Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q3 2021 Earnings Presentation
53 slides from Erste Group Bank's earnings presentation, Nov 2, 2021
Slide 1: Erste Group investor presentation Q3 2021 results
Erste Group investor presentation Q3 2021 results 2 November 2021 Excellent operating performance and benign risk environment continue, resulting in ROTE of 15.0% Bernd Spalt, 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 • Key developments and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 3
Slide 4: Key developments – Setting the frame for today's presentation
Key developments – Setting the frame for today’s presentation • CEE & AT macro recovery on track, expected 2021 real GDP growth upgraded further • Economic growth in CEE & Austria has outperformed expectations so far this year • Faster than expected rate hikes in Czech Republic, Hungary and Romania
Slide 5: ESG: a key objective for Erste Group (1)
ESG: a key objective for Erste Group (1) – Economic success paired with environmental and social well-being Our aspiration … Main topics where we aspire to make a change Climate change is not only a global challenge. Our region Climate needs green investments into energy transition, clean Action tra
Slide 6: ESG: a key objective for Erste Group (2)
ESG: a key objective for Erste Group (2) – Sustainability is embedded into the organisation ESG supports our purpose to bring prosperity and Erste Group securing financial resilience of our company ESG strategic framework Purpose Main pillars of our ESG impact Prosperity for all without differentiat
Slide 7: ESG: a key objective of Erste Group (3)
ESG: a key objective of Erste Group (3) – Tackling climate change: green finance and the transition to net zero As a member of the Net-Zero Banking We will reach Alliance we will be leading the transition climate neutral operations by 2023 within CEE We have ambitions in all our markets to reach net
Slide 8: ESG: a key objective of Erste Group (4)
ESG: a key objective of Erste Group (4) – Erste Group is a leader in green bond issues in CEE ESG ratings and key indices Our financing credentials Erste Group was upgraded to AA in July 2019 and is considered a leader among approx. 200 May 2021 June 2021 September 2021 October 2021 companies in the
Slide 9: Executive summary – Group income statement performance
Executive summary – Group income statement performance QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m) +127.8% 46 169 220 1,451 818 -5.2% 563 18 18 45 78 17 23 533 449 38 637 Q2 21 Operating Operating Risk costs Other Taxes on Minorities Q3 21 1-9 20 Operating Operating R
Slide 10: 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 2.09% 2.04% 2.13% +19.9% 1.98% 870 3,589 3,669 0.11% 2,594 -0.07% 51.0% 53.4% 2,163 1,277 1,221 962 906 47 52 -31 1-9 20 1-9 21 Q2 21 Q3 21 1-9 20 1
Slide 11: 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) +11.5% +11.5% 309,240 1,543 309,240 33 42 2,828 9,879 856 6,283 16,436 4,389 11,286 277,394 10,616 277,394 432 31/12/20 Cash Trading, Loans to Net loans Inta
Slide 12: Executive summary – Key balance sheet data
Executive summary – 31/12/20 Key balance sheet data 30/09/21 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn 86.9% 84.8% +5.9% 92.7% 59.9% 56.9% 166.1 175.9 88.6% 101.7 110.2 2.7% 2.4% Loan/deposit ratio Loans/total assets Net loans Credit RWA NPL coverag
Slide 13: Presentation topics
Presentation topics • Key developments and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 13
Slide 14: Macroeconomic update – CEE & AT recovery stronger than expected
Macroeconomic update – CEE & AT recovery stronger than expected, rate hikes in CZ, HU & RO • CEE & AT economies have switched to higher Real GDP expectations for 2021 (in %) gear – growth expectations have further increased • AT: output already at pre-crisis level forecast as of 30 April • CZ & SK:
Slide 15: Macroeconomic update – 2021 rebound set to continue in 2022
Macroeconomic update – 2021 2022 2021 economic rebound set to continue in 2022, albeit at slower pace Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (avg, in %) 7.5 8.1 7.4 7.3 4.6 4.6 4.8 6.4 5.9 3.7 3.4 3.8 4.7 4.8 4.9 5.1 5.3 5.0 5
Slide 16: Business update – Retail – what's happening on the ground? (1)
Business update – Retail – what‘s happening on the ground? (1) • Strong demand for housing loans, continued in Q3 2021; re-financing and increased mortgage demand in expectation Loan portfolio of interest rate hikes as the key drivers in CEE (in EUR billion) Housing loans Consumer loans • Demand for
Slide 17: Business update – Retail – what's happening on the ground? (2)
Business update – Retail – what‘s happening on the ground? (2) • Branch operations back to “normal”, client traffic only Number of George users slightly below pre-crisis levels (2020 vs 2021 YoY, in thsd) • Clients going digital: +30% • More than 7.5 million George users across 6 markets 7,540 • Dig
Slide 18: Corporates & Markets – what's happening on the ground?
Business update Corporates & Markets – what‘s happening on the ground? • Recovery continues Corporate loan stock development • The segments SME, large corporates and real estate showed (gross, business line view, in EUR bn) further growth on loans • NII improving due to volume growth, stable margins
Slide 19: Presentation topics
Presentation topics • Key developments and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 19
Slide 20: Operating trends: net loan stock & growth
Operating trends: net loan stock & growth – YoY 30/09/20 QoQ 30/06/21 Continuation of solid net loan growth in Q3 21, ytd +5.9% 30/09/21 164.5 6.9% • Yoy growth predominantly driven by Retail (+8.2%) Group 172.1 2.2% 175.9 and Savings Banks (+6.1%); Corporates at +4.7% AT/EBOe 35.2 36.2 4.6% • Qoq g
Slide 21: Operating trends: customer deposit stock & growth
Operating trends: customer deposit stock & growth – YoY 30/09/20 QoQ 30/06/21 Deposit growth decelerates, loan/deposit ratio at 84.8% 30/09/21 184.8 12.3% • Yoy growth due to exceptional inflows of retail Group 206.3 207.5 0.6% deposits (+14.3%), solid inflows of corporate 40.6 deposits (+9.7%) and
Slide 22: Operating trends: NII and NIM
Operating trends: NII and NIM – Q3 20 Q2 21 NII advances yoy on volume growth and rising rates in CZ Q3 21 1,192 2.04% • NII up yoy on solid volume growth and improved rate Group 1,277 2.13% 1,221 1.98% environment in CZ AT/EBOe 161 173 1.49% 1.59% • Qoq decline solely due to TLTRO III booking in AT
Slide 23: Operating trends: operating income
Operating trends: operating income – YoY Q3 20 QoQ Q2 21 4th consecutive record fee performance drives revenues Q3 21 1,814 7.2% • Revenues up yoy, pushed by exceptional fee Group 1,962 -0.9% 1,944 performance and higher NII AT/EBOe 280 308 4.9% • Qoq decline solely attributable to TLTRO III booking
Slide 24: Operating trends: operating expenses
Operating trends: operating expenses – YoY Q3 20 QoQ Q2 21 Costs increase on higher IT and marketing spend Q3 21 1,008 2.9% • Yoy operating expenses characterised by higher Group 1,000 3.8% 1,038 other administrative expenses, in particular IT and 166 0.8% marketing expenses, while personnel expense
Slide 25: Operating trends: operating result and CIR
Operating trends: operating result and CIR – YoY Q3 20 QoQ Q2 21 Operating result improves by ~20% ytd Q3 21 Operating result YoY & QoQ change Cost/income ratio 806 55.6% Group 962 12.5% -5.8% 51.0% 906 53.4% 114 59.4% AT/EBOe 148 10.8% -15.1% 51.8% 126 57.1% 157 62.5% AT/SB 189 9.8% -8.5% 57.1% 173
Slide 26: Operating trends: risk costs
Operating trends: risk costs (abs/rel*) – Q3 20 Q2 21 Benign risk environment leads to significant guidance upgrade Q3 21 Group 47 195 0.46% 0.11% • 2021 risk guidance upgraded to max 15bps due to -31 -0.07% good portfolio performance across the Group after 15 0.17% phasing-out of moratoria and revi
Slide 27: Operating trends: asset quality – NPL ratio and coverage
Operating trends: asset quality – NPL ratio and coverage 30/09/20 30/06/21 NPL ratio improves to historic low, coverage ratio with ample buffer 30/09/21 2.4% 95.5% 91.4% • NPL ratio improves to 2.4% and NPL coverage Group 2.5% 2.4% 92.7% increases to 92.7% on stable NPL stock and 1.2% 79.5% 64.6% ac
Slide 28: Operating trends: other result
Operating trends: other result – Q3 20 Q2 21 Other result declines on minor one-offs Q3 21 -42 • Other result deteriorates yoy and qoq on minor one- Group -45 -91 offs -6 AT/EBOe -7 -1 • Year-on-year segment trends: 1 AT/SB -4 • AT/OA: breakage costs related to early loan repayment 0 • HU: booking o
Slide 29: Operating trends: net result
Operating trends: net result – Q3 20 Q2 21 Net profit broadly stable qoq despite positive one-off in Q2 21 Q3 21 343 • Yoy profitability up on lower risk costs and exceptionally Group 563 533 improved operating performance 102 • Qoq development attributable to non-recurrence of AT/EBOe 90 TLTRO III
Slide 30: Presentation topics
Presentation topics • Key developments and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Wholesale funding and capital • Key takeaways and outlook • Additional information Page 30
Slide 31: Wholesale funding and capital: debt vs interbank funding
Wholesale funding and capital: debt vs interbank funding – Stable wholesale funding reliance, as customer deposits grow strongly Debt securities issued Interbank deposits in EUR bn in EUR bn +9.2% +42.9% 33.5 Sub debt 35.4 Overnight deposits 29.7 30.7 4.9 Senior non-preferred bonds Term deposits 3.2
Slide 32: Wholesale funding and capital: LT funding
Wholesale funding and capital: LT funding – Stable LT funding needs in 2021 with focus on senior preferred funding Maturity profile of debt in EUR bn 4.5 3.4 3.5 2.9 2.4 2.4 2.1 1.4 1.2 0.6 0.6 0.8 0.1 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033+ Senior unsec. bonds Senior non-p
Slide 33: Wholesale funding and capital: MREL update
Wholesale funding and capital: MREL update – MREL-related issuance progresses as planned MREL resolution groups (September 2021) Preliminary 3year MREL issuance plan (avg. p.a.) in EUR bn in EUR m 191 1,000 – 2,500 84 70 ~450-550 21 23 ~250-375 ~250-350 ~150-250 8 17 8 12 7 12 6 ~100-250 AT CZ SK RO
Slide 34: Wholesale funding and capital: CET1 waterfall
Wholesale funding and capital: CET1 waterfall – Strong fully loaded CET1 ratio of 14.2%, pro-forma at 14.5% In % 14.20 -0.99 0.14 0.08 -0.07 14.21 0.76 -0.29 0.28 0.09 CET1 Target 13.5% Reg. Min CET1 10.2% (MDA threshold; P2G excluded) YE’20 ∆ RWA Profit Dividend OCI Intangibles Risk Costs Minoritie
Slide 35: Wholesale funding and capital: capital & RWA
Wholesale funding and capital: capital & RWA – Risk-weighted assets growth moderates in Q3 21 Basel 3 capital Risk-weighted assets Basel 3 capital ratios in EUR bn in EUR bn 19.7% 19.4% 19.3% 18.7% 18.6% 23.6 23.4 23.8 23.9 127.1 128.5 16.5% 16.3% 22.4 120.2 121.0 16.0% 15.9% 15.9% 3.4 116.1 4.4 14.
Slide 36: Presentation topics
Presentation topics • Key developments and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 36
Slide 37: Conclusion – Key takeaways and outlook for 2021
Conclusion – Key takeaways and outlook for 2021 Q3 21 key takeaways 2021 outlook • Macro recovery on track in CEE, forecasts • Real GDP to rise 3.3-7.5% in 2021 in Erste Group’s Operating upgraded again in Q3 21 core CEE markets and Austria environment • Loan growth accelerated at +5.9% ytd • Mid to
Slide 38: Presentation topics
Presentation topics • Key developments and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 38
Slide 39: 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 in 7 Customers: 4.5m Customers: 2.1m geographically connected countries Employees: 9,673 Employees: 3,676 CZ Bra
Slide 40: 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 customer
Slide 41: Additional information: market shares
Additional information: market shares – 30/09/20 30/06/21 Commanding market shares across the CEE region 30/09/21 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 20.8% 22.4% 21.6% 24.3% AT 21.1% AT 23.0% AT 22.8% AT 26.2% 23.9% 20.9% 25.4% 12.2% CZ 24.1% CZ 21.5% CZ 26.3%
Slide 42: Additional information: income statement
Additional information: income statement – Year-to-date and quarterly view Year-to-date view Quarterly view in EUR million 1-9 20 1-9 21 YOY-Δ Q3 20 Q2 21 Q3 21 YOY-Δ QOQ-Δ Net interest income 3,589.3 3,669.5 2.2% 1,192.4 1,276.5 1,220.8 2.4% -4.4% Interest income 3,882.9 3,708.9 -4.5% 1,237.7 1,226
Slide 43: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Sep 20 Dec 20 Mar 21 Jun 21 Sep 21 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 27,848 35,839 53,954 48,421 47,125 69.2% 31.5% -2.7% Financial assets held for trading 6,764 6,356 6,464 6,088 6,244 -7.7% -1.8% 2.6%
Slide 44: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Sep 20 Dec 20 Mar 21 Jun 21 Sep 21 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 2,845 2,625 2,192 2,412 2,193 -22.9% -16.5% -9.1% Derivatives 2,253 2,037 1,631 1,392 1,364 -39.5% -33
Slide 45: Additional information: regulatory capital position/requirement (SREP)
Additional information: regulatory capital position/requirement (SREP) – Capital requirements (SREP) for 2021; Erste Group target of 13.5% unchanged Erste Group Consolidated Erste Group Unconsolidated ECB Capital Relief Phased-in Fully loaded Measures 1) Fully loaded Fully loaded 2019 2020 Q3 2021 Q
Slide 46: Additional information: Multiple point of entry resolution strategy
Additional information: Multiple point of entry resolution strategy – MREL compliance at Point of Entry Levels (bail-in) Ownership Structure Resolution Groups Erste Group Bank AG 100% 69.3%** & Savings Banks + other subs 100% 100%* 99.9% Banca Česká Slovenská Erste Bank Erste Bank Comercială spořite
Slide 47: Additional information: MREL details Austrian resolution group
Additional information: MREL details Austrian resolution group: MREL requirement based on RWA fulfilled MREL capacity based on TREA (RWA)* Key take-aways in % • Erste Group’s setup is based on a multiple point of entry 32.12% (MPE) resolution approach Interim MREL Target**: • In Q2 2021, Erste Group
Slide 48: 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) 176.1 179.8 176.1 179.8 179.8 168.3 170.0 171.8 168.3 170.0 171.8 176.1 4.5 4.4 5.
Slide 49: Additional information: financial and trading assets
Additional information: financial and trading assets* – LCR at excellent 181.0% By geography By debtor type Liquidity buffer +13.5% in EUR bn in EUR bn 78.3 48.9 28.0% 82.5 100% 43.0 43.8 7.8% 7.4% 7.5% 25.9% 28.9% 12.0 9.7% 8.5% 9.1% 10.6 64.8 10.6 0.7 0.7 4.2 0.8 3.7 3.4 6.1 5.8 6.0 6.2 6.2 6.0 82
Slide 50: Additional information: Ratings – Composition of issuer 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 51: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Unidentified * Erste Foundation direct Unidentified * Identified Trading ** 5.90% Sparkassen Beteiligungs Identified Trading ** 8.19% 8.19% BlackRock Inc. Gmbh & Co KG Rest of world 1.09% 1.31%
Slide 52: Additional information: segment structure
Additional information: segment structure – Geographical/operating and business segment view Erste Group – Geographical/operating segments Austria Central and Eastern Europe Other EBOe & Savings Other Czech • Holding ALM Slovakia Romania Hungary Croatia Serbia Subsidiaries Banks Austria Republic • H
Slide 53: 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