Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q2 2019 Earnings Presentation
48 slides from Erste Group Bank's earnings presentation, Jul 31, 2019
Slide 1: Erste Group investor presentation Q2 19 results
Erste Group investor presentation Q2 19 results 31 July 2019 Operating profit reaches highest level in 5 years on strong macro backdrop Andreas Treichl, CEO Erste Group Stefan Dörfler, CFO Erste Group Alexandra Habeler-Drabek, 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) -5.8% 29 85 -5.5% 80 70 377 50 22 30 219 27 355 774 22 40 732 144 Q1 19 Operating Operating Risk costs Other Taxes on Minorities Q2 19 1-6 18 Operating Operating Risk co
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 2.30% +11.5% 2.18% 2,330 2.18% 2.18% 2,214 0.01% 0.03% 1,447 63.0% 1,298 56.6% 1,161 1,169 791 656 -43 -7 -36 -73 Q1 19 Q2 19 1-6 18 1-6 19 Q1 19 Q2
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) +4.8% +4.8% 248,261 248,261 17 561 1,035 780 6,010 1,228 7,030 3,932 1,385 236,792 236,792 706 1,690 10 31/12/18 Cash Trading, Loans to Net loans Intangibles
Slide 7: Executive summary – Key balance sheet data
Executive summary – 31/12/18 Key balance sheet data 30/06/19 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn 91.8% 91.5% +4.0% 75.4% 73.4% 63.1% 62.6% 149.3 155.3 95.9 101.2 3.2% 2.8% 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 – Economic outlook improved for 2019-2020
2019 Business environment – 2020 Economic outlook improved for 2019-2020 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (avg, in %) 5.6 5.6 4.5 4.5 4.7 4.6 4.0 3.8 3.8 3.3 3.3 3.3 3.4 3.3 3.3 3.2 0.8 0.7 0.7 2.6 2.5 2.5 2.6 2.8 2.5 2.
Slide 10: Business environment – CZ has increased key policy rate in eight steps to 2.0%
3M Interbank Business environment – 10YR GOV CZ has increased key policy rate in eight steps to 2.0% since August 2017 Austria Czech Republic Romania 2.07% 2.01% 2.13% 4.80% 4.80% 4.81% 0.73% 1.88% 4.61% 0.30% 0.42% 0.19% 1.82% 1.85% 1.78% -0.33% -0.31% -0.31% 3.04% 2.94% 3.13% -0.32% 0.89% 2.15% 1-
Slide 11: Business environment – CEE currencies remain remarkably stable versus the euro
Business environment – CEE currencies remain remarkably stable versus the euro EUR/CZK EUR/RON +0.7% 0.0% -1.2% +1.9% +0.2% +1.6% 25.5 25.7 25.7 25.7 25.7 25.4 4.65 4.74 4.74 4.75 4.65 4.73 1-6 18 1-6 19 Q1 19 Q2 19 31/12/18 30/06/19 1-6 18 1-6 19 Q1 19 Q2 19 31/12/18 30/06/19 • Czech National Bank
Slide 12: Business environment – Austria, Croatia and Serbia continue to gain market share
30/06/18 Business environment – 31/03/19 Austria, Croatia and Serbia continue to gain market share 30/06/19 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 20.2% 21.1% 19.7% 21.1% AT 20.5% AT 21.8% AT 20.2% AT 21.7% 23.4% 21.2% 25.6% 12.2% CZ 23.6% CZ 21.2% CZ 25.6% CZ 12
Slide 13: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 13
Slide 14: Performing loans continue to grow across all geographies
YoY 30/06/18 Business performance: performing loan stock & growth – QoQ 31/03/19 Performing loans continue to grow across all geographies 30/06/19 143.2 7.7% • Rising performing loan volume trend continued in Q2 19 Group 150.7 154.2 2.3% across all geographies 31.5 • Yoy development driven by Corpor
Slide 15: Deposit build-up continues in Q2 19
YoY 30/06/18 Business performance: customer deposit stock & growth – QoQ 31/03/19 Deposit build-up continues in Q2 19 30/06/19 156.8 8.2% • Continuation of exceptional deposit growth across all Group 166.2 169.7 2.1% geographies despite zero/low interest rate environment as 34.8 retail and corporate
Slide 16: NII increases 3.3% yoy but growth momentum decelerates
Business performance: NII and NIM – Q2 18 Q1 19 NII increases 3.3% yoy but growth momentum decelerates Q2 19 1,131 2.32% • Yoy NII growth (+3.3%) mainly due to Corporates (esp. Group 1,161 2.18% 1,169 2.18% geographical segment CS), solid contribution from Retail and 165 1.69% Savings Banks; NIM dec
Slide 17: All major components contribute to operating income growth
YoY Q2 18 Business performance: operating income – QoQ Q1 19 All major components contribute to operating income growth Q2 19 1,719 5.9% • Yoy up in most segments on the back of good macro Group 1,772 1,821 2.8% environment; exceptionally strong rise in net trading and FV 270 result due to valuation
Slide 18: Costs down qoq, only moderately up yoy
YoY Q2 18 Business performance: operating expenses – QoQ Q1 19 Costs down qoq, only moderately up yoy Q2 19 1,012 1.9% • Yoy cost increase mainly driven by higher personnel Group 1,116 1,030 -7.6% expenses; increase in depreciation driven by IFRS 16 and 157 offset by corresponding decrease in other
Slide 19: Operating income up 5.9% yoy, operating expenses 1.9%
YoY Q2 18 Business performance: operating result and CIR – QoQ Q1 19 Operating income up 5.9% yoy, operating expenses 1.9% Q2 19 Operating result YoY & QoQ change Cost/income ratio 707 58.8% Group 656 11.8% 63.0% 791 20.6% 56.6% 113 58.0% AT/EBOe 71 5.2% 73.0% 119 67.8% 58.2% 118 68.6% AT/SB 126 19.
Slide 20: Net releases slowdown in Q2 19
Q2 18 Business performance: risk costs (abs/rel*) – Q1 19 Net releases slowdown in Q2 19 Q2 19 -19 -0.02% • Yoy and qoq development characterised by continuation of Group -36 0.01% -7 0.03% healthy asset quality, resulting in net releases in most 2 0.08% geographies AT/EBOe 6 0.10% -5 0.02% 0 0.05%
Slide 21: NPL ratio improves further to 2.8%
30/06/18 Business performance: non-performing loans and NPL ratio – 31/03/19 NPL ratio improves further to 2.8% 30/06/19 5,321 3.6% • NPL volume declines qoq by EUR 0.2bn to EUR 4.5bn in Group 4,691 3.0% 4,476 2.8% Q2 19 concurrent with loan growth leading to the NPL ratio 612 1.9% improvement. NPL
Slide 22: NPL coverage rises to 75.4%
30/06/18 Business performance: allowances for loans and NPL coverage – 31/03/19 NPL coverage rises to 75.4% 30/06/19 3,833 72.5% • NPL coverage rises yoy and qoq, exceptionally strong in Group 3,480 74.5% 3,362 75.4% Central & Eastern Europe 385 63.1% • Stock of provisions and stock of NPLs declined
Slide 23: Other result adversely affected by RO high court decision
Q2 18 Business performance: other result – Q1 19 Other result adversely affected by RO high court decision in Q2 19 Q2 19 -72 • Yoy other operating result deteriorates on legal provisions Group -210 -130 due to unexpected high court decision in RO -10 • Qoq development due to legal provisions (see a
Slide 24: Net profit declines due to one-off hit in other operating result
Q2 18 Business performance: net result – Q1 19 Net profit declines due to one-off hit in other operating result Q2 19 438 • Yoy development solely due to negative one-off effect booked Group 377 in other operating result 355 • Qoq profitability declines on provisions booked in other 75 AT/EBOe 39 op
Slide 25: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 25
Slide 26: Loan/deposit ratio stable at 91.5% at Jun 19
Assets and liabilities: YTD overview – Loan/deposit ratio stable at 91.5% at Jun 19 (Dec 18: 91.8%) Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 248.3 248.3 236.8 100% 236.8 2.5 100% 16.8 7.4% 6.8% 2.5 19.0 7.5% 1.1% 7.7% 1.0% 17.5 17.7 45.6 18.6% 18.4% 43.
Slide 27: Net customer loans up 4.0%, NPLs down 8.3% ytd
Assets and liabilities: customer loans by country of risk – Net customer loans up 4.0%, NPLs down 8.3% ytd Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +7.3% +7.7% 152.0 155.3 150.7 154.2 144.7 4.8 4.7 143.2 4.7 4.7 -15.9% 4.3 7.8 8.4 7.7 8.3 1.6 1.7 4.2 1.6 1.
Slide 28: LCR at excellent 148.6%
Assets and liabilities: financial and trading assets* – LCR at excellent 148.6% By geography By debtor type Liquidity buffer +6.0% in EUR bn in EUR bn 42.0 42.5 40.1 100% 26.7% 27.4% 9.1% 9.3% 9.9% 10.5 10.8 7.9% 10.9% 10.4% 23.3% 23.0% 9.1 55.5 0.7 0.7 0.7 51.2 52.2 52.6 3.3 3.5 3.5 4.9 5.0 4.9 4.7
Slide 29: Customer deposits grow by 4.3% ytd, driven by households and corporates
Assets and liabilities: customer deposit funding – Customer deposits grow by 4.3% ytd, driven by households and corporates By customer type By product type Highlights in EUR bn in EUR bn • Continued deposit inflows driven by Retail +8.2% segment with highest demand for overnight deposits amid low in
Slide 30: Taking advantage of favourable market conditions
Assets and liabilities: debt vs interbank funding – Taking advantage of favourable market conditions Debt securities issued Interbank deposits in EUR bn in EUR bn +8.1% +6.6% 30.8 20.3 28.7 Sub debt 19.0 28.5 Overnight deposits 6.5 Senior unsec. bonds 17.9 6.0 6.0 6.6 Term deposits Certificates of d
Slide 31: Limited LT funding needs in 2019
Assets and liabilities: LT funding – Limited LT funding needs in 2019 Maturity profile of debt in EUR bn 3.2 3.3 3.0 2.4 2.5 2.1 1.6 1.5 1.4 1.1 0.8 0.3 0.2 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031+ Senior unsec. bonds Senior non-preferred bonds Covered bonds Capital exc Tier
Slide 32: MPE resolution strategy
Assets and liabilities: LT funding – MPE resolution strategy Resolution strategy Austrian resolution group • Major entities within the Austrian resolution group*: • Direct presence in 7 geographically connected countries • Erste Group Bank AG • Erste Group’s setup suggests a multiple point of entry
Slide 33: B3FL CET1 ratio stable at 13.5%
Assets and liabilities: capital position – B3FL CET1 ratio stable at 13.5% Basel 3 capital (phased-in) Risk-weighted assets (phased-in) Basel 3 capital ratios (phased-in) in EUR bn in EUR bn 18.4% 18.2% 18.2% 17.4% 17.2% 21.3 21.8 116.3 117.0 114.6 116.8 118.3 20.3 20.1 20.9 14.9% 3.6 3.7 14.5% 14.4
Slide 34: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 34
Slide 35: Conclusion – Outlook 2019
Conclusion – Outlook 2019 • Real GDP growth of approx. 3-4% expected in 2019 in CEE and about 2% in Austria Macro outlook • Real GDP growth to be driven by solid domestic demand, as real wage growth and 2019 low unemployment support economic activity in CEE • Solid public finances across CEE • ROTE
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 – Business line and geographic view
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 – Year-to-date and quarterly view
Additional information: income statement – Year-to-date and quarterly view* Year-to-date view Quarterly view in EUR million 1-6 18 1-6 19 YOY-Δ Q2 18 Q1 19 Q2 19 YOY-Δ QOQ-Δ Net interest income 2,213.8 2,329.7 5.2% 1,131.2 1,160.9 1,168.8 3.3% 0.7% Interest income 2,485.4 2,742.0 10.3% 1,263.4 1,356
Slide 39: Additional information: group balance sheet – Assets
Additional information: group balance sheet* – Assets Quarterly data Change in EUR million Jun 18 Sep 18 Dec 18 Mar 19 Jun 19 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 16,888 15,237 17,549 16,382 16,843 -0.3% -4.0% 2.8% Financial assets held for trading 6,888 6,034 5,584 6,331 6,464 -6.1% 15.8% 2.1%
Slide 40: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet* – Liabilities and equity Quarterly data Change in EUR million Jun 18 Sep 18 Dec 18 Mar 19 Jun 19 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 3,070 2,865 2,508 2,277 2,518 -18.0% 0.4% 10.6% Derivatives 2,529 2,153 2,000 1,979 2,125 -16.0% 6.2%
Slide 41: Additional information: regulatory capital position/requirement (SREP)
Additional information: regulatory capital position/requirement (SREP) – Capital requirements (SREP) for 2019; Erste Group target of 13.5% unchanged • Combined impact of countercyclical buffers amounts to 45bps in 2019 • Management buffer targeted in 100-150bps range Erste Group Consolidated Erste G
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) 155.4 158.7 155.4 158.7 158.7 148.5 152.0 152.8 148.5 152.0 152.8 155.4 5.3 4.9 4.
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: 4.6m Customers: 2.2m in 7 geographically connected Employees: 9,821 Employees: 4,047 countries CZ Bra
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 Macro Profile SACP - Stand-Alone Credit Profile VR - Viability Rating Strong a (Individual Rating ) + Financial Profile ▲ a Asset Risk baa2 Anchor bbb+ Capital baa1 Business Position Strong +1 Profitability baa3 Ca
Slide 46: Additional information: ESG ratings, indices and alignment with UN SDGs
Additional information: ESG ratings, indices and alignment with UN SDGs ESG Ratings and Indices UN Sustainable Development Goals In principle, Erste Group supports all SDGs. Given its regional footprint and business model, Erste Group is in fact able to make notable contributions to Included in the
Slide 47: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Erste Foundation 1 Unidentified * Unidentified * 11.41% Savings Banks & 16.01% 16.01% Savings Banks Austria Foundations 2 26.29% 5.93% Identified Trading ** Identified Trading ** 2.52% Other Syn
Slide 48: 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