Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q2 2018 Earnings Presentation
46 slides from Erste Group Bank's earnings presentation, Jul 31, 2018
Slide 1: Erste Group investor presentation Q2 18 results
Erste Group investor presentation Q2 18 results 31 July 2018 Improved operating performance drives net profit growth 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) +30.4% +24.0% 6 438 29 774 36 51 25 11 4 53 178 625 81 73 336 64 Q1 18 Operating Operating Risk costs Other Taxes on Minorities Q2 18 1-6 17 Operating Operating Risk cos
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 2.40% 2.30% +0.7% 2.27% 2.32% -0.02% 2,214 1,289 1,298 64.3% 104 2,143 58.8% -0.22% 1,083 1,131 707 590 -19 -73 -54 1-6 17 1-6 18 Q1 18 Q2 18 1-6 17
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) +4.2% +4.2% 229,878 17 224 607 229,878 581 5,198 3,380 220,659 5,861 8,023 4,908 1,147 220,659 353 1,518 31/12/17 Cash Trading, Loans to Net loans Intangible
Slide 7: Executive summary – Key balance sheet data
Executive summary – 31/12/17 Key balance sheet data 30/06/18 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn +3.7% 92.4% 92.3% 72.0% 63.2% 63.0% 139.5 144.7 68.8% 89.2 94.8 4.0% 3.6% 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
2018 Business environment – 2019 Strong economic outlook for 2018 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (ave, in %) 4.6 4.7 4.3 3.9 4.2 4.1 4.0 3.8 4.1 3.8 3.6 3.4 3.3 3.4 3.3 3.5 3.0 3.1 2.8 2.7 3.0 2.8 2.9 1.8 2.4 1.1 2.5 2
Slide 10: Business environment – CZ further increases key policy rate to 100bps in June 2018
Business environment – 3M Interbank 10YR GOV CZ further increases key policy rate to 100bps in June 2018 Austria Czech Republic Romania 1.88% 1.87% 1.89% 4.46% 4.76% 0.73% 4.61% 0.57% 0.75% 0.72% 3.71% 0.71% 2.15% 2.46% 1.85% -0.33% -0.33% 0.89% 0.64% -0.33% -0.33% 0.86% 0.92% 0.29% 1-6 17 1-6 18 Q1
Slide 11: Business environment – Emerging market volatility has minor impact on CEE currencies
Business environment – Emerging market volatility has minor impact on CEE currencies EUR/CZK EUR/RON -4.8% +0.8% +1.9% +2.6% 0.0% -0.1% 26.8 25.5 25.4 25.6 25.5 26.0 4.54 4.65 4.66 4.65 4.67 4.66 1-6 17 1-6 18 Q1 18 Q2 18 31/12/17 30/06/18 1-6 17 1-6 18 Q1 18 Q2 18 31/12/17 30/06/18 • Czech National
Slide 12: Business environment – Market shares: continued gains in Austria and the Czech Republic
30/06/17 Business environment – 31/03/18 Market shares: continued gains in Austria and the Czech Republic 30/06/18 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 20.0% 20.1% 19.1% 20.6% AT 20.2% AT 21.0% AT 19.6% AT 21.7% 22.9% 19.7% 25.2% 12.2% CZ 23.2% CZ 20.5% CZ 25.4
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 in Q2 18
YoY 30/06/17 Business performance: performing loan stock & growth – QoQ 31/03/18 Performing loans continue to grow in Q2 18 30/06/18 133.1 7.6% • Rising performing loan volume trend continued in Q2 18 Group 140.5 143.2 1.9% across all geographies; yoy loan growth particularly strong in 30.2 SK and C
Slide 15: Deposit build-up continues in Q2 18
YoY 30/06/17 Business performance: customer deposit stock & growth – QoQ 31/03/18 Deposit build-up continues in Q2 18 30/06/18 145.6 7.7% • Exceptional deposit growth across all geographies despite Group 155.3 156.8 1.0% zero/low interest rate environment as retail and corporate 33.7 clients park ca
Slide 16: NII advances qoq and yoy
Business performance: NII and NIM – Q2 17 Q1 18 NII advances qoq and yoy Q2 18 1,092 2.44% • Yoy increase driven by higher NII in CZ resulting from higher Group 1,083 2.27% 1,131 2.32% business volumes, rising interest rates and CZK appreciation 166 1.75% • Qoq improvement in Retail including a EUR
Slide 17: Operating income up yoy on strong NII and fees
YoY Q2 17 Business performance: operating income – QoQ Q1 18 Operating income up yoy on strong NII and fees Q2 18 1,675 2.6% • Yoy and qoq up on higher NII and fees, offset lower net Group 1,655 1,719 3.9% trading result, partially compensated by improvement in 268 gains/losses from financial instru
Slide 18: Expenses improve qoq in line with guidance
YoY Q2 17 Business performance: operating expenses – QoQ Q1 18 Expenses improve qoq in line with guidance Q2 18 985 2.7% • Yoy cost increase mainly driven by higher PEREX following Group 1,065 1,012 -5.0% wage increases 160 -2.4% • Qoq down on deposit insurance contributions in Q1 18, AT/EBOe 180 pa
Slide 19: Operating result expands to 2-year high
YoY Q2 17 Business performance: operating result and CIR – QoQ Q1 18 Operating result expands to 2-year high Q2 18 Operating result YoY & QoQ change Cost/income ratio 690 58.8% Group 590 2.5% 64.3% 707 19.9% 58.8% 108 59.9% AT/EBOe 90 5.5% 66.7% 113 26.0% 58.0% 128 66.2% AT/SB 85 -7.8% 76.2% 38.2% 1
Slide 20: Continued net releases of risk provisions
Q2 17 Business performance: risk costs (abs/rel*) – Q1 18 Continued net releases of risk provisions Q2 18 39 0.11% • Yoy improvement due to continued asset quality Group -54 -0.22% -19 -0.02% improvements, particularly in Corporate business (particularly -2 -0.03% in HR); net releases in most geogra
Slide 21: NPL ratio improves further, now standing at 3.6%
30/06/17 Business performance: non-performing loans and NPL ratio – 31/03/18 NPL ratio improves further, now standing at 3.6% 30/06/18 6,496 4.7% • NPL volume declined further to EUR 5.3bn in Q2 18 as NPL Group 5,464 3.7% 5,321 3.6% inflows remained moderate 688 2.2% AT/EBOe 620 1.9% 612 1.9% • NPL
Slide 22: NPL provision coverage at comfortable 72.0%
30/06/17 Business performance: allowances for loans and NPL coverage* – 31/03/18 NPL provision coverage at comfortable 72.0% 30/06/18 4,451 68.5% • NPL provision coverage qoq broadly stable at group level, Group 3,963 72.5% 3,833 72.0% exceptionally strong in CZ, RO, SK and RS 413 60.0% AT/EBOe 388
Slide 23: Other result improves qoq on regulatory payments in Q1
Q2 17 Business performance: other result – Q1 18 Other result improves qoq on regulatory payments in Q1 18 Q2 18 -68 • Yoy other operating result improved slightly, while Group -124 -72 gains/losses from financial instruments not measured at FV -19 through P&L declined by EUR 10.0m AT/EBOe -11 • Qoq
Slide 24: Net profit rises significantly yoy and qoq
Q2 17 Business performance: net result – Q1 18 Net profit rises significantly yoy and qoq Q2 18 362 • Yoy profitability rises on better operating performance and net Group 336 438 releases of risk provisions across most geographies 63 • Qoq up on improved operating performance and better other AT/EB
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 relatively stable at 92.3% at Jun 18 (Dec 17: 92.4 %) Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 229.9 229.9 220.7 100% 220.7 3.1 100% 16.9 9.9% 7.3% 3.4 17.9 7.4% 1.6% 7.8% 1.3% 21.8 16.3 43.9 19.
Slide 27: Customer loans by country of risk
Assets and liabilities: customer loans by country of risk – Net customer loans up 3.7% and NPLs down 7.9% ytd Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +3.7% +4.0% 144.7 143.2 6.5 -7.9% 139.5 137.7 135.1 4.3 133.1 4.2 0.2 3.5 7.1 3.6 7.0 0.5 5.8 3.3 6.8 1.2
Slide 28: Financial and trading assets – LCR at excellent 147.5%
Assets and liabilities: financial and trading assets * – LCR at excellent 147.5% By geography By debtor type Liquidity buffer in EUR bn in EUR bn +1.7% 40.8 26.7% 27.4% 39.4 40.1 100% 25.5% 9.8% 9.2% 9.1% 24.9% 9.1 8.6 9.1 7.8% 7.8% 7.9% 55.5 54.0 0.9 51.2 0.8 0.7 2.9 3.3 3.3 46.1 5.2 5.0 4.9 5.0 4.
Slide 29: Customer deposit funding
Assets and liabilities: customer deposit funding – Customer deposits grow by 1.0% qoq, up 3.9% ytd By customer type By product type Highlights in EUR bn in EUR bn • Continued deposit inflows driven by Retail +3.9% segment with highest demand for overnight deposits amid low interest rate environment
Slide 30: 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 +13.5% -0.1% 28.5 17.9 17.9 26.6 Sub debt 16.3 Overnight deposits 25.1 6.0 Senior unsec. bonds 4.0 4.2 Term depos
Slide 31: LT funding – Limited LT funding needs
Assets and liabilities: LT funding – Limited LT funding needs Maturity profile of debt in EUR bn 3.0 3.1 2.7 2.2 2.0 1.6 1.5 1.3 1.4 1.4 1.3 0.6 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 32: Capital position – B3FL CET1 ratio stable at 12.5%
Assets and liabilities: capital position – B3FL CET1 ratio stable at 12.5% 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% 18.0% 17.6% 17.4% 19.9 19.9 20.3 20.1 20.3 114.0 116.3 106.8 110.8 110.0 3.6 2.7 2.9 3.4 14.0% 13
Slide 33: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 33
Slide 34: Conclusion – Outlook 2018
Conclusion – Outlook 2018 • Real GDP growth of approx. 3-4% 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 low unemployment support economic activity in CEE • Solid public finances across CEE • ROTE for 2018 tar
Slide 35: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 35
Slide 36: 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 37: Additional information: income statement
Additional information: income statement – Year-to-date and quarterly view Year-to-date view Quarterly view in EUR million 1-6 17 1-6 18 YOY-Δ Q2 17 Q1 18 Q2 18 YOY-Δ QOQ-Δ Net interest income 2,143.0 2,213.8 3.3% 1,091.7 1,082.6 1,131.2 3.6% 4.5% Interest income 2,812.2 2,485.4 -11.6% 1,414.5 1,222
Slide 38: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 25,842 22,104 21,796 25,246 16,888 -34.6% -22.5% -33.1% Financial assets held for trading 7,206 6,850 6,349 6,603 6,888 -4.4% 8.5% 4.3
Slide 39: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 3,960 3,551 3,423 2,940 3,070 -22.5% -10.3% 4.4% Derivatives 3,646 3,206 2,934 2,384 2,529 -30.6% -13.
Slide 40: 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 2018e 2019e 2017
Slide 41: 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) 143.5 146.0 148.5 143.5 146.0 148.5 148.5 139.6 142.3 139.6 142.3 143.5 146.0 6.2
Slide 42: 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: 10,086 Employees: 4,184 countries CZ Br
Slide 43: 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 44: 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 C
Slide 45: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Unidentified * Erste Foundation 1 Unidentified * 10% 11% Savings Banks & 10% Identified Trading ** Identified Trading ** Savings Banks 03% Foundations 2 03% Austria BlackRock Inc Rest of world 0
Slide 46: 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