Spar (SPP) – Concerns about European exposure

While SPP delivered strong FY16 results, we note the significance of Other Income in both its European divisions. In BWG, this line of income has surpassed levels management previously indicated it would peak at, but advised this was due to new lines of income (ATM fees). The disappointing performance of the Swiss operation highlights the risk SPP took in fixing the 2021 buyout price of minorities. We are also concerned about the growing exposure to defined benefit retirement fund obligations in Europe.