricing Core rev % Opex (16) (15) (8.6%) C/I ratio 26.6% 34.4% 7.8pts NPL ratio 0% 0% - Cov. ratio n/a n/a - Continued focus on high credit quality, shorter duration and strong liquidity positions 99% investment grade portfolio (100% investment grade issuer ratings) no exposure to HETA, Hungary, Russia, Ukraine and other South Eastern European countries 4

5 Acquisition update Purchase of immigon s 1) Austrian leasing business completed in October Deal landscape Autos 60% 0.7b leasing assets Other 40% Deal rationale Bolt-on acquisition creating the #3 auto lessor in Austria core franchise for BAWAG P.S.K. combined auto leasing assets 0.7b as of Sep. 15 Expands distribution footprint with limited overlap (dealers, end customer access, etc.) 2014 performance millions Volksbanken Leasing BAWAG P.S.K. Leasing Net interest income Net commission income Net profit Total assets Gain floor plan financing expertise enabler for growth Combined entity creates scale across asset groups competitive advantage Strong management with 15+ years experience in leasing Value accretive day 1 Bolt-on acquisition creating value day 1 become #3 auto lessor in Austria 1) immigon portfolioabbau ag is the former Österreichische Volksbanken AG 5

6 Financial performance Strong Q3 and YTD 2015 results across the Bank Income statement millions Q3 15 Chg. (%) Q Chg. (%) Net interest income Net commission income 42.9 (8) (6) Core revenues (2) Other revenues (40) Operating income (1) Operating expense (111.9) (7) (336.7) (8) Bank levy (6.0) (3) (17.4) (6) Risk costs (8.3) (44) (31.2) (40) Net profit Key ratios Q3 15 Chg. (pts) Q Chg. (pts) Return on equity 14.4% (0.9) 16.9% 1.0 Return on risk-weighted assets 2.40% % 0.51 Net interest margin 2.11% % 0.28 Cost-income ratio 48.6% (3.2) 46.7% (4.6) Balance sheet millions Sep 15 Chg. (%) 1) Sep 15 Chg. (%) 2) Customer loans and receivables 22, ,044 0 Customer deposits 20,919 (1) 20,919 2 IFRS equity 2, , Risk-weighted assets 15,677 (7) 15,677 (8) YTD Highlights Net profit up 22% vpy emphasis on high quality of earnings Core revenues up 6% vpy to 684m, with NII up 9% vpy to 539m Operating expenses down 8% vpy continued focus on efficiency measures driving operational excellence Risk costs down 40% reflects lowrisk balance sheet and repositioning of customer business Customer loans increased by 265m, or 1.2% vye new originations of 3.4b in Retail and International Business Continued favorable trend across key financial metrics RoE +1pt, RoRWA +1pt, CIR -5pts vpy 1) Change vs. Dec. 14 2) Change vs. Sep. 14 6

7 Core revenues Core revenue growth driven by customer loans and lower funding costs Core revenues millions NII NCI NIM 2.03% 2.11% 2.07% 2.15% 2.11% Summary NII growth driven by core lending products, pricing initiatives and lower funding costs Focus on higher margin consumer and international lending while re-pricing or exiting non-core assets Reduced funding costs blended deposit rate down to 0.35% versus 0.55% year-on-year Strong quality of earnings Other revenues as % of operating income on average only 6% over the last five quarters Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Other revenues as % of operating income 1) 4.6% 5.2% 12.1% 2.8% 5.1% 1) In absolute terms 7

8 Operating expenses Restructuring investments paying off Operating expenses millions OPEX 55.8% 51.8% 45.3% Cost-income ratio 46.4% 48.6% Summary Significant progress in fixing structural cost imbalances... benefits materializing from prior years restructuring program Operating expenses down 7% vpy driven by sustainable long-term measures Cost-income ratio of 46.7% in the first three quarters down 4.6pts vpy Well on track to achieve our net cost-out target of 5-10% in 2015 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Continued focus on operating efficiency given overall market dynamics low growth, low interest rates and shifting customer behavior away from physical to digital networks Active FTEs 2,902 2,836 2,696 2,619 2,565 8

9 Risk costs Proactive risk management to maintain conservative risk profile Risk costs millions LLPs Impairments Risk costs / L&R 0.35% 0.23% 0.17% 0.18% 0.13% Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 NPL ratio % 2.8% 2.8% 2.3% 2.2% 8.3 Summary Risk costs materially down due to de-risking activities and improved credit quality across core business segments Historic balance sheet clean-up efforts behind us no impairments YTD NPL ratio improved to 2.2%... coverage ratio at 57.2% Continued focus on proactive risk management Proactively reducing CEE loan exposure expect exit in near term Reduced CEE loans from 409m to 184m, 55% decrease vpy represents less than 0.6% of total assets 9

10 Balance sheet Successful repositioning to focus on core customer loans & deposit funding Assets Liabilities & Equity billions Customer loans Securities billions NEAs Customer loan yield Deposits Others Retail deposit costs Own issues Core equity 2.73% 2.73% 2.72% 2.62% 2.62% 0.55% 0.50% 0.42% 0.39% 0.35% % 13% 13% 15% 12% 24% 24% 23% 20% 20% % 7% 7% 8% 8% 16% 14% 16% 13% 14% 18% 18% 17% 17% 15% 64% 63% 64% 65% 68% 59% 61% 60% 62% 63% Sep '14 Dec '14 Mar '15 Jun '15 Sep'15 Customer loan yields stable despite depressed interest rate environment Slightly increasing customer loans despite a challenging market customer loans account for greater percentage of total assets continue to focus on growing as % of total assets Non-earning assets (NEAs) comprised primarily of excess liquidity positions and positive market value of derivatives Sep '14 Dec '14 Mar '15 Jun '15 Sep '15 Deleveraging wholesale funding & non-core deposits while shifting of deposit mix and maintaining pricing discipline Further opportunity to optimize funding structure to address low interest rate environment Continued focus on simplified capital structure 10

11 Capital Safe & secure, more capital efficient, lower risk and lower leverage Capital ratios (FF) RWA B/S Leverage CET1 Total Capital billions 15.8% +2.1 pts 17.9% 16.8 (6.6%) x (2.0x) 12.1% +2.8pts 14.9% 12.4x Dec '14 Sep '15 Bank managed on a fully-loaded basis very strong capital base Capital ratios significantly above target levels and regulatory requirements Capital ratios on a transitional basis (incl. interim profit): CET1 ratio 15.8% Total capital ratio 18.7% Dec '14 Sep '15 Disciplined capital allocation with focus on risk-adjusted returns RWA density of 48%... conservative ratio relative to European peers Dec '14 Sep '15 Running a low leverage business model % equity / total assets Deleveraging non-core assets / liabilities coupled with organic equity accretion Regulatory leverage ratio on a fully loaded basis of 6.5% 11

12 2015 Targets & Forecast 2015 Targets YTD Performance Net profit > 400m 320.3m Return on equity > 14% 16.9% Cost-income ratio < 50% 46.7% NPL ratio < 2.5% 2.2% CET1 ratio (FF) > 12% 14.9% Total capital ratio (FF) > 16% 17.9% Leverage ratio (FF) > 6% 6.5% Liquidity coverage ratio > 100% 138% Consumer lending market share 9% 10% FY 2015 Forecast Net profit + RoE ++ CIR ++ NPL + CET1 ++ Total capital ++ Leverage ++ Liquidity coverage + Consumer lending ++ 12

13 IMPORTANT DISCLAIMER: This presentation is prepared solely for the purpose of providing general information about BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft, Georg-Coch-Platz 2, 1018 Wien ( BAWAG P.S.K. ). The information does not constitute investment or other advice or any solicitation to participate in investment business. This presentation does not constitute an offer or recommendation to purchase any securities or other investments or financial products. In respect of any information provided past performances do not permit reliable conclusion to be drawn as to the future performances. BAWAG P.S.K. does not make any representation, express or implied, as to the accuracy, reliability or completeness of the information contained in this presentation. BAWAG P.S.K. disclaims all warranties, both express and implied, with regard to the information contained in this presentation. Actual results may vary from forecasts and variations may be materially positive or negative. In no event shall BAWAG P.S.K. be liable for any loss, damages, costs or other expenses of any kind (including, but not limited to, direct, indirect, consequential or special loss or loss of profit) arising out of or in connection with any use of, or any action taken in reliance on, any information contained in this presentation. BAWAG P.S.K. assumes no obligation for updating the provided information in this presentation. The content in this presentation are not to be relied upon as a substitute for professional advice. This presentation shall not be forwarded to any third party. 13

14 Annex Definitions B/S leverage Total assets / IFRS equity Common Equity Tier 1 capital (CET1) Based on IFRS CRR regulatory figures (BAWAG P.S.K. Group) including interim profit and year-to-date loan-loss provision movements, excluding any transitional capital (fully loaded) Common Equity Tier 1 capital ratio Common Equity Tier 1 capital (CET1) / risk-weighted assets Cost-income ratio (C/I ratio) Operating expenses (OPEX) / operating income IFRS equity Equity attributable to the owners of the parent; excluding participation capital and minorities Net interest margin (NIM) Net interest income (NII) / average total assets NPL ratio Non-performing loans (NPLs) / loans and receivables (incl. provisions); loans are not included in NPLs if no economic loss is expected 1) Regulatory leverage ratio Common Equity Tier 1 capital (CET1) / total exposure (calculation according to CRR, based on Promontoria Sacher Holding N.V. Group) Return on equity (RoE) Net profit / average IFRS equity Return on risk-weighted assets (RoRWA) Net profit / average risk-weighted assets Risk costs / loans and receivables (L&R) Provisions and loan-loss provisions as well as impairment losses (total risk costs) / average loans and receivables (including provisions) Risk-weighted assets (RWA) Based on IFRS CRR regulatory figures (BAWAG P.S.K. Group, fully loaded) RWA density RWA / total assets Total capital Based on IFRS CRR regulatory figures (BAWAG P.S.K. Group) including interim profit and year-to-date loan-loss provision movements, excluding any transitional capital (fully loaded) Total capital ratio Total capital / risk-weighted assets 1) For prior reporting dates please refer to the definitions in the respective annual and quarterly reports. 14