Bawag Group AG slumped the most in three years after activist investor Petrus Advisers disclosed a short position in the Austrian lender and raised questions about its deposit base.
(Bloomberg) — Bawag Group AG slumped the most in three years after activist investor Petrus Advisers disclosed a short position in the Austrian lender and raised questions about its deposit base.
Bawag’s franchise is “degrading” and the lender has lost retail deposit market share, pushing up the ratio of loans to deposits, the investor said in a presentation. Petrus, which was previously a shareholder in the Austrian lender, said it had recently taken a short position, betting that the stock will decline.
Bawag dropped as much as 14%. The shares hit a record high in late February before slumping in the wake of the regional banking turmoil in the US.
The lender didn’t immediately respond to a request for comment.
Petrus argued that Bawag is replacing deposits with wholesale funding, and is acting more like a credit hedge fund by increasing its commercial real estate loans in the US and buying structured credit portfolios. The firm also criticized pay for Chief Executive Officer Anas Abuzaakouk as too high.
Bawag “has erased all revenue generating business units and relies almost exclusively on brokers and third-party vendors for the structure and growth of its balance sheet,” Petrus said. “We think Bawag needs an intervention from the regulator and should not be allowed to distribute capital until the franchise has stabilized with necessary leadership changes.”
Petrus has become a frequent activist investor among smaller banks in Germany. It made a substantial profit from its investment in Comdirect when it was fully taken over by Commerzbank AG, and from selling its stake in Aareal when it was bought by Advent and Centerbridge last year. The firm is also currently engaged in a campaign against Deutsche Pfandbriefbank AG.
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