February 27, 2018 / 7:48 AM / 8 months ago

UPDATE 2-BAWAG bets on digital future, takeovers for growth

* Aims for 600 mln eur pre-tax profit by 2020

* 2017 pre-tax profit at 517 mln eur vs forecast of 514 mln

* Plans to end cooperation with Austrian Post a year early (Recasts, adds mid-term forecast, CEO, shares)

VIENNA, Feb 27 (Reuters) - Austrian bank BAWAG on Tuesday forecast that its pre-tax profit would grow five percent annually to more than 600 million euros by 2020, helped by further takeovers in Germany and Austria.

BAWAG, backed by U.S. financial investor Cerberus, said it would focus on bolt-on deals of up to 5 billion euros ($6.2 billion) and was open for complete buys as well as strategic partnerships.

Unlike other Austrian banks it has no exposure in central and eastern Europe but focuses on the German speaking region, where it agreed six acquisitions over the past two years.

“We have a pretty robust M&A pipeline,” Chief Executive Anas Abuzaakouk told Reuters. “We are looking at a number of deals, primarily in Germany, but a few in Austria... The total balance sheet size is roundabout 25 billion (euros).”

The former trade union bank, which serves mainly private customers and smaller businesses, is one of the most profitable and best-capitalized banks in Austria after it underwent an extensive restructuring following the financial crisis.

Abuzaakouk, a former Cerberus manager also aggressively pushes the bank’s digital transformation, calling for “embedding technology into the DNA of the bank”, and setting a focus on automating backoffice processes in the coming months.

He forecasts 2018 pre-tax profit to rise to at least 543 million euros from 517 million in 2017. Last year’s result was driven by higher operating income as loans and receivables with customers increased by 8 percent and deposits from customers rose by 19 percent.

Austria’s fourth-biggest bank said it agreed with Austrian Post this month to exit its partnership by end of next year, one year earlier than expected.

That will enable BAWAG to get rid of unprofitable branches and instead invest in core branches and digital services, the chief executive said. Of initially 350 branches BAWAG run at post offices, it already exited 200, Abuzaakouk said.

He targets a future network of 100 branches and expects them to generate more than 75 percent of new business activities.

Considering new regulatory requirements, BAWAG targets a fully loaded CET1 ratio - a measurement of banks’ financial strength - of at least 12 percent in the medium term after 13.5 percent in 2017.

It plans to propose a dividend of 0.58 euros per share, or 58.3 million euros in total, for the fourth quarter and aims to pay out half of its net profit to shareholders in the future.

The bank’s shares traded 1.2 percent higher at 45.04 euros at 1208 GMT, still significantly below its listing price of 48 euros in October. ($1 = 0.8119 euros) (Reporting by Kirsti Knolle, Editing by Maria Sheahan and Ed Osmond)

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