A decade on from disaster, Austrian bank BAWAG plans IPO

By Francois Murphy

VIENNA (Reuters) - Austria's former trade union bank BAWAG is planning a stock market debut later this year to set the seal on a decade-long recovery from its near collapse in a fraud scandal.

The initial public offering (IPO) looks set to be the country's largest for at least 10 years, and would provide an opportunity for its majority owner, U.S. private equity firm Cerberus Capital Management, to cash in on its investment.

Sources close to the matter told Reuters in June the listing of a 20-30 percent stake could value Austria's fourth-biggest lender at up to 5 billion euros ($5.9 billion).

BAWAG had to be bailed out in 2006 when it narrowly escaped a bank run after being sued by creditors of collapsed U.S. futures trader Refco, a BAWAG affiliate. It was then sold to Cerberus and other investors for 3.2 billion euros.

Following investigations into the scandal, a Vienna court sentenced nine people to prison in 2008, including a former BAWAG CEO, for their role in causing losses of as much as 1.7 billion euros at the bank in failed bets on risky derivative investments held in off-balance sheet vehicles.

BAWAG has since been turned around through strict cost controls, including a deal to share some of Austrian Post's branches that is coming up for review as the bank focuses increasingly on online services.

Moody's upgraded BAWAG in April to A2, its highest rating for an Austrian bank, citing the lender's high profitability and improving capitalisation.

"Our planned listing will be a major milestone for BAWAG Group and our existing shareholders," Chief Executive Anas Abuzaakouk said in a statement announcing the IPO, a day after Austrian gambling firm Novomatic ditched its own listing plan.

"Today BAWAG Group stands as one of the best capitalised and largest banks in Austria ... with a number of growth opportunities," he later added.

ACQUISITIONS

Wednesday's announcement formally launches the IPO process, which usually takes about a month. On timing, BAWAG said only that if market conditions permitted, the listing was expected to take place in the fourth quarter.

Telekom Austria raised 1.2 billion euros in an IPO in 2000, Raiffeisen Bank International raised 1.1 billion euros in 2005 and construction firm Strabag raised 1.3 billion euros in 2007, shortly before the global financial crisis hit and put the brakes on company listings.

Unlike larger Austrian banks such as Erste Group and Raiffeisen, BAWAG has not turned to the less developed economies of eastern Europe in its quest for growth. Instead, it has focused on Austria, Switzerland and Germany, which it refers to as the DACH region and where it sees room for consolidation.

It signed an agreement in July to buy German regional lender Suedwestbank and said on Wednesday other German targets were part of a "decent" acquisitions pipeline.

"We don't comment on the different levels or stages of transactions that we're at but we think it's a pretty robust pipeline as far as opportunities across the DACH region (are concerned), which means Germany in particular and then Austria as well," Abuzaakouk told reporters.

BAWAG, founded in 1922 as the Austrian workers' bank, said it was aiming to increase pretax profit by 5 percent a year and to pay 50 percent of its net profit to shareholders.

It also expects to have more than 1 billion euros in excess capital available for acquisitions or expanding its existing business through 2020, and any money left over from that would also be paid to shareholders after an annual review, it said.

($1 = 0.8506 euros)

(Editing by Louise Heavens and Mark Potter)