November 16, 2017 / 8:04 AM / a year ago

UPDATE 2-Austrian bank BAWAG has record quarter, sticks to M&A plans

* Acquisitions, core earnings drive rise in pretax profit

* BAWAG eyes further takeovers in Germany and Austria

* Cerberus owns a third of bank, also bullish on Germany

* Shares have slid since IPO despite robust growth (Adds CEO comment, share price)

By Francois Murphy

VIENNA, Nov 16 (Reuters) - BAWAG, the former trade union bank which made its market debut last month in Austria’s biggest ever IPO, on Thursday reported its highest ever third-quarter pretax profit and reiterated plans to make acquisitions in Germany.

The bank is hoarding capital to fund possible deals, mainly in Germany, and stuck to its broad guidance that it is in talks to make acquisitions of various companies with balance sheets of up to around 10 billion euros ($11.8 billion).

“We’re very bullish on the German market,” BAWAG Chief Executive Anas Abuzaakouk said. “We’re pursuing a number of M&A opportunities between Germany and Austria.”

Unlike larger Austrian lenders Raiffeisen Bank International and Erste Group, BAWAG has turned its back on eastern Europe and instead focused on Germany, Austria and Switzerland.

That is in line with major shareholder Cerberus Capital Management’s bet on German-speaking countries that has seen the private equity firm also take a stake in Deutsche Bank .

BAWAG’s initial public offering (IPO) raised 1.9 billion euros and enabled Cerberus to sell down its stake to roughly 35 percent from 53 percent. GoldenTree Asset Management also reduced its stake to around 26 percent from 39 percent.

Several recent bolt-on acquisitions helped BAWAG boost its net interest income by 12.4 percent in the three months through September compared with a year earlier while operating expenses remained flat.

Another acquisition, of German regional lender Suedwestbank agreed in July, is expected to close in the fourth quarter.

The bank said profit before tax rose 7.9 percent to 131.8 million euros compared with the same period a year earlier, mainly driven by core earnings. That brought the nine-month total for this year to 382.4 million euros.

BAWAG repeated its outlook for 2017, including pretax profit of more than 500 million euros.

Despite the bank’s solid growth in line with guidance, its shares have fallen roughly 10 percent since they started trading on Oct. 25, and they rose only slightly after Thursday’s results, having gained 0.4 percent by 1015 GMT.

“I would like to tell you I can explain what the dynamics are but quite frankly that’s out of our control,” Abuzaakouk said when asked about the recent share slide.

“It’s the same team, it’s the same strategy, it’s the same execution, it’s the same targets the day before the IPO and post-IPO. So with time hopefully people will realise the benefits of the franchise and that will take care of itself.” ($1 = 0.8490 euros) (Editing by Mark Potter and Jane Merriman)

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