UPDATE 1-Cerberus's BAWAG swings to 2010 profit

Wed Mar 16, 2011 7:35am EDT

* 2010 net profit 125.4 mln eur vs 2009 loss 21.5 mln

* Loan-loss provisions and impairments fall 15.6 pct

* Credit risk Tier 1 ratio 10.2 pct vs 10.4 pct in 2009

* Has frozen "modest amount" of Libyan funds

(Adds quotes from news conference)

By Michael Shields

VIENNA, March 16 (Reuters) - Austrian lender BAWAG P.S.K. posted its first annual profit in four years as operating profit rose significantly and risk costs fell, the bank owned by Cerberus Capital Management LP [CBS.UL] said on Wednesday.

Net interest income and commission income both gained in 2010, while operating costs edged higher and provisions and impairment losses fell.

"The bank is well prepared for the capital regulations of Basel III and already met the Basel III criteria in 2010. We are confident that we will continue to be Basel III-compliant at the time of its implementation in 2013," it said in a statement.

Chief Executive Byron Haynes said its calculations included 550 million euros ($769 million) in capital it got from Austria during the financial crisis and which it has no plans to repay in the short term.

"We will only repay the ... capital when we deem that there is sufficient financial capital strength," he said, adding this level would be determined within the context of the European banking landscape over the next two or three years.

Haynes told a news conference private equity firm Cerberus had no immediate plans to sell BAWAG.

"Cerberus made the investments in the bank in May 2007. This is a very different world now in terms of banks and bank valuation ... As far as I am concerned they continue to be a very good shareholder and they have no plans for any exit of BAWAG at this point," he said.

Cerberus bought BAWAG, Austria's fifth-largest bank, from the Austrian Trade Union Federation after a banking scandal.

BAWAG put its exposure to high-deficit EU countries at 53 million euros and said it expected the sovereign debt crisis to have only a limited impact on its capital position.

Stephan Koren, deputy CEO and chief risk officer, said the bank had frozen a "modest amount" of Libyan assets subject to international sanctions but gave no more details.

The bank, whose customer base centres on Austria, said it expected to remain in the black and boost profitability this year, despite tough competition which would weigh on margins for both the credit and deposit side.

It will also pay 20 million euros this year in an Austrian levy on banks.

BAWAG aims to sell its nearly 10 percent stake in Hungary's MKB -- in which majority owner BayernLB [BAYLB.UL] also needs to sell its stake under European Union rules -- and Haynes called it a relatively rare opportunity to buy 100 percent of a bank.

BAWAG values its stake at 80 million euros.

BAWAG last year returned 400 million in asset guarantees it got under Austria's bank stability aid programme. (Editing by Louise Heavens and David Holmes) ($1=.7152 Euro)

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