Good day, and thank you for standing by. Welcome to the BAWAG Group Second Quarter 2025 Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. There will also be a transcript published to the website. I would now like to hand the conference over to your speaker today, Anas Abuzaakouk, Chief Executive Officer. Please go ahead.

Thank you, operator. I hope everyone is doing well this morning. I'm joined by Enver, our CFO. Let us start with a summary of the second quarter results on Slide 3. We delivered net profit of EUR 210 million, earnings per share of EUR 2.65 and a return on tangible common equity of 28% during the quarter. The performance of our business was strong with operating income of EUR 552 million, up 41% versus the prior year, pre-provision profits of EUR 345 million and a cost-income ratio of 37%. Total risk costs were EUR 52 million, translating into a risk cost ratio of 37 basis points as we continue to see solid credit performance across our businesses. In terms of our balance sheet and capital, average customer loans were up 3% and average customer deposits were up 1% quarter- over-quarter. We have a fortress balance sheet with EUR 15 billion in cash, an LCR of 237% and overall strong asset quality with a low NPL ratio of 68 basis points. We recently received regulatory approval for a share buyback of EUR 175 million, in line with our capital distribution target of over 13% through 2025, landing at a CET1 ratio of 13.5% after deducting the buyback and the dividend accrual in the second quarter. The operating performance of the businesses across the group was solid, but we continue to be patient and disciplined with over 20% of our balance sheet in cash in a market environment where we believe credit is frothy. The integrations of both taking place behind the scenes. Our focus is on building a solid foundation to drive profitable growth long into the future. On the Knab front, we aim to have exited all transitional service agreements by the end of the third quarter and have already applied for a merger of the bank, the so-called branchification, which we hope to have completed by the end of this year. Barclays Consumer Bank Europe, which will be rebranded to easybank Germany in 2026, has been progressing very well. The leadership team has been onboarded and the business continues to develop ahead of plan. Our goal with both integrations is clear, fully integrate into the group operating framework and culture, work as one team and speak with one voice. We're excited about leveraging best practices, providing top talent with broader roles and pursuing the many growth opportunities ahead of us. Moving now to Slide 4, capital development. At the end of the second quarter, our CET1 ratio was 13.5% after deducting EUR 175 million for the approved share buyback program and EUR 116 million second quarter dividend accrual. For the quarter, we generated 100 basis points of gross capital, of which 91 basis points was through earnings. We have excess capital of EUR 117 million, 50 basis points above our capital distribution target of 13% in 2025. In terms of any Basel IV output floor impacts, we have 0 RWA inflation as we have a buffer of 20 points to the output floor level given that 90% of our business is currently on the standardized approach. On to Slide 5. Our Retail & SME business delivered first quarter net profit of EUR 173 million, up 32% versus the prior year and generating a very strong return on tangible common equity of 35% and a cost-income ratio of 38%. Pre-provision profits were EUR 289 million, up 44% compared to the prior year. The Retail risk costs were EUR 53 million with a risk cost ratio of 56 basis points. We continue to see solid credit performance across the business with an NPL ratio of 1.1%. We expect continued growth across the Retail & SME franchise in 2025, driven by strong operating performance as we fully integrate the two acquisitions with solid growth in consumer and SME, which will offset muted mortgage loan growth given current pricing levels. On Slide 6, our Corporates, Real Estate & Public Sector business delivered second quarter net profit of EUR 38 million, down 9% versus the prior year and generating a strong return on tangible common equity of 31% and a cost-income ratio of 25%. Pre-provision profits were EUR 52 million, down 12% versus prior year. Risk costs were a positive EUR 1 million as we continue to see solid credit performance across the business with an NPL ratio of 10 basis points, down 50 basis points from the prior quarter. This is best reflected in our U.S. office exposure, which was down 54% during the quarter with the remaining portfolio of EUR 143 million of performing loans, equal to about approximately 20 basis points of total assets and 3% of total real estate assets. Since the onset of the rise of rising U.S. interest rates in March 2022 and the subsequent distress in the U.S. office market, we have reduced our office portfolio by approximately 80% in what is arguably the most distressed asset class we've seen since the great financial crisis. When we say we are a lender focused on risk-adjusted returns, this is not a cliche, but a reflection of our discipline, conservatism and long-term focus of both our markets and risk teams. We will stay patient and continue to focus on conservative underwriting, risk-adjusted returns and not blindly chasing volume growth. With that, I'll hand it over to Enver.

Thank you, Anas. I will continue on Slide 8. A strong quarter with net profit of EUR 210 million and a return on tangible common equity of 27.6%. Core revenues were up 2% versus prior quarter, with net interest income up 3% and net commission income up 1%. Operating expenses were up 5% in the quarter and cost-income ratio stood at 37.5%. Risk costs were EUR 52 million or 37 basis points, down 12% versus prior quarter. The tax rate in the second quarter was 26%, reflecting our growth outside of Austria. With higher corporate tax rates in the Netherlands and Germany, we expect the tax rate to remain at this level. On Slide 9, key developments of our balance sheet. Major balance sheet items remained flat this quarter with averages increasing on the back of the full quarter inclusion of the most recent acquisition. With our cash position continuing to be greater than 20% of our balance sheet, we have a very comfortable liquidity buffer to address potential organic and inorganic market opportunities when they arise. Having said that, we'll stay patient and continue to focus on risk-adjusted returns and not blindly chasing volume growth. Core revenue developments on Page 10. Net interest income was up by 3% in the second quarter. Despite having a full quarter of the credit cards business in Germany, net interest income also reflects the impact of the low interest rate environment with the average 3- month Euribor down 50 basis points during the quarter, leading to high deposit betas of 48%, 4 points higher versus prior quarter. With rates slowly but surely coming close to the terminal rate and overall solid margin development across our businesses, and further deposit repricing, we expect the second quarter NII to be a good run rate for the remainder of the year. The net commission income was up 1%, reflecting the positive trend we have seen over the last couple of quarters, and we expect a similar run rate for the rest of 2025. On Page 11, operating expenses up 5% in the quarter, reflecting mainly two effects

one, our new baseline of the larger group; and two, salary indexation after the collective bargaining agreement in Austria came into effect on April 1 with a 3.15% wage inflation. We believe that we have seen the peak of operating expenses in the second quarter, and we have made further progress on the integration of our acquisitions, and we expect our cost base to start coming down in the third quarter. We reconfirm our full year outlook of approximately EUR 800 million of operating expenses. On the regulatory charges, they were EUR 10 million in the quarter, and we expect it to be around EUR 40 million for the full year. Moving to Page 12. Risk costs were down to EUR 52 million in the quarter, in line with our expectations. Asset quality remains strong with an NPL ratio of 70 basis points. We continue to see a robust credit performance and expect risk costs of approximately 40 basis points for the full year. Let me close with the outlook and targets on Page 13. We reconfirm our P&L outlook and targets for 2025 with a net profit of EUR 800 million and earnings per share of above EUR 10. And with that, let's open up for Q&A.

[Operator Instructions] Your first question comes from the line of Gabor Kemeny from Autonomous.

My first question is on NII and your stable NII outlook for the rest of the year. Can you elaborate, please, a little bit on the assumptions here? And in particular, what sort of NII tailwind do you see from deposit repricing? I believe you indicated you are pricing new interest-bearing deposits around 1%. If you could quantify the NII benefit from the repricing, that would be helpful. And on the rate outlook, I believe you are assuming something like 1.7% terminal rate. How sensitive would be your NII outlook looks to, let's say, 1 or 2 more rate cuts than you assume? And my final question would be on capital. Shall we model anything -- any unusual developments in your capital ratios over the second half besides the usual items like an SRT or any other transactions you are working on?

Enver, you'll get to do the NII, and I'll do the capital.

Okay. Perfect. So Gabor, the trend for the rest of the year on the NII, so you are right, we expect another rate cut to happen. That's our current assumption. If you look at the overall NIM development over the last couple of quarters, I think it's very obvious that we are less sensitive to rate cuts, but there is obviously an element of that going into the NII projection. So on your specific question, if you're sensitive to 2 rate cuts versus 1 rate cut, I don't think that would play a big role. It might just be quarterly timing. We feel very confident that the current run rate is sustainable. I think, we are fairly cautious on these assumptions. There are a few things that could be better than what we expect right now. We see the deposit repricing. We see the general market trend on deposit repricing that we follow right now. It just takes time. Deposit hedge takes time, it is a positive tailwind. And then overall, we have seen a bit of a drop in business on the non-retail side. Also, I think there's more momentum in the second half that could drive the NII upwards. So overall, I think fairly cautious. But right now, our best estimate is to have a stable NII.

Gabor, on the capital side, I'd say, the proxy of 100 basis points of gross capital for the quarter, 90 basis points of which is earnings, that's a good launch pad. And then, as far as SRTs, we're projecting two in the second half, one in the third quarter, one in the fourth quarter. So you'll see probably continued healthy capital development. And then, in terms of M&A or anything, if that's what you were alluding to, nothing significant for this year. So...

Maybe just to add on the SRTs, we would provide more details if the transactions materialize.

Just one small follow-up, if I may, please. What is the average rate on your interest-bearing deposits, the back book right now?

So, we are paying pretty much 1% on the EUR 50 billion or so of customer deposits on average.

We will take our next question. Your next question comes from the line of Gulnara Saitkulova from Morgan Stanley.

My questions are on M&A. So given the strong capital position and the ongoing integration of Barclays German Consumer business and Knab, when it would be feasible for BAWAG to reinitiate M&A activity? You mentioned you are not expecting anything particular in the second half of the year. So when would be the perfect timing for you to start M&A? And how are current global geopolitical uncertainties, including the potential tariffs and macro volatility influencing your investment appetite and M&A considerations? And the second question also related to M&A. So you have emphasized a focus on the Retail banking and SME in the DACH/NL region as you call, strategic priority. Is it still the case going forward? Or would you ever consider expanding your scope, for example, through acquisitions outside Europe, such as in the U.S.

Thanks, Gulnara. Very good questions. On the M&A front, as I stated earlier, 2025 is about landing the integrations. So anything on the M&A front, it would be small, if anything, as far as kind of bolt-on acquisitions. I think, we -- once the acquisitions are landed and we're in a firm position, we will -- we have a game board. Obviously, we're tracking a number of opportunities, and we'll reengage with the game board in 2026. But there's a lead time to M&A. So that takes about 6 to 9 months even to actively source a deal. There was a question in terms of the DACH/NL region. That's been the bulk of the M&A that we have executed, but we also look in Western Europe, and we've done the acquisition of Idaho First Bank in the States. So we look at platforms, we look at bolt-on opportunities across the seven markets, both DACH/NL and Western Europe and the United States.

We will take our next question. Your next question comes from the line of Noemi Peruch from Mediobanca.

I have three. The first one is on the legal risk in Austria. If you could share with us the range of potential top-up in provision you expect for 2025 would be useful. And here, I wonder about your preference, if it is more towards an upfront cost perhaps or kind of taking provision as claims come in, so potentially spreading into 2026. Then my second question is on asset quality. So we have seen in the last quarters an increase in bankruptcies in Austria and also the local regulator quite vocal on commercial real estate risk. So I was wondering here how do you see these trends impacting your book? And if you expect cost of risk to exceed 40 bps in the next years? And finally, a follow-up on the deposit cost. So what's the duration on the term deposits right now? And is the pricing tougher in the Netherlands at the moment or in Austria?

Thanks, Noemi. We had a hard time hearing the question. So let me just try to recap and we'll distribute between myself and Enver. So the first was on the legal fees, I think the upfront fees. Yes, in Austria. The second was, was it commercial real estate that you asked about or...

Risk cost guidance...

Asset quality in Austria and on the...

In Austria asset quality. Okay. It's really hard to hear your line.

Yes. And if this could trigger a higher cost of risk in the next year, perhaps...

Okay. Got it. Asset quality. And then, the third one was with deposit pricing.

I guess.

Okay. So let me, just on the legal fees. Honestly, this is one where I think the headlines far outpaced the actual reality. We reached an amicable settlement with the Consumer Protection Bureau, and we think we've adequately addressed it. But I think sometimes the sensationalization of headlines sometimes overruns the actual -- the substance of the topic. So we've addressed that. And then the second one, asset quality. I'd say in general, look, we're under 70 basis points. We see solid credit performance. The bigger issue is not so much what we see today on book. I think we're -- the numbers speak for themselves. It's just the frothiness in the market. So I would be more concerned less about, at least from a BAWAG perspective. What's on book, it's just about the aggressiveness in terms of higher advance rates, lower margins as people are chasing volume. So I see that as a bigger concern as opposed to kind of what we see from our balance sheet perspective. And then the third, I will give it to you, Enver.

Deposit costs?

Yes.

Yes, we have seen the trend that deposit costs are coming down across markets from Netherlands, Germany to Austria, just a bit slower than the rate cuts. But I think what I said before, once we hit the terminal rate, we will see a positive tailwind of the continuous deposit repricing that we would expect to continue in all the markets. I think, you asked about term deposits. It's a very small fraction of our overall customer deposit base and has almost no impact on pricing or repricing.

Your next question comes from the line of Borja Ramirez from Citi.

Can you hear me?

Can you speak up a bit? It's very hard to understand you.

Can you hear me little better?

A bit better.

Understood. I have two questions, please. On the NII, I understand that your guidance is conservative based on the rate of 1.7%. And also the deposit beta, could you provide details on where you see the deposit beta in the medium term? That would be my first question. And my second question would be on the integration of Knab. As per your presentation, the TSA will be closed by third quarter and you were targeting bank merger branchification by year-end. So I would like to ask if this could mean any potential upside to the efficiency target and also to the [indiscernible]

Okay. I'll take the second one. Again, sorry, it was really hard to hear. I think we have a bad line. But the -- as it relates to the Knab integration, yes, the TSAs are being closed out by third quarter. Hopefully, the merger done by the end of the year. But in terms of changing the targets, we're still -- the Investor Day targets under EUR 800 million and then under 33% cost-income ratio. Hopefully, we will beat that. But I think we feel comfortable in just the plans that we put out. And if there's an update in the coming quarters, we'll update you guys, but everything is on plan.

And I think the first question was on our projections on deposit betas. We don't provide that detail, but probably it's fair to assume that over time, we would expect deposit betas to trend below 40% again.

Your next question comes from the line of Jovan Sikimic from ODDO BHF.

I have just a short one on organic growth. If you could provide a kind of geographical split or breakdown now you have sizable operations in Netherlands and you added operations in Germany and you have anyway a strong business in Austria. So how geographically Retail and Corporate lending are performing? If you can add some colors on that, please?

Yes. Thanks, Jovan. We don't break out by individual countries, the volumes, but I can give you just some color as to what we're seeing in general and where there's pockets of strength and probably where areas are more muted. So Consumer and SME, which has probably been the strongest, we've seen good opportunity there. Obviously, in credit cards, Barclays is performing ahead of plan. We do some embedded finance there as well in Germany, which is going really well. Mortgages is incredibly muted in Germany. We're seeing a pickup in mortgages in the Netherlands. The same for Austria, but it's been muted to date. I think maybe we're potentially at an inflection point. Consumer loans are going well, specialty finance. That's kind of traditionally been steady Eddie over the past quarters, if not years. And that's kind of in the Retail and SME space. We started in Ireland recently, but that's pretty much greenfield. And then the Corporates, I think where you see the most volatility, the corporate real estate public sector. Public sector is well in the DACH/NL region, in particular, obviously, Austria being the anchor. The Corporate has been more volatile in the sense that we've seen more redemptions and the opportunities, as I've mentioned before, it just seems like it's a really frothy market. And then Real Estate, I think there were some idiosyncrasies in the second quarter. In particular, we had two big developments. We had early redemptions in 2Q in the U.S., some which were more than welcome. And then, we also had the impact of the euro-dollar FX, which is probably half of the reduction in the real estate. And that's just an FX impact, and we have -- that was something that we were aware of. We do have a good pipeline, but a deal is not funded until it's funded. So I think we've had a good pipeline for some time. But markets are choppy, and we'll be patient. So that's kind of a tour of the different asset classes across the different geographies. I hope that helps.

There seems to be no further -- apologies. A further question has just come through, one moment. You have a follow-up question from the line of Borja Ramirez from Citi.

I have a follow-up question, if I may, on deposits. I would like to ask if you could give an overview on the deposit trend by regions, that has been just referred. And also linked to this, given your very comfortable liquidity position, I think that gives you an advantage in terms of repricing the deposits going forward.

Borja, we do not provide split by regions' deposits, but it's been a very similar trend that we see across Austria, Germany, Netherlands in terms of overall customer deposits. And yes, we have a quite comfortable liquidity position. So also we are quite comfortable to reprice the deposits in line with the market.

There are no further questions. I would like to hand back for closing remarks.

Thank you, operator. Thanks, everyone, for joining the call this morning. I hope everybody has a lovely summer and gets a chance to get some rest and relaxation. Take care, and we'll talk to you guys in the third quarter. Bye.

This concludes today's conference call. Thank you for participating. You may now disconnect. GMT CONSENSUS CONSENSUS CONSENSUS BAWAG Group AG WBAG

BG FQ2 2025 Earnings Call Wednesday, July 23, 2025 8

00 AM S&P Global Market Intelligence Estimates -FQ2 2025- CONSENSUS ACTUAL SURPRISE EPS Normalized 2.68 2.65 (1.12 %) Revenue (mm) 554.51 551.90 (0.47 %) Currency

EUR Consensus as of Jul-23-2025 12

59 PM GMT Unable to generate Chart

Unable to get data to chart - EPS NORMALIZED - CONSENSUS ACTUAL FQ3 2024 2.14 2.25 FQ4 2024 2.40 3.03 FQ1 2025 2.39 2.54 FQ2 2025 2.68 2.65 COPYRIGHT © S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved -FQ3 2025- 2.74 565.88 -FY 2025- 10.75 2194.50 SURPRISE 5.14 % 26.25 % 6.28 % (1.12 %) -FY 2026- NA NA Contents Table of Contents Call Participants .................................................................................. Presentation .................................................................................. Question and Answer .................................................................................. COPYRIGHT © S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved 3 4 7 Call Participants

Good day, and thank you for standing by. Welcome to the BAWAG Group Second Quarter 2025 Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. There will also be a transcript published to the website. I would now like to hand the conference over to your speaker today, Anas Abuzaakouk, Chief Executive Officer. Please go ahead.

Thank you, operator. I hope everyone is doing well this morning. I'm joined by Enver, our CFO. Let us start with a summary of the second quarter results on Slide 3. We delivered net profit of EUR 210 million, earnings per share of EUR 2.65 and a return on tangible common equity of 28% during the quarter. The performance of our business was strong with operating income of EUR 552 million, up 41% versus the prior year, pre-provision profits of EUR 345 million and a cost-income ratio of 37%. Total risk costs were EUR 52 million, translating into a risk cost ratio of 37 basis points as we continue to see solid credit performance across our businesses. In terms of our balance sheet and capital, average customer loans were up 3% and average customer deposits were up 1% quarter- over-quarter. We have a fortress balance sheet with EUR 15 billion in cash, an LCR of 237% and overall strong asset quality with a low NPL ratio of 68 basis points. We recently received regulatory approval for a share buyback of EUR 175 million, in line with our capital distribution target of over 13% through 2025, landing at a CET1 ratio of 13.5% after deducting the buyback and the dividend accrual in the second quarter. The operating performance of the businesses across the group was solid, but we continue to be patient and disciplined with over 20% of our balance sheet in cash in a market environment where we believe credit is frothy. The integrations of both Knab and Barclays Consumer Bank Europe are progressing well. There has been a great deal of work taking place behind the scenes. Our focus is on building a solid foundation to drive profitable growth long into the future. On the Knab front, we aim to have exited all transitional service agreements by the end of the third quarter and have already applied for a merger of the bank, the so-called branchification, which we hope to have completed by the end of this year. Barclays Consumer Bank Europe, which will be rebranded to easybank Germany in 2026, has been progressing very well. The leadership team has been onboarded and the business continues to develop ahead of plan. Our goal with both integrations is clear, fully integrate into the group operating framework and culture, work as one team and speak with one voice. We're excited about leveraging best practices, providing top talent with broader roles and pursuing the many growth opportunities ahead of us. Moving now to Slide 4, capital development. At the end of the second quarter, our CET1 ratio was 13.5% after deducting EUR 175 million for the approved share buyback program and EUR 116 million second quarter dividend accrual. For the quarter, we generated 100 basis points of gross capital, of which 91 basis points was through earnings. We have excess capital of EUR 117 million, 50 basis points above our capital distribution target of 13% in 2025. In terms of any Basel IV output floor impacts, we have 0 RWA inflation as we have a buffer of 20 points to the output floor level given that 90% of our business is currently on the standardized approach. On to Slide 5. Our Retail & SME business delivered first quarter net profit of EUR 173 million, up 32% versus the prior year and generating a very strong return on tangible common equity of 35% and a cost-income ratio of 38%. Pre-provision profits were EUR 289 million, up 44% compared to the prior year. The Retail risk costs were EUR 53 million with a risk cost ratio of 56 basis points. We continue to see solid credit performance across the business with an NPL ratio of 1.1%. We expect continued growth across the Retail & SME franchise in 2025, driven by strong operating performance as we fully integrate the two acquisitions with solid growth in consumer and SME, which will offset muted mortgage loan growth given current pricing levels. On Slide 6, our Corporates, Real Estate & Public Sector business delivered second quarter net profit of EUR 38 million, down 9% versus the prior year and generating a strong return on tangible common equity of 31% and a cost-income ratio of 25%. Pre-provision profits were EUR 52 million, down 12% versus prior year. Risk costs were a positive EUR 1 million as we continue to see solid credit performance across the business with an NPL ratio of 10 basis points, down 50 basis points from the prior quarter. This is best reflected in our U.S. office exposure, which was down 54% during the quarter with the remaining portfolio of EUR 143 million of performing loans, equal to about approximately 20 basis points of total assets and 3% of total real estate assets. Since the onset of the rise of rising U.S. interest rates in March 2022 and the subsequent distress in the U.S. office market, we have reduced our office portfolio by approximately 80% in what is arguably the most distressed asset class we've seen since the great financial crisis. When we say we are a lender focused on risk-adjusted returns, this is not a cliche, but a reflection of our discipline, conservatism and long-term focus of both our markets and risk teams. We will stay patient and continue to focus on conservative underwriting, risk-adjusted returns and not blindly chasing volume growth. With that, I'll hand it over to Enver.

Thank you, Anas. I will continue on Slide 8. A strong quarter with net profit of EUR 210 million and a return on tangible common equity of 27.6%. Core revenues were up 2% versus prior quarter, with net interest income up 3% and net commission income up 1%. Operating expenses were up 5% in the quarter and cost-income ratio stood at 37.5%. Risk costs were EUR 52 million or 37 basis points, down 12% versus prior quarter. The tax rate in the second quarter was 26%, reflecting our growth outside of Austria. With higher corporate tax rates in the Netherlands and Germany, we expect the tax rate to remain at this level. On Slide 9, key developments of our balance sheet. Major balance sheet items remained flat this quarter with averages increasing on the back of the full quarter inclusion of the most recent acquisition. With our cash position continuing to be greater than 20% of our balance sheet, we have a very comfortable liquidity buffer to address potential organic and inorganic market opportunities when they arise. Having said that, we'll stay patient and continue to focus on risk-adjusted returns and not blindly chasing volume growth. Core revenue developments on Page 10. Net interest income was up by 3% in the second quarter. Despite having a full quarter of the credit cards business in Germany, net interest income also reflects the impact of the low interest rate environment with the average 3- month Euribor down 50 basis points during the quarter, leading to high deposit betas of 48%, 4 points higher versus prior quarter. With rates slowly but surely coming close to the terminal rate and overall solid margin development across our businesses, and further deposit repricing, we expect the second quarter NII to be a good run rate for the remainder of the year. The net commission income was up 1%, reflecting the positive trend we have seen over the last couple of quarters, and we expect a similar run rate for the rest of 2025. On Page 11, operating expenses up 5% in the quarter, reflecting mainly two effects

one, our new baseline of the larger group; and two, salary indexation after the collective bargaining agreement in Austria came into effect on April 1 with a 3.15% wage inflation. We believe that we have seen the peak of operating expenses in the second quarter, and we have made further progress on the integration of our acquisitions, and we expect our cost base to start coming down in the third quarter. We reconfirm our full year outlook of approximately EUR 800 million of operating expenses. On the regulatory charges, they were EUR 10 million in the quarter, and we expect it to be around EUR 40 million for the full year. Moving to Page 12. Risk costs were down to EUR 52 million in the quarter, in line with our expectations. Asset quality remains strong with an NPL ratio of 70 basis points. We continue to see a robust credit performance and expect risk costs of approximately 40 basis points for the full year. Let me close with the outlook and targets on Page 13. We reconfirm our P&L outlook and targets for 2025 with a net profit of EUR 800 million and earnings per share of above EUR 10. And with that, let's open up for Q&A.

[Operator Instructions] Your first question comes from the line of Gabor Kemeny from Autonomous.

My first question is on NII and your stable NII outlook for the rest of the year. Can you elaborate, please, a little bit on the assumptions here? And in particular, what sort of NII tailwind do you see from deposit repricing? I believe you indicated you are pricing new interest-bearing deposits around 1%. If you could quantify the NII benefit from the repricing, that would be helpful. And on the rate outlook, I believe you are assuming something like 1.7% terminal rate. How sensitive would be your NII outlook looks to, let's say, 1 or 2 more rate cuts than you assume? And my final question would be on capital. Shall we model anything -- any unusual developments in your capital ratios over the second half besides the usual items like an SRT or any other transactions you are working on?

Enver, you'll get to do the NII, and I'll do the capital.

Okay. Perfect. So Gabor, the trend for the rest of the year on the NII, so you are right, we expect another rate cut to happen. That's our current assumption. If you look at the overall NIM development over the last couple of quarters, I think it's very obvious that we are less sensitive to rate cuts, but there is obviously an element of that going into the NII projection. So on your specific question, if you're sensitive to 2 rate cuts versus 1 rate cut, I don't think that would play a big role. It might just be quarterly timing. We feel very confident that the current run rate is sustainable. I think, we are fairly cautious on these assumptions. There are a few things that could be better than what we expect right now. We see the deposit repricing. We see the general market trend on deposit repricing that we follow right now. It just takes time. Deposit hedge takes time, it is a positive tailwind. And then overall, we have seen a bit of a drop in business on the non-retail side. Also, I think there's more momentum in the second half that could drive the NII upwards. So overall, I think fairly cautious. But right now, our best estimate is to have a stable NII.

Gabor, on the capital side, I'd say, the proxy of 100 basis points of gross capital for the quarter, 90 basis points of which is earnings, that's a good launch pad. And then, as far as SRTs, we're projecting two in the second half, one in the third quarter, one in the fourth quarter. So you'll see probably continued healthy capital development. And then, in terms of M&A or anything, if that's what you were alluding to, nothing significant for this year. So...

Maybe just to add on the SRTs, we would provide more details if the transactions materialize.

Just one small follow-up, if I may, please. What is the average rate on your interest-bearing deposits, the back book right now?

So, we are paying pretty much 1% on the EUR 50 billion or so of customer deposits on average.

We will take our next question. Your next question comes from the line of Gulnara Saitkulova from Morgan Stanley.

My questions are on M&A. So given the strong capital position and the ongoing integration of Barclays German Consumer business and Knab, when it would be feasible for BAWAG to reinitiate M&A activity? You mentioned you are not expecting anything particular in the second half of the year. So when would be the perfect timing for you to start M&A? And how are current global geopolitical uncertainties, including the potential tariffs and macro volatility influencing your investment appetite and M&A considerations? And the second question also related to M&A. So you have emphasized a focus on the Retail banking and SME in the DACH/NL region as you call, strategic priority. Is it still the case going forward? Or would you ever consider expanding your scope, for example, through acquisitions outside Europe, such as in the U.S.

Thanks, Gulnara. Very good questions. On the M&A front, as I stated earlier, 2025 is about landing the integrations. So anything on the M&A front, it would be small, if anything, as far as kind of bolt-on acquisitions. I think, we -- once the acquisitions are landed and we're in a firm position, we will -- we have a game board. Obviously, we're tracking a number of opportunities, and we'll reengage with the game board in 2026. But there's a lead time to M&A. So that takes about 6 to 9 months even to actively source a deal. There was a question in terms of the DACH/NL region. That's been the bulk of the M&A that we have executed, but we also look in Western Europe, and we've done the acquisition of Idaho First Bank in the States. So we look at platforms, we look at bolt-on opportunities across the seven markets, both DACH/NL and Western Europe and the United States.

We will take our next question. Your next question comes from the line of Noemi Peruch from Mediobanca.

I have three. The first one is on the legal risk in Austria. If you could share with us the range of potential top-up in provision you expect for 2025 would be useful. And here, I wonder about your preference, if it is more towards an upfront cost perhaps or kind of taking provision as claims come in, so potentially spreading into 2026. Then my second question is on asset quality. So we have seen in the last quarters an increase in bankruptcies in Austria and also the local regulator quite vocal on commercial real estate risk. So I was wondering here how do you see these trends impacting your book? And if you expect cost of risk to exceed 40 bps in the next years? And finally, a follow-up on the deposit cost. So what's the duration on the term deposits right now? And is the pricing tougher in the Netherlands at the moment or in Austria?

Thanks, Noemi. We had a hard time hearing the question. So let me just try to recap and we'll distribute between myself and Enver. So the first was on the legal fees, I think the upfront fees. Yes, in Austria. The second was, was it commercial real estate that you asked about or...

Risk cost guidance...

Asset quality in Austria and on the...

In Austria asset quality. Okay. It's really hard to hear your line.

Yes. And if this could trigger a higher cost of risk in the next year, perhaps...

Okay. Got it. Asset quality. And then, the third one was with deposit pricing.

I guess.

Okay. So let me, just on the legal fees. Honestly, this is one where I think the headlines far outpaced the actual reality. We reached an amicable settlement with the Consumer Protection Bureau, and we think we've adequately addressed it. But I think sometimes the sensationalization of headlines sometimes overruns the actual -- the substance of the topic. So we've addressed that. And then the second one, asset quality. I'd say in general, look, we're under 70 basis points. We see solid credit performance. The bigger issue is not so much what we see today on book. I think we're -- the numbers speak for themselves. It's just the frothiness in the market. So I would be more concerned less about, at least from a BAWAG perspective. What's on book, it's just about the aggressiveness in terms of higher advance rates, lower margins as people are chasing volume. So I see that as a bigger concern as opposed to kind of what we see from our balance sheet perspective. And then the third, I will give it to you, Enver.

Deposit costs?

Yes.

Yes, we have seen the trend that deposit costs are coming down across markets from Netherlands, Germany to Austria, just a bit slower than the rate cuts. But I think what I said before, once we hit the terminal rate, we will see a positive tailwind of the continuous deposit repricing that we would expect to continue in all the markets. I think, you asked about term deposits. It's a very small fraction of our overall customer deposit base and has almost no impact on pricing or repricing.

Your next question comes from the line of Borja Ramirez from Citi.

Can you hear me?

Can you speak up a bit? It's very hard to understand you.

Can you hear me little better?

A bit better.

Understood. I have two questions, please. On the NII, I understand that your guidance is conservative based on the rate of 1.7%. And also the deposit beta, could you provide details on where you see the deposit beta in the medium term? That would be my first question. And my second question would be on the integration of Knab. As per your presentation, the TSA will be closed by third quarter and you were targeting bank merger branchification by year-end. So I would like to ask if this could mean any potential upside to the efficiency target and also to the [indiscernible]

Okay. I'll take the second one. Again, sorry, it was really hard to hear. I think we have a bad line. But the -- as it relates to the Knab integration, yes, the TSAs are being closed out by third quarter. Hopefully, the merger done by the end of the year. But in terms of changing the targets, we're still -- the Investor Day targets under EUR 800 million and then under 33% cost-income ratio. Hopefully, we will beat that. But I think we feel comfortable in just the plans that we put out. And if there's an update in the coming quarters, we'll update you guys, but everything is on plan.

And I think the first question was on our projections on deposit betas. We don't provide that detail, but probably it's fair to assume that over time, we would expect deposit betas to trend below 40% again.

Your next question comes from the line of Jovan Sikimic from ODDO BHF.

I have just a short one on organic growth. If you could provide a kind of geographical split or breakdown now you have sizable operations in Netherlands and you added operations in Germany and you have anyway a strong business in Austria. So how geographically Retail and Corporate lending are performing? If you can add some colors on that, please?

Yes. Thanks, Jovan. We don't break out by individual countries, the volumes, but I can give you just some color as to what we're seeing in general and where there's pockets of strength and probably where areas are more muted. So Consumer and SME, which has probably been the strongest, we've seen good opportunity there. Obviously, in credit cards, Barclays is performing ahead of plan. We do some embedded finance there as well in Germany, which is going really well. Mortgages is incredibly muted in Germany. We're seeing a pickup in mortgages in the Netherlands. The same for Austria, but it's been muted to date. I think maybe we're potentially at an inflection point. Consumer loans are going well, specialty finance. That's kind of traditionally been steady Eddie over the past quarters, if not years. And that's kind of in the Retail and SME space. We started in Ireland recently, but that's pretty much greenfield. And then the Corporates, I think where you see the most volatility, the corporate real estate public sector. Public sector is well in the DACH/NL region, in particular, obviously, Austria being the anchor. The Corporate has been more volatile in the sense that we've seen more redemptions and the opportunities, as I've mentioned before, it just seems like it's a really frothy market. And then Real Estate, I think there were some idiosyncrasies in the second quarter. In particular, we had two big developments. We had early redemptions in 2Q in the U.S., some which were more than welcome. And then, we also had the impact of the euro-dollar FX, which is probably half of the reduction in the real estate. And that's just an FX impact, and we have -- that was something that we were aware of. We do have a good pipeline, but a deal is not funded until it's funded. So I think we've had a good pipeline for some time. But markets are choppy, and we'll be patient. So that's kind of a tour of the different asset classes across the different geographies. I hope that helps.

There seems to be no further -- apologies. A further question has just come through, one moment. You have a follow-up question from the line of Borja Ramirez from Citi.

I have a follow-up question, if I may, on deposits. I would like to ask if you could give an overview on the deposit trend by regions, that has been just referred. And also linked to this, given your very comfortable liquidity position, I think that gives you an advantage in terms of repricing the deposits going forward.

Borja, we do not provide split by regions' deposits, but it's been a very similar trend that we see across Austria, Germany, Netherlands in terms of overall customer deposits. And yes, we have a quite comfortable liquidity position. So also we are quite comfortable to reprice the deposits in line with the market.

There are no further questions. I would like to hand back for closing remarks.

Thank you, operator. Thanks, everyone, for joining the call this morning. I hope everybody has a lovely summer and gets a chance to get some rest and relaxation. Take care, and we'll talk to you guys in the third quarter. Bye.

This concludes today's conference call. Thank you for participating. You may now disconnect. GMT CONSENSUS CONSENSUS CONSENSUS BAWAG Group AG WBAG

BG FQ2 2025 Earnings Call Wednesday, July 23, 2025 8

00 AM S&P Global Market Intelligence Estimates -FQ2 2025- CONSENSUS ACTUAL SURPRISE EPS Normalized 2.68 2.65 (1.12 %) Revenue (mm) 554.51 551.90 (0.47 %) Currency

EUR Consensus as of Jul-23-2025 12

59 PM GMT Unable to generate Chart

Unable to get data to chart - EPS NORMALIZED - CONSENSUS ACTUAL FQ3 2024 2.14 2.25 FQ4 2024 2.40 3.03 FQ1 2025 2.39 2.54 FQ2 2025 2.68 2.65 COPYRIGHT © S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved -FQ3 2025- 2.74 565.88 -FY 2025- 10.75 2194.50 SURPRISE 5.14 % 26.25 % 6.28 % (1.12 %) -FY 2026- NA NA Contents Table of Contents Call Participants .................................................................................. Presentation .................................................................................. Question and Answer .................................................................................. COPYRIGHT © S&P Global Market Intelligence, a division of S&P Global Inc. All rights reserved 3 4 7 Call Participants

Good day, and thank you for standing by. Welcome to the BAWAG Group Second Quarter 2025 Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. There will also be a transcript published to the website. I would now like to hand the conference over to your speaker today, Anas Abuzaakouk, Chief Executive Officer. Please go ahead.

Thank you, operator. I hope everyone is doing well this morning. I'm joined by Enver, our CFO. Let us start with a summary of the second quarter results on Slide 3. We delivered net profit of EUR 210 million, earnings per share of EUR 2.65 and a return on tangible common equity of 28% during the quarter. The performance of our business was strong with operating income of EUR 552 million, up 41% versus the prior year, pre-provision profits of EUR 345 million and a cost-income ratio of 37%. Total risk costs were EUR 52 million, translating into a risk cost ratio of 37 basis points as we continue to see solid credit performance across our businesses. In terms of our balance sheet and capital, average customer loans were up 3% and average customer deposits were up 1% quarter- over-quarter. We have a fortress balance sheet with EUR 15 billion in cash, an LCR of 237% and overall strong asset quality with a low NPL ratio of 68 basis points. We recently received regulatory approval for a share buyback of EUR 175 million, in line with our capital distribution target of over 13% through 2025, landing at a CET1 ratio of 13.5% after deducting the buyback and the dividend accrual in the second quarter. The operating performance of the businesses across the group was solid, but we continue to be patient and disciplined with over 20% of our balance sheet in cash in a market environment where we believe credit is frothy. The integrations of both Knab and Barclays Consumer Bank Europe are progressing well. There has been a great deal of work taking place behind the scenes. Our focus is on building a solid foundation to drive profitable growth long into the future. On the Knab front, we aim to have exited all transitional service agreements by the end of the third quarter and have already applied for a merger of the bank, the so-called branchification, which we hope to have completed by the end of this year. Barclays Consumer Bank Europe, which will be rebranded to easybank Germany in 2026, has been progressing very well. The leadership team has been onboarded and the business continues to develop ahead of plan. Our goal with both integrations is clear, fully integrate into the group operating framework and culture, work as one team and speak with one voice. We're excited about leveraging best practices, providing top talent with broader roles and pursuing the many growth opportunities ahead of us. Moving now to Slide 4, capital development. At the end of the second quarter, our CET1 ratio was 13.5% after deducting EUR 175 million for the approved share buyback program and EUR 116 million second quarter dividend accrual. For the quarter, we generated 100 basis points of gross capital, of which 91 basis points was through earnings. We have excess capital of EUR 117 million, 50 basis points above our capital distribution target of 13% in 2025. In terms of any Basel IV output floor impacts, we have 0 RWA inflation as we have a buffer of 20 points to the output floor level given that 90% of our business is currently on the standardized approach. On to Slide 5. Our Retail & SME business delivered first quarter net profit of EUR 173 million, up 32% versus the prior year and generating a very strong return on tangible common equity of 35% and a cost-income ratio of 38%. Pre-provision profits were EUR 289 million, up 44% compared to the prior year. The Retail risk costs were EUR 53 million with a risk cost ratio of 56 basis points. We continue to see solid credit performance across the business with an NPL ratio of 1.1%. We expect continued growth across the Retail & SME franchise in 2025, driven by strong operating performance as we fully integrate the two acquisitions with solid growth in consumer and SME, which will offset muted mortgage loan growth given current pricing levels. On Slide 6, our Corporates, Real Estate & Public Sector business delivered second quarter net profit of EUR 38 million, down 9% versus the prior year and generating a strong return on tangible common equity of 31% and a cost-income ratio of 25%. Pre-provision profits were EUR 52 million, down 12% versus prior year. Risk costs were a positive EUR 1 million as we continue to see solid credit performance across the business with an NPL ratio of 10 basis points, down 50 basis points from the prior quarter. This is best reflected in our U.S. office exposure, which was down 54% during the quarter with the remaining portfolio of EUR 143 million of performing loans, equal to about approximately 20 basis points of total assets and 3% of total real estate assets. Since the onset of the rise of rising U.S. interest rates in March 2022 and the subsequent distress in the U.S. office market, we have reduced our office portfolio by approximately 80% in what is arguably the most distressed asset class we've seen since the great financial crisis. When we say we are a lender focused on risk-adjusted returns, this is not a cliche, but a reflection of our discipline, conservatism and long-term focus of both our markets and risk teams. We will stay patient and continue to focus on conservative underwriting, risk-adjusted returns and not blindly chasing volume growth. With that, I'll hand it over to Enver.

Thank you, Anas. I will continue on Slide 8. A strong quarter with net profit of EUR 210 million and a return on tangible common equity of 27.6%. Core revenues were up 2% versus prior quarter, with net interest income up 3% and net commission income up 1%. Operating expenses were up 5% in the quarter and cost-income ratio stood at 37.5%. Risk costs were EUR 52 million or 37 basis points, down 12% versus prior quarter. The tax rate in the second quarter was 26%, reflecting our growth outside of Austria. With higher corporate tax rates in the Netherlands and Germany, we expect the tax rate to remain at this level. On Slide 9, key developments of our balance sheet. Major balance sheet items remained flat this quarter with averages increasing on the back of the full quarter inclusion of the most recent acquisition. With our cash position continuing to be greater than 20% of our balance sheet, we have a very comfortable liquidity buffer to address potential organic and inorganic market opportunities when they arise. Having said that, we'll stay patient and continue to focus on risk-adjusted returns and not blindly chasing volume growth. Core revenue developments on Page 10. Net interest income was up by 3% in the second quarter. Despite having a full quarter of the credit cards business in Germany, net interest income also reflects the impact of the low interest rate environment with the average 3- month Euribor down 50 basis points during the quarter, leading to high deposit betas of 48%, 4 points higher versus prior quarter. With rates slowly but surely coming close to the terminal rate and overall solid margin development across our businesses, and further deposit repricing, we expect the second quarter NII to be a good run rate for the remainder of the year. The net commission income was up 1%, reflecting the positive trend we have seen over the last couple of quarters, and we expect a similar run rate for the rest of 2025. On Page 11, operating expenses up 5% in the quarter, reflecting mainly two effects

one, our new baseline of the larger group; and two, salary indexation after the collective bargaining agreement in Austria came into effect on April 1 with a 3.15% wage inflation. We believe that we have seen the peak of operating expenses in the second quarter, and we have made further progress on the integration of our acquisitions, and we expect our cost base to start coming down in the third quarter. We reconfirm our full year outlook of approximately EUR 800 million of operating expenses. On the regulatory charges, they were EUR 10 million in the quarter, and we expect it to be around EUR 40 million for the full year. Moving to Page 12. Risk costs were down to EUR 52 million in the quarter, in line with our expectations. Asset quality remains strong with an NPL ratio of 70 basis points. We continue to see a robust credit performance and expect risk costs of approximately 40 basis points for the full year. Let me close with the outlook and targets on Page 13. We reconfirm our P&L outlook and targets for 2025 with a net profit of EUR 800 million and earnings per share of above EUR 10. And with that, let's open up for Q&A.

[Operator Instructions] Your first question comes from the line of Gabor Kemeny from Autonomous.

My first question is on NII and your stable NII outlook for the rest of the year. Can you elaborate, please, a little bit on the assumptions here? And in particular, what sort of NII tailwind do you see from deposit repricing? I believe you indicated you are pricing new interest-bearing deposits around 1%. If you could quantify the NII benefit from the repricing, that would be helpful. And on the rate outlook, I believe you are assuming something like 1.7% terminal rate. How sensitive would be your NII outlook looks to, let's say, 1 or 2 more rate cuts than you assume? And my final question would be on capital. Shall we model anything -- any unusual developments in your capital ratios over the second half besides the usual items like an SRT or any other transactions you are working on?

Enver, you'll get to do the NII, and I'll do the capital.

Okay. Perfect. So Gabor, the trend for the rest of the year on the NII, so you are right, we expect another rate cut to happen. That's our current assumption. If you look at the overall NIM development over the last couple of quarters, I think it's very obvious that we are less sensitive to rate cuts, but there is obviously an element of that going into the NII projection. So on your specific question, if you're sensitive to 2 rate cuts versus 1 rate cut, I don't think that would play a big role. It might just be quarterly timing. We feel very confident that the current run rate is sustainable. I think, we are fairly cautious on these assumptions. There are a few things that could be better than what we expect right now. We see the deposit repricing. We see the general market trend on deposit repricing that we follow right now. It just takes time. Deposit hedge takes time, it is a positive tailwind. And then overall, we have seen a bit of a drop in business on the non-retail side. Also, I think there's more momentum in the second half that could drive the NII upwards. So overall, I think fairly cautious. But right now, our best estimate is to have a stable NII.

Gabor, on the capital side, I'd say, the proxy of 100 basis points of gross capital for the quarter, 90 basis points of which is earnings, that's a good launch pad. And then, as far as SRTs, we're projecting two in the second half, one in the third quarter, one in the fourth quarter. So you'll see probably continued healthy capital development. And then, in terms of M&A or anything, if that's what you were alluding to, nothing significant for this year. So...

Maybe just to add on the SRTs, we would provide more details if the transactions materialize.

Just one small follow-up, if I may, please. What is the average rate on your interest-bearing deposits, the back book right now?

So, we are paying pretty much 1% on the EUR 50 billion or so of customer deposits on average.

We will take our next question. Your next question comes from the line of Gulnara Saitkulova from Morgan Stanley.

My questions are on M&A. So given the strong capital position and the ongoing integration of Barclays German Consumer business and Knab, when it would be feasible for BAWAG to reinitiate M&A activity? You mentioned you are not expecting anything particular in the second half of the year. So when would be the perfect timing for you to start M&A? And how are current global geopolitical uncertainties, including the potential tariffs and macro volatility influencing your investment appetite and M&A considerations? And the second question also related to M&A. So you have emphasized a focus on the Retail banking and SME in the DACH/NL region as you call, strategic priority. Is it still the case going forward? Or would you ever consider expanding your scope, for example, through acquisitions outside Europe, such as in the U.S.

Thanks, Gulnara. Very good questions. On the M&A front, as I stated earlier, 2025 is about landing the integrations. So anything on the M&A front, it would be small, if anything, as far as kind of bolt-on acquisitions. I think, we -- once the acquisitions are landed and we're in a firm position, we will -- we have a game board. Obviously, we're tracking a number of opportunities, and we'll reengage with the game board in 2026. But there's a lead time to M&A. So that takes about 6 to 9 months even to actively source a deal. There was a question in terms of the DACH/NL region. That's been the bulk of the M&A that we have executed, but we also look in Western Europe, and we've done the acquisition of Idaho First Bank in the States. So we look at platforms, we look at bolt-on opportunities across the seven markets, both DACH/NL and Western Europe and the United States.

We will take our next question. Your next question comes from the line of Noemi Peruch from Mediobanca.

I have three. The first one is on the legal risk in Austria. If you could share with us the range of potential top-up in provision you expect for 2025 would be useful. And here, I wonder about your preference, if it is more towards an upfront cost perhaps or kind of taking provision as claims come in, so potentially spreading into 2026. Then my second question is on asset quality. So we have seen in the last quarters an increase in bankruptcies in Austria and also the local regulator quite vocal on commercial real estate risk. So I was wondering here how do you see these trends impacting your book? And if you expect cost of risk to exceed 40 bps in the next years? And finally, a follow-up on the deposit cost. So what's the duration on the term deposits right now? And is the pricing tougher in the Netherlands at the moment or in Austria?

Thanks, Noemi. We had a hard time hearing the question. So let me just try to recap and we'll distribute between myself and Enver. So the first was on the legal fees, I think the upfront fees. Yes, in Austria. The second was, was it commercial real estate that you asked about or...

Risk cost guidance...

Asset quality in Austria and on the...

In Austria asset quality. Okay. It's really hard to hear your line.

Yes. And if this could trigger a higher cost of risk in the next year, perhaps...

Okay. Got it. Asset quality. And then, the third one was with deposit pricing.

I guess.

Okay. So let me, just on the legal fees. Honestly, this is one where I think the headlines far outpaced the actual reality. We reached an amicable settlement with the Consumer Protection Bureau, and we think we've adequately addressed it. But I think sometimes the sensationalization of headlines sometimes overruns the actual -- the substance of the topic. So we've addressed that. And then the second one, asset quality. I'd say in general, look, we're under 70 basis points. We see solid credit performance. The bigger issue is not so much what we see today on book. I think we're -- the numbers speak for themselves. It's just the frothiness in the market. So I would be more concerned less about, at least from a BAWAG perspective. What's on book, it's just about the aggressiveness in terms of higher advance rates, lower margins as people are chasing volume. So I see that as a bigger concern as opposed to kind of what we see from our balance sheet perspective. And then the third, I will give it to you, Enver.

Deposit costs?

Yes.

Yes, we have seen the trend that deposit costs are coming down across markets from Netherlands, Germany to Austria, just a bit slower than the rate cuts. But I think what I said before, once we hit the terminal rate, we will see a positive tailwind of the continuous deposit repricing that we would expect to continue in all the markets. I think, you asked about term deposits. It's a very small fraction of our overall customer deposit base and has almost no impact on pricing or repricing.

Your next question comes from the line of Borja Ramirez from Citi.

Can you hear me?

Can you speak up a bit? It's very hard to understand you.

Can you hear me little better?

A bit better.

Understood. I have two questions, please. On the NII, I understand that your guidance is conservative based on the rate of 1.7%. And also the deposit beta, could you provide details on where you see the deposit beta in the medium term? That would be my first question. And my second question would be on the integration of Knab. As per your presentation, the TSA will be closed by third quarter and you were targeting bank merger branchification by year-end. So I would like to ask if this could mean any potential upside to the efficiency target and also to the [indiscernible]

Okay. I'll take the second one. Again, sorry, it was really hard to hear. I think we have a bad line. But the -- as it relates to the Knab integration, yes, the TSAs are being closed out by third quarter. Hopefully, the merger done by the end of the year. But in terms of changing the targets, we're still -- the Investor Day targets under EUR 800 million and then under 33% cost-income ratio. Hopefully, we will beat that. But I think we feel comfortable in just the plans that we put out. And if there's an update in the coming quarters, we'll update you guys, but everything is on plan.

And I think the first question was on our projections on deposit betas. We don't provide that detail, but probably it's fair to assume that over time, we would expect deposit betas to trend below 40% again.

Your next question comes from the line of Jovan Sikimic from ODDO BHF.

I have just a short one on organic growth. If you could provide a kind of geographical split or breakdown now you have sizable operations in Netherlands and you added operations in Germany and you have anyway a strong business in Austria. So how geographically Retail and Corporate lending are performing? If you can add some colors on that, please?

Yes. Thanks, Jovan. We don't break out by individual countries, the volumes, but I can give you just some color as to what we're seeing in general and where there's pockets of strength and probably where areas are more muted. So Consumer and SME, which has probably been the strongest, we've seen good opportunity there. Obviously, in credit cards, Barclays is performing ahead of plan. We do some embedded finance there as well in Germany, which is going really well. Mortgages is incredibly muted in Germany. We're seeing a pickup in mortgages in the Netherlands. The same for Austria, but it's been muted to date. I think maybe we're potentially at an inflection point. Consumer loans are going well, specialty finance. That's kind of traditionally been steady Eddie over the past quarters, if not years. And that's kind of in the Retail and SME space. We started in Ireland recently, but that's pretty much greenfield. And then the Corporates, I think where you see the most volatility, the corporate real estate public sector. Public sector is well in the DACH/NL region, in particular, obviously, Austria being the anchor. The Corporate has been more volatile in the sense that we've seen more redemptions and the opportunities, as I've mentioned before, it just seems like it's a really frothy market. And then Real Estate, I think there were some idiosyncrasies in the second quarter. In particular, we had two big developments. We had early redemptions in 2Q in the U.S., some which were more than welcome. And then, we also had the impact of the euro-dollar FX, which is probably half of the reduction in the real estate. And that's just an FX impact, and we have -- that was something that we were aware of. We do have a good pipeline, but a deal is not funded until it's funded. So I think we've had a good pipeline for some time. But markets are choppy, and we'll be patient. So that's kind of a tour of the different asset classes across the different geographies. I hope that helps.

There seems to be no further -- apologies. A further question has just come through, one moment. You have a follow-up question from the line of Borja Ramirez from Citi.

I have a follow-up question, if I may, on deposits. I would like to ask if you could give an overview on the deposit trend by regions, that has been just referred. And also linked to this, given your very comfortable liquidity position, I think that gives you an advantage in terms of repricing the deposits going forward.

Borja, we do not provide split by regions' deposits, but it's been a very similar trend that we see across Austria, Germany, Netherlands in terms of overall customer deposits. And yes, we have a quite comfortable liquidity position. So also we are quite comfortable to reprice the deposits in line with the market.

There are no further questions. I would like to hand back for closing remarks.

Thank you, operator. Thanks, everyone, for joining the call this morning. I hope everybody has a lovely summer and gets a chance to get some rest and relaxation. Take care, and we'll talk to you guys in the third quarter. Bye.

This concludes today's conference call. Thank you for participating. You may now disconnect. 19525543732025-07-23 08

00

00BAWAG Group AG, Q2 2025 Earnings Call, Jul 23, 20251554617BAWAG Group AG (WBAG

BG)BG1OperatorOperator2Anas Abuzaakouk253369767Chairman of the Management Board & CEOExecutivesBAWAG Group AG3Enver Sirucic429933897CFO, Deputy CEO & Member of Management BoardExecutivesBAWAG Group AG4Borja Ramirez Segura364436939Assistant VP & AnalystAnalystsCitigroup Inc., Research Division5Gabor Zoltan Kemeny316410010Research AnalystAnalystsBernstein Autonomous LLP6Gulnara Saitkulova678317789Equity AnalystAnalystsMorgan Stanley, Research Division7Jovan Sikimic1930722832AnalystAnalystsODDO BHF Corporate & Markets, Research Division8Noemi Peruch590920221Equity AnalystAnalystsMediobanca - Banca di credito finanziario S.p.A., Research Division 0PresentationOperatorMessage1Good day, and thank you for standing by. Welcome to the BAWAG Group Second Quarter 2025 Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. There will also be a transcript published to the website. I would now like to hand the conference over to your speaker today, Anas Abuzaakouk, Chief Executive Officer. Please go ahead.1PresenterSpeech2Thank you, operator. I hope everyone is doing well this morning. I'm joined by Enver, our CFO. Let us start with a summary of the second quarter results on Slide 3. We delivered net profit of EUR 210 million, earnings per share of EUR 2.65 and a return on tangible common equity of 28% during the quarter. The performance of our business was strong with operating income of EUR 552 million, up 41% versus the prior year, pre-provision profits of EUR 345 million and a cost-income ratio of 37%. Total risk costs were EUR 52 million, translating into a risk cost ratio of 37 basis points as we continue to see solid credit performance across our businesses. In terms of our balance sheet and capital, average customer loans were up 3% and average customer deposits were up 1% quarter-over-quarter. We have a fortress balance sheet with EUR 15 billion in cash, an LCR of 237% and overall strong asset quality with a low NPL ratio of 68 basis points. We recently received regulatory approval for a share buyback of EUR 175 million, in line with our capital distribution target of over 13% through 2025, landing at a CET1 ratio of 13.5% after deducting the buyback and the dividend accrual in the second quarter. The operating performance of the businesses across the group was solid, but we continue to be patient and disciplined with over 20% of our balance sheet in cash in a market environment where we believe credit is frothy. The integrations of both Knab and Barclays Consumer Bank Europe are progressing well. There has been a great deal of work taking place behind the scenes. Our focus is on building a solid foundation to drive profitable growth long into the future. On the Knab front, we aim to have exited all transitional service agreements by the end of the third quarter and have already applied for a merger of the bank, the so-called branchification, which we hope to have completed by the end of this year. Barclays Consumer Bank Europe, which will be rebranded to easybank Germany in 2026, has been progressing very well. The leadership team has been onboarded and the business continues to develop ahead of plan. Our goal with both integrations is clear, fully integrate into the group operating framework and culture, work as one team and speak with one voice. We're excited about leveraging best practices, providing top talent with broader roles and pursuing the many growth opportunities ahead of us. Moving now to Slide 4, capital development. At the end of the second quarter, our CET1 ratio was 13.5% after deducting EUR 175 million for the approved share buyback program and EUR 116 million second quarter dividend accrual. For the quarter, we generated 100 basis points of gross capital, of which 91 basis points was through earnings. We have excess capital of EUR 117 million, 50 basis points above our capital distribution target of 13% in 2025. In terms of any Basel IV output floor impacts, we have 0 RWA inflation as we have a buffer of 20 points to the output floor level given that 90% of our business is currently on the standardized approach. On to Slide 5. Our Retail & SME business delivered first quarter net profit of EUR 173 million, up 32% versus the prior year and generating a very strong return on tangible common equity of 35% and a cost-income ratio of 38%. Pre-provision profits were EUR 289 million, up 44% compared to the prior year. The Retail risk costs were EUR 53 million with a risk cost ratio of 56 basis points. We continue to see solid credit performance across the business with an NPL ratio of 1.1%. We expect continued growth across the Retail & SME franchise in 2025, driven by strong operating performance as we fully integrate the two acquisitions with solid growth in consumer and SME, which will offset muted mortgage loan growth given current pricing levels. On Slide 6, our Corporates, Real Estate & Public Sector business delivered second quarter net profit of EUR 38 million, down 9% versus the prior year and generating a strong return on tangible common equity of 31% and a cost-income ratio of 25%. Pre- provision profits were EUR 52 million, down 12% versus prior year. Risk costs were a positive EUR 1 million as we continue to see solid credit performance across the business with an NPL ratio of 10 basis points, down 50 basis points from the prior quarter. This is best reflected in our U.S. office exposure, which was down 54% during the quarter with the remaining portfolio of EUR 143 million of performing loans, equal to about approximately 20 basis points of total assets and 3% of total real estate assets. Since the onset of the rise of rising U.S. interest rates in March 2022 and the subsequent distress in the U.S. office market, we have reduced our office portfolio by approximately 80% in what is arguably the most distressed asset class we've seen since the great financial crisis. When we say we are a lender focused on risk- adjusted returns, this is not a cliche, but a reflection of our discipline, conservatism and long-term focus of both our markets and risk teams. We will stay patient and continue to focus on conservative underwriting, risk-adjusted returns and not blindly chasing volume growth. With that, I'll hand it over to Enver.2PresenterSpeech3Thank you, Anas. I will continue on Slide 8. A strong quarter with net profit of EUR 210 million and a return on tangible common equity of 27.6%. Core revenues were up 2% versus prior quarter, with net interest income up 3% and net commission income up 1%. Operating expenses were up 5% in the quarter and cost-income ratio stood at 37.5%. Risk costs were EUR 52 million or 37 basis points, down 12% versus prior quarter. The tax rate in the second quarter was 26%, reflecting our growth outside of Austria. With higher corporate tax rates in the Netherlands and Germany, we expect the tax rate to remain at this level. On Slide 9, key developments of our balance sheet. Major balance sheet items remained flat this quarter with averages increasing on the back of the full quarter inclusion of the most recent acquisition. With our cash position continuing to be greater than 20% of our balance sheet, we have a very comfortable liquidity buffer to address potential organic and inorganic market opportunities when they arise. Having said that, we'll stay patient and continue to focus on risk-adjusted returns and not blindly chasing volume growth. Core revenue developments on Page 10. Net interest income was up by 3% in the second quarter. Despite having a full quarter of the credit cards business in Germany, net interest income also reflects the impact of the low interest rate environment with the average 3-month Euribor down 50 basis points during the quarter, leading to high deposit betas of 48%, 4 points higher versus prior quarter. With rates slowly but surely coming close to the terminal rate and overall solid margin development across our businesses, and further deposit repricing, we expect the second quarter NII to be a good run rate for the remainder of the year. The net commission income was up 1%, reflecting the positive trend we have seen over the last couple of quarters, and we expect a similar run rate for the rest of 2025. On Page 11, operating expenses up 5% in the quarter, reflecting mainly two effects

one, our new baseline of the larger group; and two, salary indexation after the collective bargaining agreement in Austria came into effect on April 1 with a 3.15% wage inflation. We believe that we have seen the peak of operating expenses in the second quarter, and we have made further progress on the integration of our acquisitions, and we expect our cost base to start coming down in the third quarter. We reconfirm our full year outlook of approximately EUR 800 million of operating expenses. On the regulatory charges, they were EUR 10 million in the quarter, and we expect it to be around EUR 40 million for the full year. Moving to Page 12. Risk costs were down to EUR 52 million in the quarter, in line with our expectations. Asset quality remains strong with an NPL ratio of 70 basis points. We continue to see a robust credit performance and expect risk costs of approximately 40 basis points for the full year. Let me close with the outlook and targets on Page 13. We reconfirm our P&L outlook and targets for 2025 with a net profit of EUR 800 million and earnings per share of above EUR 10. And with that, let's open up for Q&A. 3QuestionAndAnswerOperatorMessage1[Operator Instructions] Your first question comes from the line of Gabor Kemeny from Autonomous.4Question5My first question is on NII and your stable NII outlook for the rest of the year. Can you elaborate, please, a little bit on the assumptions here? And in particular, what sort of NII tailwind do you see from deposit repricing? I believe you indicated you are pricing new interest-bearing deposits around 1%. If you could quantify the NII benefit from the repricing, that would be helpful. And on the rate outlook, I believe you are assuming something like 1.7% terminal rate. How sensitive would be your NII outlook looks to, let's say, 1 or 2 more rate cuts than you assume? And my final question would be on capital. Shall we model anything -- any unusual developments in your capital ratios over the second half besides the usual items like an SRT or any other transactions you are working on? 5Answer2Enver, you'll get to do the NII, and I'll do the capital.6Answer3Okay. Perfect. So Gabor, the trend for the rest of the year on the NII, so you are right, we expect another rate cut to happen. That's our current assumption. If you look at the overall NIM development over the last couple of quarters, I think it's very obvious that we are less sensitive to rate cuts, but there is obviously an element of that going into the NII projection. So on your specific question, if you're sensitive to 2 rate cuts versus 1 rate cut, I don't think that would play a big role. It might just be quarterly timing. We feel very confident that the current run rate is sustainable. I think, we are fairly cautious on these assumptions. There are a few things that could be better than what we expect right now. We see the deposit repricing. We see the general market trend on deposit repricing that we follow right now. It just takes time. Deposit hedge takes time, it is a positive tailwind. And then overall, we have seen a bit of a drop in business on the non-retail side. Also, I think there's more momentum in the second half that could drive the NII upwards. So overall, I think fairly cautious. But right now, our best estimate is to have a stable NII.7Answer2Gabor, on the capital side, I'd say, the proxy of 100 basis points of gross capital for the quarter, 90 basis points of which is earnings, that's a good launch pad. And then, as far as SRTs, we're projecting two in the second half, one in the third quarter, one in the fourth quarter. So you'll see probably continued healthy capital development. And then, in terms of M&A or anything, if that's what you were alluding to, nothing significant for this year. So...8Answer3Maybe just to add on the SRTs, we would provide more details if the transactions materialize.9Question5Just one small follow-up, if I may, please. What is the average rate on your interest-bearing deposits, the back book right now?10Answer3So, we are paying pretty much 1% on the EUR 50 billion or so of customer deposits on average.11QuestionAndAnswerOperatorMessage1We will take our next question. Your next question comes from the line of Gulnara Saitkulova from Morgan Stanley.12Question6My questions are on M&A. So given the strong capital position and the ongoing integration of Barclays German Consumer business and Knab, when it would be feasible for BAWAG to reinitiate M&A activity? You mentioned you are not expecting anything particular in the second half of the year. So when would be the perfect timing for you to start M&A? And how are current global geopolitical uncertainties, including the potential tariffs and macro volatility influencing your investment appetite and M&A considerations? And the second question also related to M&A. So you have emphasized a focus on the Retail banking and SME in the DACH/NL region as you call, strategic priority. Is it still the case going forward? Or would you ever consider expanding your scope, for example, through acquisitions outside Europe, such as in the U.S.13Answer2Thanks, Gulnara. Very good questions. On the M&A front, as I stated earlier, 2025 is about landing the integrations. So anything on the M&A front, it would be small, if anything, as far as kind of bolt-on acquisitions. I think, we -- once the acquisitions are landed and we're in a firm position, we will -- we have a game board. Obviously, we're tracking a number of opportunities, and we'll reengage with the game board in 2026. But there's a lead time to M&A. So that takes about 6 to 9 months even to actively source a deal. There was a question in terms of the DACH/NL region. That's been the bulk of the M&A that we have executed, but we also look in Western Europe, and we've done the acquisition of Idaho First Bank in the States. So we look at platforms, we look at bolt-on opportunities across the seven markets, both DACH/NL and Western Europe and the United States.14QuestionAndAnswerOperatorMessage1We will take our next question. Your next question comes from the line of Noemi Peruch from Mediobanca.15Question8I have three. The first one is on the legal risk in Austria. If you could share with us the range of potential top-up in provision you expect for 2025 would be useful. And here, I wonder about your preference, if it is more towards an upfront cost perhaps or kind of taking provision as claims come in, so potentially spreading into 2026. Then my second question is on asset quality. So we have seen in the last quarters an increase in bankruptcies in Austria and also the local regulator quite vocal on commercial real estate risk. So I was wondering here how do you see these trends impacting your book? And if you expect cost of risk to exceed 40 bps in the next years? And finally, a follow-up on the deposit cost. So what's the duration on the term deposits right now? And is the pricing tougher in the Netherlands at the moment or in Austria?16Answer2Thanks, Noemi. We had a hard time hearing the question. So let me just try to recap and we'll distribute between myself and Enver. So the first was on the legal fees, I think the upfront fees. Yes, in Austria. The second was, was it commercial real estate that you asked about or...17Answer3Risk cost guidance...18Question8Asset quality in Austria and on the...19Answer2In Austria asset quality. Okay. It's really hard to hear your line.20Question8Yes. And if this could trigger a higher cost of risk in the next year, perhaps...21Answer2Okay. Got it. Asset quality. And then, the third one was with deposit pricing.22Answer3I guess.23Answer2Okay. So let me, just on the legal fees. Honestly, this is one where I think the headlines far outpaced the actual reality. We reached an amicable settlement with the Consumer Protection Bureau, and we think we've adequately addressed it. But I think sometimes the sensationalization of headlines sometimes overruns the actual -- the substance of the topic. So we've addressed that. And then the second one, asset quality. I'd say in general, look, we're under 70 basis points. We see solid credit performance. The bigger issue is not so much what we see today on book. I think we're -- the numbers speak for themselves. It's just the frothiness in the market. So I would be more concerned less about, at least from a BAWAG perspective. What's on book, it's just about the aggressiveness in terms of higher advance rates, lower margins as people are chasing volume. So I see that as a bigger concern as opposed to kind of what we see from our balance sheet perspective. And then the third, I will give it to you, Enver.24Answer3Deposit costs? 25Answer2Yes.26Answer3Yes, we have seen the trend that deposit costs are coming down across markets from Netherlands, Germany to Austria, just a bit slower than the rate cuts. But I think what I said before, once we hit the terminal rate, we will see a positive tailwind of the continuous deposit repricing that we would expect to continue in all the markets. I think, you asked about term deposits. It's a very small fraction of our overall customer deposit base and has almost no impact on pricing or repricing.27QuestionAndAnswerOperatorMessage1Your next question comes from the line of Borja Ramirez from Citi.28Question4Can you hear me?29Answer3Can you speak up a bit? It's very hard to understand you.30Question4Can you hear me little better?31Answer2A bit better.32Question4Understood. I have two questions, please. On the NII, I understand that your guidance is conservative based on the rate of 1.7%. And also the deposit beta, could you provide details on where you see the deposit beta in the medium term? That would be my first question. And my second question would be on the integration of Knab. As per your presentation, the TSA will be closed by third quarter and you were targeting bank merger branchification by year-end. So I would like to ask if this could mean any potential upside to the efficiency target and also to the [indiscernible]33Answer2Okay. I'll take the second one. Again, sorry, it was really hard to hear. I think we have a bad line. But the -- as it relates to the Knab integration, yes, the TSAs are being closed out by third quarter. Hopefully, the merger done by the end of the year. But in terms of changing the targets, we're still -- the Investor Day targets under EUR 800 million and then under 33% cost-income ratio. Hopefully, we will beat that. But I think we feel comfortable in just the plans that we put out. And if there's an update in the coming quarters, we'll update you guys, but everything is on plan.34Answer3And I think the first question was on our projections on deposit betas. We don't provide that detail, but probably it's fair to assume that over time, we would expect deposit betas to trend below 40% again.35QuestionAndAnswerOperatorMessage1Your next question comes from the line of Jovan Sikimic from ODDO BHF.36Question7I have just a short one on organic growth. If you could provide a kind of geographical split or breakdown now you have sizable operations in Netherlands and you added operations in Germany and you have anyway a strong business in Austria. So how geographically Retail and Corporate lending are performing? If you can add some colors on that, please?37Answer2Yes. Thanks, Jovan. We don't break out by individual countries, the volumes, but I can give you just some color as to what we're seeing in general and where there's pockets of strength and probably where areas are more muted. So Consumer and SME, which has probably been the strongest, we've seen good opportunity there. Obviously, in credit cards, Barclays is performing ahead of plan. We do some embedded finance there as well in Germany, which is going really well. Mortgages is incredibly muted in Germany. We're seeing a pickup in Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. © 2025 S&P Global Market Intelligence.