Petrus Advisers has asked European bank regulators to step in and address what it called an ‘‘unprecedented management plundering’’ at Austrian bank Bawag, accompanied by a ‘‘unstable and risky’’ strategy. Petrus said capital distributions should be halted until leadership changes are made.
In a 37-slide presentation Friday, Petrus raised a number of red flags about the way in which Bawag has been run in recent years, saying the lender is ‘‘losing clients, deposit market share, and relevance very rapidly.’’ The bank has lost 7% of its nominal retail deposit base since year-end 2021, despite strong inflation over the last quarters, Petrus noted.
Despite this underperformance, Bawag executives are compensated above the peer average, with CEO Anas Abuzaakouk receiving more than the entire management teams of European competitors, said Petrus. The investor also pointed out that Bawag’s management has loans outstanding of 36 million euros with the bank, after the figure tripled last year.
Petrus accused Bawag of deploying customer funds poorly and acting more like a hedge fund than a regulated bank and said that it does not have the appropriate risk management in place to run such an investment strategy. The firm stated that Bawag’s chief risk officer has no relevant risk management experience.
These issues have not been addressed because Bawag lacks proper oversight, argued Petrus, claiming the lender’s supervisory board is made up of ‘‘cronies and friends’’ of management.
Petrus criticized the European Banking Authority regulators for tolerating Bawag’s ‘‘flawed business practices’’ and for approving its recent share buyback plan, and urged regulators to intervene and ensure the lender does not move ‘‘further and further away from sustainability, social responsibility and fairness.’’
‘‘Due to the lack of an engaged shareholder base and a functioning supervisory board, we think Bawag needs an intervention from the regulator and should not be allowed to distribute capital until the franchise has stabilised with necessary leadership changes,’’ said Petrus.
The London-based activist said it used to be a Bawag shareholder, with up to a 3% stake, but that it flipped to a short position after taking a closer look at the business. Petrus said the evaluation was prompted by the U.S. regional banking crisis earlier this year, which spilled into Europe, leading to a government-backed rescue of Swiss giant Credit Suisse.
Bawag shares fell more than 12% to 37.60 euros each in morning trading Friday in Vienna, the most in three years, after Petrus’ attack. However, the stock pared most of the losses in afternoon trading and rose a further 2.1% Monday to close at 43.10 euros, giving the lender a market value of 3.56 billion euros.
In a statement Friday afternoon, Bawag rebuffed Petrus’ report as ”inconsistent, out of context, and misleading.” Bawag pointed out that it has distributed more than €2 billion of capital to shareholders and outperformed the European bank indices since its public listing in 2017. It also argued that measures taken over the past decade have made it ”one of the most profitable and efficient banks in Europe.”