Understanding BAWAG Bank and Its Future

BAWAG Bank has a rich history dating back to 1846, making it one of the oldest banks in Austria.

Founded by a group of entrepreneurs, the bank initially focused on serving the local community, offering a range of financial services including deposit accounts and loans.

Today, BAWAG Bank is a major player in the Austrian banking market, with a strong presence in the country and a growing international presence.

The bank's commitment to innovation and customer satisfaction has enabled it to stay ahead of the competition, with a robust online banking platform and a wide range of financial products and services.

In 2000, BAWAG successfully took over a majority of shares of the Österreichische Postsparkasse (P.S.K.) bank, buying 74.82% of the shares from the government.

The merger created the country's third-largest bank group with a balance sheet total of nearly 45 billion euros.

The new BAWAG/P.S.K. Group had 5000 employees and over one million private customers.

With the combined assets, the new group BAWAG/P.S.K. experienced further growth.

The piano manufacturer Bösendorfer was bought from the American company Kimball International in 2001.

In 2002, the Slovakian bank Istrobanka was bought, and a year later, the Czech bank Interbanka was acquired.

The new partners opened up opportunities to expand in retail banking and intended to open new branches throughout Europe.

The management decided to transfer as much capital as possible from the holding to the operative bank, so that a 1.5 billion euro debt of the ÖGB were inherited by the bank.

In 2004, BAWAG acquired 100% of the shares of Dresdner Bank CZ, integrating it into the Interbanka, now renamed as BAWAG Bank CZ.

The Bayerische Landesbank sold its 46% share in 2004 to the other shareholder, the Austrian Trade Union Federation (ÖGB), making the ÖGB the sole owner of the BAWAG.

The BAWAG Affair was a major scandal that shook the bank to its core. It all started with the Refco scandal in October 2005, which involved bad loans worth 425 million euros.

The losses were staggering and came from a series of failed bets using risky derivative investments held in off-balance-sheet vehicles. These bets dated back to 1998 but only surfaced in 2006 during U.S. investigations into the bankruptcy of Refco.

The bank had to be bailed out by the conservative government of Wolfgang Schüssel, which cast doubts about the future of links between the socialist-led unions and the bank. This was a major blow to the bank's reputation.

Several people were found guilty and convicted in connection with the scandal, including Helmut Elsner, the former chief executive of Bawag. He was sentenced to nine and a half years in prison.

Johann Zwettler, another Bawag executive, was given a five-year sentence, while investment banker Wolfgang Flöttl was sentenced to 10 months. Six others received various sentences.

The aftermath of the scandal saw BAWAG P.S.K. pursue a 2 brands strategy, which was later switched to the joint brand BAWAG PSK in 2007. This was part of a larger effort to transform the bank.

To achieve this, the new management sold off non-strategic assets, including a 43% stake in Austrian TV operator ATV, foreign subsidiaries Istrobanka, and several other companies.

BAWAG Bank was founded in 1922 by Austrian Chancellor Dr. Karl Renner as the Arbeiterbank (Austrian Worker's Bank).

The bank was initially established to spare ordinary people from dealing with more capitalist institutions, but it had close ties to the Social Democratic Party of Austria (SPÖ) and labour unions.

BAWAG was forced to close in 1934 by the Austro-fascist government of Chancellor Engelbert Dollfuß and resumed operations after World War II in 1947.

In 1963, the bank changed its name to Bank für Arbeit und Wirtschaft AG (BAWAG), or "Bank for Labour and Business".

BAWAG Bank has made a significant move with the acquisition of Barclays Consumer Bank Europe. BAWAG Group signed a transaction to acquire the Hamburg-based consumer bank from Barclays Bank Ireland PLC.

The acquisition will expand BAWAG Group's footprint in the DACH/NL region, positioning it for future growth in one of its core markets. As of 31 March 2024, Barclays Consumer Bank Europe had gross assets of € 4.7 billion.

The bank's assets primarily comprise card and loan receivables, with approximately € 2 billion in credit card receivables. BAWAG Group will work with the current leadership team to continue growing its Retail business in Germany and Austria.

The acquisition creates long-term value to BAWAG's franchise, with an expected profit before tax contribution of greater than € 100 million in 2027. The CET1 impact of the transaction is expected at ~140 basis points.

The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to occur in Q4 2024 / Q1 2025.

The Bank für Arbeit und Wirtschaft, also known as BAWAG, was founded in 1922 by Austrian Chancellor Dr. Karl Renner as the Arbeiterbank.

It was initially created to provide credit to ordinary people, but also to spare them from dealing with more capitalist institutions.

The bank was forced to close in 1934 due to its close ties to the Social Democratic Party of Austria and labour unions.

It resumed operations after World War II in 1947.

In 1963, the bank took on its current name, Bank für Arbeit und Wirtschaft AG, or BAWAG.

The Austrian Trade Union Federation retained a 70% stake in the bank, while the Konsumretail cooperative chain held 30% of the shares.

The bank's close relations to the social democratic party and unions continued throughout the years.

BAWAG experienced rapid expansion throughout Austria, growing from 26 offices to 120 by 1982.

The bank's expansion was made possible by the amendment of the Austrian Banking Act in 1979, which allowed for the operation of branches.