* Q2 net profit nearly doubles to 95 mln euros
* Maintains 2014 targets, H2 profit growth set to slow
* Common equity tier 1 capital ratio at 11.2 pct
(Combines stories, adds comments from CEO, CFO)
By Michael Shields and Angelika Gruber
VIENNA, Aug 20 Austrian lender BAWAG PSK
nearly doubled net profit in the second quarter and
boosted its core capital adequacy ratio to over 11 percent, it
reported, putting it in good shape for the European regulatory
health checks now underway.
Majority owned by U.S. investor Cerberus Capital Management
, BAWAG is one of six Austrian lenders lining up for the
checks being led by the European Central Bank before it takes
over as the euro zone's main banking regulator in November.
BAWAG PSK was now looking forward to the results, Chief
Executive Byron Haynes told Reuters on Wednesday after the bank
reported its common equity tier 1 capital ratio hit 11.2 percent
of risk-weighted assets in the first half.
"We believe that we are well prepared for the announcements
towards the end of October and we are well prepared because of
the actions we have taken," he said.
Haynes declined to say whether Cerberus might now look to
sell out, having acquired BAWAG PSK with other investors for 3.2
billion euros ($4.25 billion) in 2007, adding that no sale
process was under way and a potential sale was beyond
U.S. firm GoldenTree Asset Management also now has a stake
of nearly 40 percent in the bank, whose book value is around 2.3
Chief Financial Officer Anas Abuzaakouk added: "Cerberus is
a financial investor. At some point there will be a
monetisation. Whether it is an IPO, a trade sale, that is
something we don't control. What we communicate to the employees
here is BAWAG's best years are still ahead of it."
He said the bank was around one third of the way towards
achieving its full potential.
Its second-quarter net profit of 95.1 million euros ($127
million) brought the first-half total to 175 million euros, up
87 percent despite tough market conditions.
"We expect the second half of the year to be in line with
the first half, maybe a slightly slower run rate compared to the
second quarter annualised," Haynes said, noting its core capital
ratio should rise more by year's end.
First-half core revenue increased 21 percent as reduced
funding costs helped net interest income rise by a quarter. In a
cut-throat Austrian market, BAWAG boosted its net interest
margin by 0.53 percentage points to 1.84 percent.
It repaid the last 350 million euros of Austrian state aid
in March, redeemed "non-sustainable" minorities of 400 million
in the first half and paid off the remaining 60 million euros of
non-sustainable Tier 1 instruments on July 31, it said.
Unlike Austrian rivals Erste Group, Raiffeisen
Bank International and UniCredit Bank Austria
, BAWAG is withdrawing from central and eastern Europe
(CEE) to focus on stabler economies in Austria, Germany, Britain
and western Europe.
BAWAG's CEE exposure has been reduced to 560 million euros,
less than 2 percent of total assets, and is set to disappear
entirely without losses within 18 months, officials said.
It was on track to hit its targeted return on equity of
above 10 percent this year, boost its Austrian retail lending
market share above 8.5 percent from 8 in 2013, and cut core
operating expenses to below 500 million euros from 574 million
BAWAG's partnership with Austrian Post gives it a nationwide
network of branches to complement its online products.
It has slashed its balance sheet in a drive to cut risk and
non-core assets while boosting capital efficiency, and has also
cut staff by 15 percent in the past year to under 3,000.
However, the bank is still embroiled in a legal fight with
the Austrian city of Linz over a swap transaction from 2007.
Hayes said he was open to a settlement but would fight the case
(1 US dollar = 0.7517 euros)
(Editing by Georgina Prodhan and Greg Mahlich)