Addiko Bank Ag · VIE:ADKO
Addiko Bank — H1 2023 Earnings Presentation
50 slides from Addiko Bank's earnings presentation, Aug 17, 2023
Slide 1: 1H23 Results Presentation
1H23 Results Presentation Herbert Juranek (CEO) Edgar Flaggl (CFO) Tadej Krašovec (CRO) Ganesh Krishnamoorthi (CMO & CIO) Constantin Gussich (Investor Relations) 17 August 2023
Slide 2: Executive Summary & Business Update
Executive Summary & Business Update Financials & Risk Update Outlook & Wrap-Up Additional Materials
Slide 3: Key Highlights 1H23
Key Highlights 1H23 • 1H23 net profit up 55% YoY to €19.5m (1H22: €12.6m), 1H23 EPS at €1.00 − Second quarter result 2023 after tax at €9.8m (€9.7m in 1Q23) − Cost of Risk remained benign at -27bps (€-9.2m) Earnings • Return on average Tangible Equity at 5.4% YTD (1H22: 3.4%) & • Operating result up
Slide 4: Economic Environment
Economic Environment GDP forecasts1 (%, real growth) Forecasts • 2023’s economic growth in EU 2022 2023E 2023E 2024E 2024E 2025E 2026E Base Pessimistic Base Pessimistic Base Base member states slowed, however, Slovenia 5.4% 1.4% (1.0%) 2.5% (1.3%) 2.7% 2.7% Southeast Europe motors on Croatia 6.2% 2.
Slide 5: Update on Key Developments in Acceleration Program
Update on Key Developments in Acceleration Program Key developments • Focus book with double digit growth YoY – on track to achieve guidance for full year on the back of 1H23’s growth of 7% Business • Continued extension of partnership universe to c. 1 Growth in Focus Areas 470 partners • Launch of
Slide 6: Growth in Focus on Track - While Keeping Prudent Underwriting
Growth in Focus on Track - While Keeping Prudent Underwriting Focus portfolio development Development during 1H23 Gross performing loans (€m) YoY • +10% YoY growth in focus book (+14% YoY +7% +10% excluding medium SME) • +7% growth in focus book in the first half 2,904 2,722 2023 on track to gui
Slide 7: Further Progress in Becoming the Leading Specialist Bank for Consumer & SME Customers
Further Progress in Becoming the Leading Specialist Bank for Consumer & SME Customers in the CSEE Region Business Update Improving dynamics YoY €m, digital users and clients in thousands YoY • Strong customer growth +34% YoY in cash loans 758 694 +9% • Solid new business delivered considering lowe
Slide 8: Several Innovations as Part of the Acceleration Program
Several Innovations as Part of the Acceleration Program No need to go to Getting finance Focus on enhancing Hassle-free online Optimised SME the bank, Addiko right when and product revenue SME loans – first in digital lending tool will come to you! where needed streams the market live in all countri
Slide 9: Financials & Risk Update
Executive Summary & Business Update Financials & Risk Update Outlook & Wrap-Up Additional Materials
Slide 10: Financial Performance 1H23 at a Glance
Financial Performance 1H23 at a Glance Financial Performance 1H23 2Q22 3Q22 4Q22 1Q23 2Q23 5.80% YTD, €m 5.30% 72.9 1H22 YoY 67.8 4.80% 62.5 64.0 64.2 17.0 Net Netinterest interestincome income 108.1 84.6 +27.8% NCI 15.6 4.30% 19.3 17.1 19.1 3.80% 3.55% 3.80% Net Net fee & fee & commission NIM 32.5
Slide 11: Capital Position Remains Strong
Capital Position Remains Strong Capital development fully-loaded % CET1/TCR, YTD, RWA in €m Addiko Group 3,481 3,507 3,559 RWFL 0.04% 0.01% 0.22% 0.15% 0.20% 0.30% CET1/ 20.0% 20.0% TCR 19.9% fully-loaded 1 1 2022 OCI Reg. & RWA 1Q23 OCI Reg. & RWA 1H23 changes Equity developm. changes Equity develo
Slide 12: Stable Development in Plain Vanilla Investment Portfolio
Stable Development in Plain Vanilla Investment Portfolio Evolution of Investment Portfolio Key highlights €m 1,062 1,109 972 19 • 1H23 Investment portfolio at €1.1b: 18 117 Equity 16 118 21 13 31% of the portfolio are in securities in HTC Corporations 120 51 book and 68% in securities measured at Cr
Slide 13: Balanced NPE Development in First Half 2023
Balanced NPE Development in First Half 2023 NPE volume & ratio development Quarterly NPE formation & exit €m, YTD €m, QTD 3Q22 4Q22 1Q23 2Q23 NPE ratio 3.5% 2.9% 2.4% 2.4% NPE ratio Formation 23.7 28.3 19.9 21.0 (on-balance loans)1 4.7% 4.0% 3.3% 3.3% 2.5 4.2 1.5 13.2 1.1 7.3 7.2 8.0 244 12.3 12.6 1
Slide 14: Cost of Risk at a Glance
Cost of Risk at a Glance Credit loss expenses on financial assets 1H23 YTD, €m, positive number for release • 1H23 credit loss expenses 3.1 of €-9.2m resulting in Impairments (negative) (0.2) Releases (positive) (6.0) -0.27% cost of risk (on net loans, not annualised): (9.0) (9.2) − Consumer: -0.38%
Slide 15: Outlook & Wrap-Up
Executive Summary & Business Update Financials & Risk Update Outlook & Wrap-Up Additional Materials
Slide 16: Outlook 2023 and Wrap-Up
Outlook 2023 and Wrap-Up The group raised the outlook for 2023 to reflect strong business development, the favourable interest environment and continued prudent stance on risk & legal costs: – Gross performing loans: c. €3.5b with >10% growth in focus ➔ REVISED – Net Banking Income: up by c. 15% pos
Slide 17: Additional Materials
Executive Summary & Business Update Financials & Risk Update Outlook & Wrap-Up Additional Materials
Slide 18: Management Team Since June 2021
Management Team Since June 2021 Herbert Juranek Edgar Flaggl Tadej Krašovec Ganesh Krishnamoorthi Chief Executive Officer Chief Financial Officer Chief Risk Officer Chief Market, IT & Digitalisation Officer Chair of the Management Board Member of the Management Board Member of the Management Board M
Slide 19: Addiko at a Glance
Addiko at a Glance Overview of Addiko Operating as one region - one bank 1H23, % of Group Assets (rounded) ✓ Fully licensed bank with HQ in Austria, focused 100% on Central ✓ and South Eastern Europe ✓ Addiko Bank AG is regulated by the Austrian Financial Market Austria ✓ (5%2) Authority (“FMA”)1 an
Slide 20: ESG in Addiko
Addiko’s Commitment to the Sustainable Development Goals ESG in Addiko - It is the little things that count Environment Social Governance Making ESG work through Vision Carbon footprint reduction Committed to the good good governance Addiko helps its employees Sound principles of Addiko supports soc
Slide 21: Balance Sheet Composition
Balance Sheet Composition Assets Liabilities and Equity 1H23, €b 1H23, €b 5.9 5.9 Other ✓• Liquid balance sheet Other Assets 0.2 0.2 Liabilities ✓• Strong deposit base - LCR ratio: 336% (YE22: 307%) 0.1 Due to Credit Institutions - Loan-deposit ratio 0.5 Direct (customer) : 70.6% (YE22: ✓• Liquid as
Slide 22: Acceleration of Growth in Focus Areas Consumer & SME
Acceleration of Growth in Focus Areas Consumer & SME Gross performing loans in focus segments Gross yield by segment1 Gross loans of focus segments as % of total gross performing loans 1H23 YTD QTD QTD Full year 2Q23 1Q23 2022 yield yield yield Consumer 7.0% 7.1% 7.0% 6.9% % in focus 40% 51% 56% 62%
Slide 23: Consumer and SME Lending Development
Consumer and SME Lending Development Consumer (Micro shifted to SME as of 1Q21) SME €m, YTD €m, YTD 1,606 1,525 1,535 1,562 1,431 1,476 1,342 1,312 1,389 1,243 1,298 1,188 1,164 1,177 1,188 1,106 1,059 1,040 1,057 1,028 928 Gross 791 774 Performing 646 Loans 2016 2017 2018 2019 2020 2021 1Q22 1H22 3
Slide 24: Growth in Consumer Lending Slowly Returning
Growth in Consumer Lending Slowly Returning Addiko market share – unsecured consumer loans (stock outstanding, 1H23E)1,2 Bosnia & Serbia Croatia Slovenia Montenegro Herzegovina Market • Consumer lending market Size, 7.6 10.1 4.5 4.3 1.0 size grew by +3.0% vs. YE22 €b Market • Strong growth largest m
Slide 25: Digital Lending Platforms in All Major Markets
Digital Lending Platforms in All Major Markets WebLoan (Consumer & SME) Group Application Processing System – GAPS (Consumer) Simple entry point for loan requests with Simple branch loan Application Processing System instant initial offer including CDE (Credit Decision Engine) Achievements 2Q23 Achi
Slide 26: Digital Transformation
Digital Transformation Digital capabilities YTD +14% YoY Registered Mobile Banking 118 150 188 230 242 258 263 277 +5% Mobile banking users (vs. PQ) Users (ths.)2 +12% YoY +4% Digital users (vs. PQ) 289 273 277 257 246 210 26% Bank@Work 177 (1Q23: 27%, YE22: 26%, 3Q22: 24%, 1H22: 26%) 149 33% Digita
Slide 27: Financials: Financial Performance 1H23 in Detail
Financials: Financial Performance 1H23 in Detail Key financials P&L in €m YTD QTD •1 Operating result up 53.7% YoY to €49.6m: 1H23 (YTD) 1H22 (YTD) +/- PY 2Q23 1Q23 +/- PQ − Net banking income up 16.6% YoY driven Net interest income 108.1 84.6 27.8% 55.9 52.2 7.1% by strong development in Consumer &
Slide 28: Financials: Key Performance Drivers 1H23
Financials: Key Performance Drivers 1H23 Net interest income Net fee and commission income €m €m NIM 296bp 367bp 302bp 355bp 380bp % of 43% 30% 44% 30% 30% NII +27.8% +29.0% -11.0% +20.4% +7.1% 108.1 -9.7% -18.6% +9.3% 84.6 52.2 55.9 43.4 36.1 32.5 19.1 15.6 17.0 1H22 (YTD) 1H23 (YTD) 2Q22 (QTD) 1Q2
Slide 29: Financials: Interest Income Dynamics
Financials: Interest Income Dynamics Interest income by quarter1 Gross yield by quarter2 €m 67.3 2Q22 3Q22 4Q22 1Q23 2Q23 61.0 6.9% 6.8% 6.8% 7.0% 7.1% 17.1 Consumer 53.1 6.5% 6.4% 6.6% 7.5% 7.6% 13.8 49.2 new new new new new Other 47.5 1.7 business business business business business 8.8 Public & 7
Slide 30: Financials: Breakdown of Other Interest Income
Financials: Breakdown of Other Interest Income Treasury interest income by quarter €m • HTC bond portfolio strategy: interest income from the instruments held under the Hold-to-Collect (HTC) bond portfolio strategy in EU Other interest entities. This portfolio is steered as the HTC bond portfolio, b
Slide 31: Financials: Interest Expense Dynamics
Financials: Interest Expense Dynamics Interest expense by quarter Cost of funding by quarter1 €m 11.4 2.0 2Q22 3Q22 4Q22 1Q23 2Q23 8.7 Deposits - 1.1 Network 0.23% 0.30% 0.40% 0.50% 0.55% 0.4 0.9 2.4 Direct Treasury 6.0 0.24% 0.23% 0.74% 1.52% 1.76% 2.1 Deposits Deposits – 0.2 0.5 Credit 4.5 Group C
Slide 32: Financials: Perspective on Interest Rate Sensitivity
Financials: Perspective on Interest Rate Sensitivity Estimated impact on NII and NIM for parallel interest rate shifts Interest binding structure of customer deposits €m, calculated based on 1H23 balance sheet % of customer deposits, calculated based on 1H23 balance sheet D NIM +40bp +42bp +45bp +37
Slide 33: Financials: Commission Income Dynamics
Financials: Commission Income Dynamics Net fee and commission income by quarter Key highlights €m 19.1 19.3 • Net fee and commission income recovered in 2Q23 1.3 0.9 mainly driven by higher card business, bancassurance 17.1 17.0 Non-Focus and remaining FX/DCC business 0.6 15.6 0.9 and Other 0.7 • Ot
Slide 34: Financials: Other Income & Other Result
Financials: Other Income & Other Result Other income breakdown (YTD) €m 1H22 1H23 Lower deposit guarantee expenses as in the reporting Deposit guarantee -4.0 -2.9 period no contributions were charged in Croatia as well as 1 1 Bank levies and other taxes -1.8 -1.8 lower frontloaded regulatory charges
Slide 35: Financials: Development of Operating Expenses
Financials: Development of Operating Expenses Operating expenses development by quarter Other Administrative expenses €m 1H23 YTD, €m Other1 3.7 12% Advertising 3.3 11% Total: 15.3 1.6 IT €30.3m 51% Legal & Advisory 5% 43.3 43.7 43.1 6.3 41.7 41.9 21% Depreciation 4.2 4.3 4.2 Premises Expenses 4.4 4
Slide 36: Financials: Balance Sheet
Financials: Balance Sheet Detailed balance sheet overview (YTD) €m 2019 2020 2021 2022 1H23 Cash reserves 899.4 1,156.3 1,361.7 1,382.9 1,129.4 Investment Portfolio 1,135.1 965.5 1,044.8 1,084.4 1,132.9 Financial assets held for trading 38.5 36.4 32.6 22.8 23.8 Investment securities 1,096.6 929.0 1,
Slide 37: Financials: Income Statement
Financials: Income Statement Detailed income statement overview (YTD) €m 2019 2020 2021 2022 1H22 1H23 Interest income calculated using the effective interest method 207.4 194.3 185.5 192.9 92.3 121.3 Other interest income 3.4 2.6 2.2 2.3 0.6 7.0 Interest expense (27.8) (22.3) (18.2) (18.7) (8.2) (2
Slide 38: Financials: Breakdown by Entity
Financials: Breakdown by Entity 1H23 YTD Addiko Bank d.d., Addiko Bank d.d., Addiko Bank d.d., Addiko Bank a.d., Addiko Bank a.d., Addiko Bank A.D., (€m, IFRS) Zagreb Ljubljana Banja Luka Sarajevo Beograd Podgorica Net interest income 34.0 27.6 10.2 9.4 19.5 6.1 Net commission income 10.4 7.2 4.3 4.
Slide 39: Risk: Strong Risk Management Framework
Risk: Strong Risk Management Framework Non-performing loan portfolio (YTD) NPE Volumes, 1,229 761 606 404 277 244 194 163 161 159 €m NPE Coverage Ratio1 61.7% 67.5% 67.0% 75.4% 73.8% 73.6% 71.9% 75.4% 77.0% 78.0% (Ex-Collateral) 14.3% NPE Ratio2 9.2% 8.1% 5.6% 3.9% 3.5% 2.9% 2.4% 2.4% 2.4% NPE Ratio
Slide 40: Risk: Robust Asset Quality in Portfolios
Risk: Robust Asset Quality in Portfolios Focus Non-Focus Consumer SME €m, rounded €m, rounded €m, rounded 1,909 1,829 1,858 1,872 1,777 > 90 1,827 33 > 90 1,742 1,748 44 days 34 37 33 45 32 32 26 days 49 45 68 61-90 39 61-90 59 73 days 75 days 31-60 31-60 days days < 30 < 30 > 90 days days days 61-9
Slide 41: Risk: Provision Coverage Evolution
Risk: Provision Coverage Evolution Stage 1, 2 and 3 assets1 Business segments: Stage 1 & 2 (Performing) coverage1 €m 1H23 (YTD) ECL coverage (YTD) By Segment 1Q22 2022 3Q22 1H22 4,477 4,408 4,427 Focus Focus 1.6% 1.7% 1.7% 1.9% 1.9% 4,362 4,382 183 183 159 163 161 450 448 Consumer 2.0% 2.1% 2.1% 2.8
Slide 42: Risk: NPE Formation and Exit Dynamics
Risk: NPE Formation and Exit Dynamics Quarterly NPE formation & exit - group level Consumer SME Mortgages Large Corporates Public Finance €m €m €m €m €m Net 1.6 -4.8 0.0 -1.6 -0.7 0.8 0.5 -0.7 -1.5 -15.3 -2.3 -0.6 1.1 -1.4 0.0 0.0 -0.4 0.8 0.0 0.0 12.3 12.6 11.6 11.5 13.2 1.1 1.7 0.0 7.3 7.2 8.0 1.1
Slide 43: Risk: Low NPE Concentration, Well Provisioned and Carefully Managed
Risk: Low NPE Concentration, Well Provisioned and Carefully Managed Overview of Top 10 NPEs 1H23 Group of Borrowers, €m Borrower Total Exposure Country Description Metal industry and mechanical NPE 1 9.5 Croatia engineering Coverage for Top 10 NPEs NPE 2 4.3 Croatia Construction industry Coverage 68
Slide 44: Risk: NPE and Cost of Risk Development
Risk: NPE and Cost of Risk Development Focus Non-Focus3 €m Consumer SME €m €m NPE Coverage Ratio (Excl. 78.8% 79.2% 78.7% 80.1% 64.1% 69.9% 68.6% 73.9% 72.4% 80.9% 79.9% 80.9% Collateral)1 6.1% 6.0% 5.3% 5.4% 4.0% 4.0% 3.7% NPE Ratio2 3.5% 3.5% 3.2% 3.1% 3.1% 2021 1H22 2022 1H23 2021 1H22 2022 1H23
Slide 45: Risk: NPE and Cost of Risk Development by Business Segment
Risk: NPE and Cost of Risk Development by Business Segment Consumer SME Mortgages Large Corporates Public Finance €m €m €m €m €m NPE Coverage Ratio1 78.8% 78.7% 80.1% 64.1% 68.6% 73.9% 77.6% 77.4% 78.6% 53.5% 91.0% 90.7% 40.6% 61.8% 62.2% 9.4% 5.8% 5.7% 5.4% 4.5% 4.8% 4.5% 4.0% 3.7% NPE Ratio2 3.5%
Slide 46: Risk: CHF Loans Significantly Managed Down
Risk: CHF Loans Significantly Managed Down CHF portfolio overview CHF status across countries €m % of Total 5.5% 4.4% 3.4% 2.0% 1.7% 1.3% 1.1% 1.0% 1.0% Credit Risk • Several legislative initiatives on CHF loans were launched, but ultimately Exposure 1 rejected because the parliamentary constitution
Slide 47: Capital: Capital Requirements & Guidance Going Forward
Capital: Capital Requirements & Guidance Going Forward Capital requirements as of 2023 (excluding P2G) • Unchanged at 3.25% P2R • At least 56.25% must be held in CET1 (2023) capital and at least 75% in Tier 1 capital • Yearly review as part of SREP 19.9% 19.9% 19.9% • Systemic Risk Buffer for Addiko
Slide 48: Capital: Further Details
Capital: Further Details Breakdown of capital position1 Fully-loaded Addiko is using the standardised approach for 21.6% 20.0% 20.0% 19.9% its RWA calculation with most of its RWAs 18.8% stemming from credit risk Expiration of IFRS 9 transitional capital rules as of 1 January 2023 leading to no diff
Slide 49: Capital: Credit Risk RWA in Focus vs. Non-Focus
Capital: Credit Risk RWA in Focus vs. Non-Focus Risk weighting for focus portfolio is in line with overall contribution to loan book Credit risk RWA Credit risk RWA: breakdown by segment1 1H23, €m 1H23, €m Public Large Finance Corporate 130 20 3,037 Mortgages 238 - Corporate 504 Consumer Center Tota
Slide 50: Disclaimer
Disclaimer THESE RESULTS AND STATEMENTS (HEREINAFTER REFERRED TO AS “MATERIALS”) WERE CAREFULLY PREPARED BY ADDIKO BANK AG. HOWEVER, THE MATERIALS HAVE NOT BEEN INDEPENDENTLY VERIFIED. THEREFORE, ADDIKO BANK AG MAKES NO REPRESENTATION AND GIVES NO WARRANTY, NEITHER IMPLIED NOR EXPRESSED, AND ASSUMES