BAWAG Forging Ahead and Staying at the Forefront of Banking Strategy — by Maintaining a Long-Term Focus

People, patience, and profits are all allied for Austria’s burgeoning BAWAG banking group…

Austria’s BAWAG has emerged as one of Europe’s most profitable and efficient banking groups, with a simple, but ambitious goal: to deliver transparent and affordable financial products and services.

This strategy has served it well since its transformation in 2012, going public in 2017. The decade-long process of initiatives and advances laid the groundwork for its impressive growth trajectory — and has set the stage for continued expansion in the years ahead.

“We focus on the developed and mature markets of the DACH/NL region,” explains Manfred Rapolter, head of corporate affairs, “with a strong emphasis on retail and SME banking. Our unwavering commitment has always been, and will continue to be, delivering consistent and reliable results for all our stakeholders.”

As a prudent and disciplined commercial lender, Vienna-based BAWAG does not engage in investment banking, trading, or capital market activities.

Its approach relies rather on a long-term perspective, looking beyond quarterly results. This mindset, although not always understood by its less patient competitors, positions it to capitalise on unique opportunities as they arise. “By maintaining robust capital and liquidity, we ensure that we are ready to leverage these opportunities for long-term success,” says Rapolter.

Disciplined capital allocation, particularly in mergers and acquisitions, is a cornerstone of the financial institution’s strategy and modus operandi. “Our robust profitability underpins our capital distribution plans,” says Rapolter, “enabling us to generate significant amounts of capital each year. We strategically deploy this capital to invest in our business and teams, provide credit to our customers, acquire businesses, and return value to our shareholders.

“Being good stewards of capital means being prudent in our distribution strategies, maintaining a strong and resilient balance sheet, and always being prepared to seize exceptional opportunities.”

Since the bank’s IPO in 2017, it has extended €47bn in credit to its customers, supporting their needs while also expanding the franchise. “We have also self-funded nine acquisitions,” says Rapolter. “We have consistently increased our dividend, starting at €0.60 per share in 2017 and reaching €5.00 per share in 2023.

“In total, we have distributed €19.70 per share in dividends — €1.7bn. We have completed €900m in share buy-backs, reducing our overall share capital by over 21 percent since our IPO.”

In February this year, BAWAG Group signed a transaction to acquire 100 percent of the shares in digital bank Knab, from ASR Nederland NV. Knab was founded in 2012 and has developed a strong brand and loyal customer base by addressing the under-served Dutch self-employed space.

“This deal will expand our DACH/NL footprint,” says the corporate affairs chief, “building our customer franchise, and allowing us to grow the business and earnings.” Knab has some 400,000 retail and SME primary current account customers. “This is a strategic fit for BAWAG in terms of product offering, providing us with a platform for current accounts — which we will augment with our retail and SME product offering across the group.”

BAWAG remains committed to its 2025 ESG targets, laid out in 2021. When setting those goals, the aim was to set a positive example for peers and customers, launching initiatives to reduce its CO2 footprint.

“But our biggest emissions, as a bank, arise from our financed emissions,” he explains. “This year, we’ll assess a transition pathway for our residential mortgage and commercial real estate assets. These represent the largest exposures on our balance sheet.

“As far as other asset classes go, we have a very low exposure to mid- to high-emitting sectors across our corporate and public sector exposures.”

BAWAG enhanced its ESG strategy in 2023 as an integral initiative that cuts across the entire underpinning its strategy: risk-management, and allowing the group to drive responsible, sustainable, and profitable growth. Tangible examples include new green financing opportunities that meet the bank’s risk-adjusted returns, again reducing the carbon footprint.

“It also supports our customers in their own green transition, capturing environmental risks in our underwriting and limit-setting, maintaining a meritocratic culture as well as increasing female representation across the senior leadership team.”

Being safe and secure is not limited to balance sheet numbers or regulatory KPIs for BAWAG. It’s also about managing non-financial risk, whether AML- or ESG-related. “We continuously enhance our governance structure as well as risk management frameworks to address these risks, with climate risk having gained importance for all stakeholders.

“We will continue to integrate environmental factors, as we enhance our data collection and underwriting to account for emerging climate risks.” A risk materiality assessment In 2023 established a “low environmental risk” categorisation. As of December 2023, BAWAG had no relevant exposure to emerging markets or CEE countries — and no operations in countries with elevated AML risk. “We are committed to keeping our exposure to high-emitting GHG sectors low across our corporates portfolio,” says Rapolter.

BAWAG recognises that more is required of companies to tackle environmental threats. In addition to the climate crisis itself, it tackles issues stemming from socio-economic inequalities, and engages with the communities it serves on a grassroots level.

“The team’s efforts around social engagement resulted in a record year of both financial support and volunteerism,” says Rapolter, “which reflect the values of our team members and the bank itself.

“In 2023, we had a record year, surpassing 3,700-hour mark of corporate volunteering, with some 400 team members — more than 15 percent of all employees — having actively participated in volunteer programmes.

“Our efforts were focused on partnering with Samariterbund and Kinderuni, providing support to under-served communities and promoting financial literacy.”

These partnerships have been rewarding for all involved — and BAWAG has committed to providing financial and volunteer support in coming years. It also supported disaster-relief efforts, helping communities in Carinthia and Styria across 19 municipalities in Austria. “To further develop our community outreach programs, the management board and extended management board collectively donated €1m, which will be matched in full by the bank, to fund the various social programmes.”

BAWAG takes immense pride in the positive role it plays in society. “It reflects the values of our company and demonstrates the positive impact we can have in local communities.”

BAWAG finds itself in the midst of one of the most dynamic and transformative eras of banking, says Rapolter. “The coming years will see rapid shifts as the traditional model is disrupted by advancing technologies, shifting customer behaviours, new engagement methods, and the widespread adoption of AI across all facets of our business.

“One thing is certain about the future: it promises continuous change. Commercial banking is increasingly becoming a platform where financial institutions can leverage technology to create seamless processes. To deliver the simple, transparent, and affordable financial products our customers need, while ensuring the long-term competitiveness and profitability of our franchise, it’s crucial to define our core competencies, maintain a sharp focus on a select range of core products and services, exercise discipline and prudence in lending, and streamline end-to-end processes across the organisation.”

BAWAG differentiates itself from its competitors with a commitment to operational excellence, embracing user-friendly technology and a focus on initiatives to achieve the levels of excellence its pursues in productivity and efficiency.

And efficiency is not just about cutting costs, Rapolter points out. “It’s about optimising processes, enhancing agility, effectively managing risks, and delivering superior value to customers in diverse global markets.

“We focus on two key areas that are crucial for driving long-term value and enhancing shareholder value. First, we consistently invest in growth and efficiency — about €600m in recent years — to expand our branch network.

“This commitment ensures that we remain competitive as the banking landscape evolves. By investing in these areas, we stay at the forefront of emerging trends in customer engagement and continue to deliver high-quality products and services.”

The second emphasis is on disciplined growth. “We operate a multi-brand and multi-channel lending and advisory platform across our core markets. Our growth strategy combines organic expansion and M&A. We have used this to enhance our presence in our core markets. We aim to achieve stable and sustainable profitable growth well into the future.”

In terms of business activity, 2023 was defined by that patience and discipline. “We saw an impact on customer lending volumes as high rates and inflation translated into anaemic growth,” admits Rapolter, negatively impacting lending opportunities across both retail and SME, as well as the corporate, real estate, and public sectors.

“Despite our record performance in 2023, our best years are still ahead. Our strategy has been consistent, focused on cutting through the noise and on consistent execution. This approach to commercial lending focused on risk-adjusted returns, not blindly chasing volume growth. Thinking beyond the immediate quarter is not always obvious or understood by all players.

“But we are rewarded when unique opportunities present themselves — and we have the capital and liquidity to take advantage of them.”

BAWAG is certain that its strength stems from its unique culture, which blends the best aspects of its heritage as a trade union bank, dedicated to serving local communities in a spirit of entrepreneurship, accountability, meritocracy, and inclusion.”

BAWAG values dynamic leaders of uncompromising integrity, with a strong work ethic — those who do not shy away from tough decisions. “Our senior leadership team, 98-strong, has led our transformation over the past decade. Between them, they have an average of 14 years of experience at BAWAG.”

Maintaining a simple and flat organisational structure is part of the recipe for success, believes Rapolter. “We do our best to maintain that structure. We encourage all team members to focus on the work at hand, and always challenge the status quo for the betterment of the team.

“We believe hierarchy, bureaucracy and a siloed organisation lead to disjointed analysis, wide-scale inefficiencies, poor decision-making and ultimately a bloated cost structure.”

Accountability, meritocracy and inclusion are integral parts of the corporate identity. “We believe our diversity, inclusivity and meritocratic culture are a source of strength.

“The team members represent 53 nationalities, and we are fully committed to equity and diversity. This is a beneficial byproduct of merit, integrity and our work ethic. Our greatest asset is our human capital, so we are focused on developing and mentoring team members. Our senior leadership team alone represents 13 nationalities, with a female representation of 32 percent — 55 percent across the entire organisation.

“We are proud of our achievements — but recognise we have more to do.”

BAWAG operates across seven core markets, with Austria as its base. “We take pride in fostering an environment where the best, brightest, and hardest-working individuals thrive,” says Rapolter. “We challenge the status quo and are committed to continuous improvement in ourselves and our business. We embrace change, understanding that it is the only constant.”

The bank intends to help its employees to develop professionally, promoting diversity, meritocracy and a sense of ownership. “We embrace a culture of continuous learning and improvement. We actively seek feedback, reflect on our performance, and strive to enhance our skills and processes over time.”

That ownership mentality is bolstered by employee stock grants and matching programmes, and the focus is set on retaining and attracting top talent.