Annual Report 2023

Dear Shareholders,

2023 has been another record year for BAWAG Group.

€ 178 million

Net Profit

€ 8.31

EPS

25.0%

RoTCE

32.3%

CIR

Read our Consolidated Annual Report

“I want to thank our customers for placing their trust in us, our shareholders for their continued support, and our team members for their commitment and execution.“

Anas Abuzaakouk
Chairman of the Management Board & Chief Executive Officer

€ 2.6 billion capital distributed since IPO

We also distributed € 480 million of capital in the form of
€ 305 million dividends (€ 3.70 per share) and completed a € 175 million share buyback during 2023, reducing our number of shares by 5%, which now stand at 78.6 million shares.

We ended the year with a CET1 ratio of 14.7% (post dividend accrual of € 393 million, or € 5.00 per share) and excess capital of € 475 million versus our CET1 target of 12.25%.

Delivering a record year in 2023

2023 was a record year for the Group delivering on all targets despite a challenging macroeconomic environment. The seeds of this past year’s success were planted over a decade ago, when we launched our strategic transformation. We must never forget that to be successful year-in and year-out, we cannot take a short-term view. We must anticipate and prepare for the future, always adapting, and continuously investing in our franchise.

Although the franchise is in great shape, we need to remain vigilant in guarding against complacency, and continue to adapt from a position of strength. This continuous improvement culture, more than anything else, will secure the long-term success of the franchise.

Being good stewards of capital

Disciplined capital allocation, and M&A in specific, is key to our strategy and how we run the Bank. We aim to be good stewards of capital, making sure we are prudent in our capital distribution plans, maintain our fortress balance sheet, and being ready to capitalize on unique opportunities.

Underpinning this is our strong profitability, which allows us to accrete significant amounts of capital each year. We then use this capital to invest in our franchise and teams, extend credit to our customers, acquire businesses, and distribute to our shareholders. Our priority is to invest in our franchise, both organically and through acquisitions.

Staying patient & disciplined

In terms of business activity, 2023 was defined by staying patient and disciplined. We saw an impact on customer lending volumes as high rates and inflation translated into anemic growth negatively impacting lending opportunities across both Retail & SME as well as the Corporates, Real Estate, and Public Sector business. Despite our record performance in 2023, our best years are still ahead.

We closed the year with a significant amount of dry powder – equal to € 475 million of excess capital and € 13 billion of cash. We are now investing in a transformative and highly accretive acquisition of Knab bank in the Netherlands. This deal will expand our DACH/NL footprint, building-out our customer franchise, and allowing us to significantly grow the business and earnings in the years ahead. Given the nature of the transaction and the quality franchise we are buying, the deal will be P&L accretive Day 1 and is projected to contribute ~ € 150 million of pre-tax profit by 2026 with EPS accretion of ~16%, without factoring in any future potential buybacks. The transaction is subject to customary regulatory approvals and we hope to provide updates throughout the course of the year.

Read more about knab

The € 475 million of excess capital will be earmarked for the acquisition of Knab bank as well pursuing other strategic opportunities. Given the significant capital accretion of the franchise of over 300 basis points per year, we will revisit buybacks as part of our overall capital distributions in 2025.

Our strategy over the past decade:
consistency + execution

We focus on growing our franchise in our core markets “providing customers with simple, transparent, and affordable financial products and services they need and that promote their financial health.”

1. GROWING IN OUR CORE MARKETS FOCUSED ON SERVING OUR CUSTOMERS

Retail & SME

We delivered a solid year across the Retail & SME franchise. We continued to invest in developing our branch and digital channels, integrating our online brokerage capabilities, expanding our partnerships and platforms, and continuing our transition to an advisory focused bank all while staying close to our customers despite challenging market conditions. We launched several customer initiatives in 2023 focused on simplifying customer journeys, targeting new customer segments, expanding our community banking footprint

Corporates, Real Estate & Public Sector

The Non-Retail & SME business also delivered solid results, staying close to our customers, and remaining patient as we anticipate credit risk being repriced more broadly across asset classes. We expanded our capabilities across payments, funding, investments and growing our Public Sector footprint.

Growth initatives

Across the Group, we remain committed to disciplined and profitable long-term growth, remaining cautious as markets digest the new normal of higher interest rates. In addition to signing the strategic acquisition of Knab bank in February 2024 that I touched upon, our teams worked on several strategic growth opportunities in 2023.

€ 702 million

PBT

€ 225 million

PBT

Peak Bancorp

acquisition completed on
November 30, 2023

31.8%

RoTCE

22.9%

RoTCE

Knab

transaction signed on
February 1, 2024

30.2%

CIR

24.6%

CIR

MoCo

soft launch in Ireland

2. DRIVING EFFICIENCY THROUGH OPERATIONAL EXCELLENCE

Because change is the only constant, we need to continuously evolve and transform ourselves. This requires being selfcritical, being open to feedback of all stakeholders, always challenging the status quo, and never growing complacent. We pride ourselves on focusing on the things we can control and embracing a “self-help” DNA. As a result, we believe in proactive absolute cost management, not relying on ratios that are divorced from the underlying operations of the business. We focus on executing key operational initiatives by making strategic long-term investments that ultimately drive greater efficiency through scale, digital engagement, and simplification across the Group.

To this end, we consolidated our Technology, Operations, and Payments teams in 2023 under “TechOps” with the aim of creating frictionless customer journeys across the Group, improving the overall customer experience, simplifying our workflows, and working to be more externally versus internally focused. The goal is to provide high quality services to our customers, build out our analytics and portfolio monitoring capabilities, consistently invest in technology, and leverage our infrastructure and development capabilities across the Group.

The goal is to invest in our people, break unnecessary silos, create a single Group identity, and simplify our operations.

3. MAINTAINING A SAFE & SECURE RISK PROFILE

Core to the bank’s strategy is to maintain a safe and secure risk profile as this is a key differentiator and competitive advantage. This was best reflected in the EBA/ECB stress test results this past year, where BAWAG ranked #2 among the 57 Eurozone stress-tested banks and #5 among the 70 total EBA sample

Read stress test results

We primarily focus on the DACH/NL region with no exposure to Russia or emerging markets and de minimis exposure to Eastern Europe. Our lending is 79% secured or public sector, reflecting our long term strategic growth in low-risk asset classes and collateralized lending.

We also enhanced our ESG (Environmental, Social & Governance) strategy in 2023. This is an integral initiative that cuts across the entire Bank underpinning our strategy, how we manage risk, and allowing us to drive responsible, sustainable, and profitable growth. A few tangible examples around ESG are pursuing new green financing opportunities that meet our risk-adjusted returns, reducing our own carbon footprint, supporting existing customers in their green transition, capturing environmental risks in our underwriting and limit setting, maintaining a meritocratic culture, increasing female representation across the Senior Leadership Team, supporting underserved communities, and ensuring that we play a positive role in society.

Read CSR Report

Our Targets in 2024

As we look ahead to 2024, our business and strategy remain consistent and no different than what has guided our transformation over the past decade. Our foundation is Austria, however, we’ve grown into six new markets over the past decade and planted the seeds for significant and profitable growth. On the back of a record year in 2023, we are setting the following targets for 2024 (excluding any contributions from the recently announced Knab transaction):

The BAWAG Group culture

Our foundation is as strong as ever. I truly believe this is born from our unique culture. One that captures the best parts of our legacy as a trade union bank focused on serving local communities infused with a culture of entrepreneurship, accountability, meritocracy, and inclusion. Today, our team members span 53 different nationalities operating across 7 core markets, with Austria as our foundation. We pride ourselves on promoting the best-and-brightest-and-hardest working, challenging the status quo, and continuously looking to improve ourselves and our business. We do not shy away from change, knowing that this is the only constant.

Supporting our local communities

Over the years, we have learned that more is required of companies in engaging on the issues of our time. Be it in addressing the climate crisis, issues stemming from socio-economic inequalities across society, or reengaging with the communities we serve on a grassroots level. The team's efforts around social engagement resulted in a record year of both financial support and volunteerism, which reflect the values of our team members and the Bank.

Annual report 2023

Annual Report 2023

€ 178 million

€ 8.31

25.0%

32.3%

€ 2.6 billion capital distributed since IPO

Staying patient & disciplined