Erste Group Bank Ag · VIE:EBS
Erste Group Bank — FY2017 Earnings Presentation
47 slides from Erste Group Bank's earnings presentation, Feb 28, 2018
Slide 1: Erste Group investor presentation FY 2017 preliminary results
Erste Group investor presentation FY 2017 preliminary results 28 February 2018 Erste Group delivers 11.5% ROTE in 2017 as revenue pressure eases Andreas Treichl, CEO Erste Group Gernot Mittendorfer, CFO Erste Group Willibald Cernko, CRO Erste Group Page
Slide 2: Disclaimer – Cautionary note regarding forward-looking statements
Disclaimer – Cautionary note regarding forward-looking statements • THE INFORMATION CONTAINED IN THIS DOCUMENT HAS NOT BEEN INDEPENDENTLY VERIFIED AND NO REPRESENTATION OR WARRANTY EXPRESSED OR IMPLIED IS MADE AS TO, AND NO RELIANCE SHOULD BE PLACED ON, THE FAIRNESS, ACCURACY, COMPLETENESS OR CORREC
Slide 3: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 3
Slide 4: Executive summary – Group income statement performance
Executive summary – Group income statement performance QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m) 4 79 1,316 1,265 22 216 130 64 363 88 135 329 25 93 98 17 Q3 17 Operating Operating Risk costs Other Taxes on Minorities Q4 17 2016 Operating Operating Risk costs Other
Slide 5: Executive summary – Key income statement data
Executive summary – Key income statement data Net interest income & margin Operating result & cost/income ratio Cost of risk in EUR m in EUR m in EUR m 2.51% 2.40% -5.7% 66.1% 2.39% 2.41% 61.4% -32.5% 4,375 4,353 2,663 2,511 196 0.17% 1,124 132 -0.09% 1,086 634 587 61 -33 2016 2017 Q3 17 Q4 17 2016
Slide 6: Executive summary – Group balance sheet performance
Executive summary – Group balance sheet performance YTD total asset reconciliation (EUR m) YTD equity & total liability reconciliation (EUR m) 133 220,659 220,659 846 2,097 493 1,686 8,878 12,957 208,227 3,444 5,656 208,227 1,718 4,833 1,339 31/12/16 Cash Trading, Loans to Net loans Intangibles Othe
Slide 7: Executive summary – Key balance sheet data
Executive summary – 31/12/16 Key balance sheet data 31/12/17 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn +6.8% 94.7% 92.4% 69.1% 68.8% 62.7% 63.2% 130.7 139.5 83.1 89.2 4.9% 4.0% Loan/deposit ratio Loans/total assets Net loans Credit RWA NPL coverage
Slide 8: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 8
Slide 9: Business environment – Strong economic outlook for 2018
2017 Business environment – 2018 Strong economic outlook for 2018 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (ave, in %) 7.0 8.3 4.5 4.7 5.7 4.4 3.9 4.0 3.0 3.4 3.4 3.5 4.2 4.1 1.2 2.9 2.8 3.0 2.8 3.4 3.5 3.4 3.7 3.2 0.7 0.8 1.0 2
Slide 10: Business environment – CZ further increases key policy rate to 75bps in February 2018
Business environment – 3M Interbank 10YR GOV CZ further increases key policy rate to 75bps in February 2018 Austria Czech Republic Romania 1.02% 1.63% 4.36% 3.92% 3.90% 0.58% 0.63% 1.04% 3.31% 0.36% 0.53% 0.41% 1.76% 0.58% 0.95% -0.26% -0.33% -0.33% -0.33% 0.73% 0.41% 0.65% 0.29% 0.40% 2016 2017 Q3
Slide 11: Business environment – CZK appreciates amid rising rates, RON depreciates
Business environment – CZK appreciates amid rising rates, RON depreciates on political uncertainty EUR/CZK EUR/RON -2.6% -1.7% -5.6% +1.7% +0.8% +2.8% 27.0 26.3 26.1 25.7 27.0 25.5 4.49 4.57 4.58 4.62 4.54 4.67 2016 2017 Q3 17 Q4 17 31/12/16 31/12/17 2016 2017 Q3 17 Q4 17 31/12/16 31/12/17 • Czech N
Slide 12: Business environment – Market shares: mostly stable or increasing across the region
31/12/16 Business environment – 30/09/17 Market shares: mostly stable or increasing shares across the region 31/12/17 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 19.7% 19.9% 18.9% 19.0% AT 20.0% AT 20.3% AT 19.2% AT 20.7% 23.0% 19.7% 25.3% 12.2% CZ 23.1% CZ 20.2% CZ 2
Slide 13: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 13
Slide 14: Business performance: performing loan stock & growth
YoY 31/12/16 Business performance: performing loan stock & growth – QoQ 30/09/17 Performing loans continue to grow in Q4 17 31/12/17 128.6 7.1% • Rising performing loan volume trend continues in Q4 17 Group 136.1 137.7 1.2% across most geographies; yoy loan growth particularly strong 30.3 in CZ (sup
Slide 15: Business performance: customer deposit stock & growth
YoY 31/12/16 Business performance: customer deposit stock & growth – QoQ 30/09/17 Deposits keep advancing in Q4 17 31/12/17 138.0 9.4% • Exceptional deposit growth across all geographies despite Group 148.4 151.0 1.8% zero interest rate environment as retail and corporate clients 31.8 park cash in o
Slide 16: Business performance: NII and NIM
Business performance: NII and NIM – Q4 16 Q3 17 NII entering growth path, NIM stabilising Q4 17 1,107 2.52% Group 1,086 2.39% 1,124 2.41% • Yoy increase driven by higher NII in CZ resulting from 185 2.00% increased business volumes, rising interest rates, CZK AT/EBOe 160 1.60% appreciation; and impr
Slide 17: Business performance: operating income
YoY Q4 16 Business performance: operating income – QoQ Q3 17 Operating income driven by strong NII and fees Q4 17 1,732 0.0% • Yoy flat as higher NII and fees offset lower fair value result Group 1,644 1,732 5.4% and lower rental income (one-off effect in Q4 16) 299 -9.9% • Qoq increase driven by st
Slide 18: Business performance: operating expenses
YoY Q4 16 Business performance: operating expenses – QoQ Q3 17 Expenses burdened by regulatory and IT project costs Q4 17 1,065 7.5% • Yoy cost increase mainly driven by higher other Group 1,010 1,145 13.3% administrative expenses related to IT and regulatory projects 184 -0.3% • Qoq up due to highe
Slide 19: Business performance: operating result and CIR
YoY Q4 16 Business performance: operating result and CIR – QoQ Q3 17 Positive revenue trends overshadowed by Q4 17 cost peak Q4 17 Operating result YoY & QoQ change Cost/income ratio 666 61.5% Group -11.8% 61.4% 634 -7.4% 587 66.1% 115 61.4% AT/EBOe 93 -25.3% 63.2% 86 -7.7% 68.0% 102 73.1% AT/SB 122
Slide 20: Business performance: risk costs
Q4 16 Business performance: risk costs (abs/rel*) – Q3 17 Risk costs remain at all-time-lows Q4 17 132 0.39% • Yoy improvement due to continued asset quality Group -33 -0.09% 61 0.17% improvements and one-off effect in Q4 16 21 0.27% • Qoq deterioration due to higher level of releases in Q3 17 AT/EB
Slide 21: Business performance: non-performing loans and NPL ratio
31/12/16 Business performance: non-performing loans and NPL ratio – 30/09/17 NPL ratio improves again, now standing at 4.0% 31/12/17 6,678 4.9% • NPL volume declined to EUR 5.8bn in Q4 17 as NPL inflows Group 6,189 4.3% 5,776 4.0% remain moderate 781 2.5% AT/EBOe 635 2.0% 631 2.0% • NPL sales of EUR
Slide 22: Business performance: allowances for loans and NPL coverage
31/12/16 Business performance: allowances for loans and NPL coverage – 30/09/17 NPL provision coverage stable at 68.8% 31/12/17 4,613 69.1% • NPL provision coverage remained comfortable at group level, Group 4,302 69.5% 3,977 68.8% exceptionally strong in CZ, RO, SK, HU and RS 463 59.3% AT/EBOe 379
Slide 23: Business performance: other result
Q4 16 Business performance: other result – Q3 17 Other result improves significantly yoy on lower banking tax Q4 17 -412 • Yoy improvement driven by significant one-off banking tax Group -59 -75 payment in Austria in Q4 16 -33 • Qoq deterioration due to impairments for IT projects and AT/EBOe -2 bra
Slide 24: Business performance: net result
Q4 16 Business performance: net result – Q3 17 Net profit soars yoy on significantly reduced negative one-offs Q4 17 86 • Yoy profitability improved on lower negative one-off effects Group 363 and lower risk costs 329 29 • Qoq down on higher operating expenses and risk costs, AT/EBOe 70 which were n
Slide 25: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 25
Slide 26: Assets and liabilities: YTD overview
Assets and liabilities: YTD overview – Loan/deposit ratio down to 92.4% at Dec 17 (Dec 16: 94.7%) Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 220.7 220.7 208.2 100% 208.2 3.4 2.3% 100% 21.8 8.8% 9.9% 4.8 16.3 7.0% 7.4% 1.6% 18.4 14.6 42.8 22.9% 19.4% 47.6
Slide 27: Assets and liabilities: customer loans by country of risk
Assets and liabilities: customer loans by country of risk – Net customer loans up 6.8% in 2017, NPLs down 13.5% Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +6.8% +7.1% -13.5% 138.0 139.5 136.1 137.7 6.7 130.6 3.5 3.5 128.6 3.5 3.6 0.2 6.2 6.8 6.8 6.6 6.6 0.4 3
Slide 28: Assets and liabilities: allowances for customer loans
Assets and liabilities: allowances for customer loans – As asset quality improves lower interest income from NPLs weighs on NII Quarterly development (EUR m) Highlights • Development of interest income from NPLs: • 2014: EUR 202m • 2015: EUR 162m 212 • 2016: EUR 106m 137 • 2017: EUR 70m 587 • P&L un
Slide 29: Assets and liabilities: financial and trading assets
Assets and liabilities: financial and trading assets * – LCR at excellent 145.2% By geography By debtor type Liquidity buffer in EUR bn in EUR bn -8.0% 42.8 26.7% 27.4% 39.9 100% 24.9% 39.4 8.9% 9.3% 9.2% 9.9 7.3% 7.8% 7.8% 8.3 8.6 55.5 1.0 51.2 2.4 0.8 0.8 46.1 3.2 3.3 4.8 5.2 5.0 5.4 5.1 4.6 83.8%
Slide 30: Assets and liabilities: customer deposit funding
Assets and liabilities: customer deposit funding – Customer deposits grow by 1.8% qoq, up 9.4% ytd By customer type By product type Highlights in EUR bn in EUR bn • Continued deposit inflows driven by Retail +9.4% segment with highest demand for overnight deposits amid low interest rate environment
Slide 31: Assets and liabilities: debt vs interbank funding
Assets and liabilities: debt vs interbank funding – Declining wholesale funding reliance, as customer deposits grow strongly Debt securities issued Interbank deposits in EUR bn in EUR bn -7.7% +11.7% 27.2 19.2 25.7 Sub debt 25.1 Overnight deposits 6.1 Hybrid issues 16.3 5.9 5.4 Term deposits 5.8 Sen
Slide 32: Assets and liabilities: LT funding
Assets and liabilities: LT funding – Limited LT funding needs Maturity profile of debt in EUR bn 3.0 3.1 3.0 2.7 2.0 1.9 1.3 1.4 0.8 0.6 0.6 0.2 0.1 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030+ Senior unsec. bonds Covered bonds Capital exc Tier 1 Debt CEE • In January 2018 Erste
Slide 33: Assets and liabilities: capital position
Assets and liabilities: capital position – B3FL CET1 ratio at comfortable 12.9% post EUR 1.2 dividend for 2017 Basel 3 capital (phased-in) Risk-weighted assets (phased-in) Basel 3 capital ratios (phased-in) in EUR bn in EUR bn 18.7% 18.5% 18.5% 18.4% 18.0% 19.9 19.9 20.3 106.8 110.8 110.0 18.8 19.0
Slide 34: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 34
Slide 35: Conclusion – Outlook 2018
Conclusion – Outlook 2018 • Real GDP growth of approx. 3-5% expected in 2018 in CEE and Austria Macro outlook • Real GDP growth to be driven by solid domestic demand, as real wage growth and 2018 declining unemployment support economic activity in CEE • Solid public finances across CEE • Dividend pr
Slide 36: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 36
Slide 37: Additional information: new segmentation
Additional information: new segmentation – Business line and geographic view Erste Group – Business segments ALM & Group Group Savings Intragroup Retail Corporates Local CC Corporate Markets Banks Elimination (ALM&LCC) Center • SME • Other Subsidiaries • Local Large Corporate • Asset/Liability Manag
Slide 38: Additional information: income statement
Additional information: income statement – Year-to-date and quarterly view Year-to-date view Quarterly view in EUR million 2016 2017 YOY-Δ Q4 16 Q3 17 Q4 17 YOY-Δ QOQ-Δ Net interest income 4,374.5 4,353.2 -0.5% 1,107.0 1,086.3 1,123.9 1.5% 3.5% Net fee and commission income 1,783.0 1,851.6 3.8% 463.
Slide 39: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 18,353 24,731 25,842 22,104 21,796 18.8% 18.8% -1.4% Financial assets - held for trading 7,950 7,827 7,206 6,850 6,349 -20.1% -20.1% -
Slide 40: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities - held for trading 4,762 4,314 3,960 3,551 3,423 -28.1% -28.1% -3.6% Derivatives 4,185 3,855 3,646 3,206 2,934 -29.9% -
Slide 41: Additional information: regulatory capital position
Additional information: regulatory capital position – Capital requirements (SREP) for 2018; Erste target of 12.75%+ unchanged • As buffers are phasing in in 2018, P2G declines Erste Group Consolidated Erste Group Unconsolidated Phased-in Fully loaded Phased-in Fully loaded 2016 2017 2018 2019e 2017
Slide 42: Additional information: gross customer loans
Additional information: gross customer loans – By risk category, by currency, by industry Gross cust. loans by risk category (EUR bn) Gross customer loans by currency (EUR bn) Gross customer loans by industry (EUR bn) 137.5 139.6 142.3 143.5 139.6 142.3 143.5 142.3 143.5 135.3 135.3 137.5 139.6 6.2
Slide 43: Additional information: footprint
Additional information: footprint – Customer banking in Austria and the eastern part of the EU Erste Group footprint Highlights Czech Republic Slovakia • Leading retail and corporate bank Customers: 4.7m Customers: 2.2m in 7 geographically connected Employees: 10,171 Employees: 4,250 countries CZ Br
Slide 44: Additional information: strategy
Additional information: strategy – A real customer need is the reason for all business Customer banking in Central and Eastern Europe Eastern part of EU Focus on CEE, limited exposure to other Europe Retail Corporate Capital Public Interbank banking banking markets sector business Focus on local cur
Slide 45: Additional information: Ratings
Additional information: Ratings – Composition of Erste Group Bank AG’s issuer ratings Financial Profile SACP - Stand-Alone Credit Profile VR - Viability Rating Asset Risk baa3 a (Individual Rating ) Capital baa1 Profitability baa3 ▲ a- Funding Structure a3 Anchor bbb+ Liquid Resources baa1 Business
Slide 46: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Unidentified * Erste Foundation 1 Unidentified * 11.2% 11.2% 11.2% Savings Banks 2 Rest of world BlackRock Inc Austria 5.0% 4.8% 3.5% 27.8% Other Syndicated 3 3.8% 9.9% Caixa Continental Europe
Slide 47: Investor relations details
Investor relations details • Erste Group Bank AG, Am Belvedere 1, 1100 Vienna E-mail: investor.relations@erstegroup.com Internet: http://www.erstegroup.com/investorrelations http://twitter.com/ErsteGroupIR http://www.slideshare.net/Erste_Group Erste Group IR App for iPad, iPhone and Android http://w