Bawag is not a glory sheet for Cerberus

Whe watches Commerzbank and its investor Cerberus, perhaps remembers the Bawag bank. The American company hunters have checked their fortunes at Bank Bawag in Vienna for many years. It should not have been a good investment for an investment company of this risk class. Finally, the institute was acquired in 2007. At that time, much higher prices were paid than after the collapse of the investment company Lehman Brothers in autumn 2008 and the subsequent global financial crisis.

The former union bank was on the verge of collapse after speculative business became known and had to be sold. It was a classic emergency sale, and the scandal surrounding the country’s fourth largest money house is considered the largest post-war economic scandal in Austria to date. The purchase price was € 2.6 billion, and the bank received € 600 million in capital injections. Others followed. It is questionable whether the purchase price alone was earned.

The Americans’ exit came later than planned. Actually, the Cerberus people, who also included Austrian Post and industrialists in the buyers’ consortium, would have loved to see their bank in Vienna fit for the stock exchange in 2012. That was not the case. At the end of 2012, a new minority shareholder was added with the American Golden Tree fund, although it is unclear who benefited more from it. The American funds are said to have recently increased the pressure on profitability on Vienna. Cerberus now holds less than 2 percent; the majority of the bank is in free float.

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To detailed view

Bawag had been moderately successful on the Vienna Stock Exchange three years ago with an issue volume of EUR 1.9 billion, even though it was the largest new issue in Vienna. However, the course has been under water since then. This suggests that investors are skeptical about the institute’s earnings prospects. Analysts complain that it is unclear how much organic growth the bank has and a lack of transparency.

Management was undoubtedly a profiteer with its high remuneration for Austrian standards. First came the British Byron Haynes. He was replaced two years ago, earlier than planned and surprisingly, by the American CFO Anas Abuzaakouk. Abuzaakouk moved to the board in 2012 as a restructuring manager. He has been CFO since 2014.

When he took over the executive chair, he was convinced that “the best years are still ahead of us”. Management was successful in resizing costs. Of the 6,000 employees at the time of the takeover, 4,400 (including 3,700 full-time positions) remained. The ratio of costs to revenues is expected to drop below 40 percent this year – after almost 43 percent recently – and is therefore better than that of comparable competitors.

A lot has been bought in recent years, especially in Germany. The largest acquisition to date is the Baden-Württemberg Südwestbank with a balance sheet volume of 7.4 billion euros. However, there was a sell-out in the numerous holdings – from the Stiefelkönig shoe retail chain to the Bösendorfer piano manufacturer to the lottery gambling group. The bank’s strategic focus today is mainly on Austria and Western Europe. She got out of the Eastern Europe region.

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