BAWAG Group confirmed at BUY, TP EUR 46.00 - Capital generation stays excellent
BAWAG delivered on its 2019 targets and confirmed the earnings guidance for 2020. The cornerstone of BAWAGs investment case remains the strong capital generation (2017: 220 bps, 2018: 260 bps, 2019: 230 bps). Given the strong commitment of the management to again return excess capital above 13% CET1 (via share buybacks) we have factored in excess capital above a 13.5% CET1 threshold in our valuation approach. Thus we adjust our TP to EUR 46 (was EUR 45) also accounting for a general increase in equity market risk premium by 50 bps to account for current Covid-19 uncertainties. The superior capital generation and the still compelling valuation versus peers (P/E of 7.8x, DY 19 of 6.6%) underline our BUY call. While further impairment of City of Linz claims poses a threat (50% accounted for in our valuation) BAWAG offers strong leverage on the planned corporate tax rate cut in Austria.Bank fuer Arbeit und Wirtschaft is engaged in financial services. Co. maintains four segments: Retail and Corporate Customers, Key Accounts, Financial Markets, and Real Estate and Leasing. The Retail and Corporate Customers provides accounts and cards, e-banking, payments, savings, private and pension investments, and financing and leasing services to small and medium-sized enterprises. The Key Accounts segment involves in documentary business, financing, international payments, and e-banking activities. The Financial Markets segment provides treasury and investment banking. The Real Estate and Leasing segment includes real estate projects financing and real estate leasing activities.
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
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