Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q3 2007 Earnings Presentation
57 slides from Erste Group Bank's earnings presentation, Oct 30, 2007
Slide 1: Erste Bank - 1-9 2007 results presentation
ERSTE GROUP Erste Bank - 1-9 2007 results presentation 30 October 2007, London Stable performance in turbulent times Andreas Treichl, CEO Peter Kisbenedek, CFO
Slide 2: Disclaimer – Cautionary note regarding forward-looking statements
Disclaimer – Cautionary note regarding forward-looking statements ERSTE GROUP − 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, COMPLETENE
Slide 3: Presentation topics
Presentation topics ERSTE GROUP − 1-9 07 highlights − Financial statements − Segment reporting − Asset quality − Outlook and targets − Appendix NB • According to revised IAS 19 (Employee Benefits), actuarial profits and losses can now be charged against equity without affecting net income when calcu
Slide 4: 1-9 07 financial highlights – Net profit improves quarter on quarter
1-9 07 financial highlights – Net profit improves quarter on quarter ERSTE GROUP − Net profit up 27.9% ytd to EUR 837.9m Cash earnings per share * 3.0 2.80 − Total assets up 10.4% to EUR 200.6bn 2.5 2.13 2.20 2.69 − Tier 1 ratio at 6.2% (YE 06: 6.6%) 2.0 1.53 in EUR 1.5 1.33 − Cash EPS grew to EUR 2
Slide 5: 1-9 07 segment highlights – Operating result reaches all-time-high in Q3 07
1-9 07 segment highlights – Operating result reaches all-time-high in Q3 07 ERSTE GROUP − Austria Operating result per segment * − Strong performance of R&M segment – in EUR million 1-9 07 1-9 06 Change despite seasonally slower retail business Austria 754.5 711.0 6.1% Savings Banks 305.1 292.1 4.4%
Slide 6: 1-9 07 operating highlights – Q3 07 focus on improving the overall performance
1-9 07 operating highlights – Q3 07 focus on improving the overall performance ERSTE GROUP − Drive in marketing and efficiency improvements at BCR − September rebranding launched major marketing activities to support introduction of new products − Announcement of target headcount for 2008 (reduction
Slide 7: 1-9 cost development – Expense growth outlook for 2007
1-9 07 cost development – Expense growth outlook for 2007 ERSTE GROUP − Cost guidance for 2007 confirmed – costs expected to increase by about 25% − Expenses in first nine month of 2007 increased by 7.7% on an adjusted basis 1-9 07 costs adjusted for 5-year operating expense analysis acquisitions &
Slide 8: Update on BCR – 1-9 07 financial highlights
Update on BCR – 1-9 07 financial highlights * ERSTE GROUP − BCR Group net profit increases by 21.2% yoy − Despite restructuring & transformation costs of EUR 30.4m (after tax) − NII continues to improve - up 11.6% − Overall NIM for BCR stable at 5.3% (Q1 07 – 5.2%) – supported by change in asset mix
Slide 9: Update on BCR (cont) – 1-9 2007 (IFRS) local results
Update on BCR (cont) – 1-9 2007 (IFRS) local results (post restructuring) * ERSTE GROUP in EUR million 1-9 07 1-9 06 Change Net interest income 413.3 370.4 11.6% Risk provisions for loans and advances (30.5) (21.8) 39.6% Net fee and commission income 179.7 123.4 45.6% Net trading result 77.4 59.3 30
Slide 10: Update on BCR (cont) – Outlook for 2007 confirmed
Update on BCR (cont) – Outlook for 2007 confirmed ERSTE GROUP − Positive trend in operating performance Retail loan development confirmed in Q3 2007 4 73% 80% − BCR attracting about 40,000 new retail 57% 3.2 3 2.8 53% 60% in EUR billion customers per month 48% 2.3 2.3 42% 2.1 − Successful launch of
Slide 11: Presentation topics
Presentation topics ERSTE GROUP − 1-9 07 highlights − Financial statements − Segment reporting − Asset quality − Outlook and targets − Appendix 1-9 2007 Results Analyst presentation & Conference call 30 October 2007 11
Slide 12: Group income statement (IFRS) – CEE retail business supporting Group performance
Group income statement (IFRS)* – CEE retail business supporting Group performance ERSTE GROUP Excluding BCR in EUR million 1-9 07 1-9 06 Change 1-9 07 Change Net interest income 2,844.1 2,261.5 25.8% 2,430.8 7.5% Risk provisions for loans and advances (335.9) (331.2) 1.4% (350.6) 5.9% Net fee and co
Slide 13: Group balance sheet (IFRS) – Growth in customer loans driven by retail business
Group balance sheet (IFRS)* – Growth in customer loans driven by retail business ERSTE GROUP in EUR million Sep 07 Dec 06 Change Cash and balances with central banks 7,311 7,378 (0.9%) Loans and advances to credit institutions 21,261 16,616 28.0% Loans and advances to customers 107,218 97,107 10.4%
Slide 14: Group balance sheet (IFRS) – Above average growth in customer deposits
Group balance sheet (IFRS)* – Above average growth in customer deposits ERSTE GROUP in EUR million Sep 07 Dec 06 Change Amounts owed to credit institutions 40,400 37,688 7.2% Amounts owed to customers 98,184 90,849 8.1% Debt securities in issue 27,834 21,814 27.6% Trading liabilities 1,942 1,200 61.
Slide 15: Presentation topics
Presentation topics ERSTE GROUP − 1-9 07 highlights − Financial statements − Segment reporting − Asset quality − Outlook and targets − Appendix 1-9 2007 Results Analyst presentation & Conference call 30 October 2007 15
Slide 16: Core segments – CEE divisions contribute 73% to Group net profit
Core segments* – CEE divisions contribute 73% to Group net profit ERSTE GROUP Austria CEE Int'l Business Corp. Center Total in EUR million 1-9 07 1-9 06 1-9 07 1-9 06 1-9 07 1-9 06 1-9 07 1-9 06 1-9 07 1-9 06 Net interest income 1,219.8 1,177.7 1,538.2 947.5 112.0 109.6 (25.9) 26.7 2,844.1 2,261.5 R
Slide 17: Core segment – Austria: Retail & Mortgage segment drives performance
Core segment – Austria* Retail & Mortgage segment drives performance ERSTE GROUP Savings Banks Retail & Mortgage Large Corporates Treasury & IB Austria in EUR million 1-9 07 1-9 06 1-9 07 1-9 06 1-9 07 1-9 06 1-9 07 1-9 06 1-9 07 1-9 06 Net interest income 641.5 622.1 408.3 399.4 128.7 109.2 41.3 46
Slide 18: Austria/Savings Banks – 1-9 07 highlights
Austria/Savings Banks – 1-9 07 highlights ERSTE GROUP − Operating result up 4.4% yoy − Strong improvement qoq (+ 9%) Savings Banks 1-9 07 1-9 06 Change − NII increases by 3.1% yoy Operating income 939.9 914.5 2.8% − Styrian savings banks continue to show strong Operating expenses (634.8) (622.4) 2.0
Slide 19: Austria/Retail and Mortgage – 1-9 07 highlights
Austria/Retail and Mortgage – 1-9 07 highlights ERSTE GROUP − Net profit improves by 22.5% yoy − Driven by increased fee income while costs stay flat Retail & Mortgage 1-9 07 1-9 06 Change − Positive Basel II effect: lower RWAs result in lower Operating income 696.6 671.9 3.7% allocated equity Opera
Slide 20: Austria/Retail and Mortgage – Solid results across all business divisions
Austria/Retail and Mortgage – Solid results across all business divisions ERSTE GROUP Operating result (EUR m) Net profit (EUR m) 81.1 1-9 06 1-9 07 1-9 06 1-9 07 74.0 52.2 47.3 39.6 31.9 29.2 27.2 31.5 32.8 26.7 18.8 18.6 20.1 14.7 10.5 19.4 16.9 11.0 3.4 Branches SME Own SBs Mortgage Subsidiaries
Slide 21: Austria/Large Corporates – 1-9 07 highlights
Austria/Large Corporates – 1-9 07 highlights ERSTE GROUP − Net profit improves by 24% yoy − Despite a slowdown in Q3 07 Large Corporates 1-9 07 1-9 06 Change − YTD improvement supported by strong NII and Operating income 197.2 180.5 9.2% declining risk costs Operating expenses (80.3) (71.6) 12.2% −
Slide 22: Austria/Treasury & Investment Banking – 1-9 07 highlights
Austria/Treasury & Investment Banking – 1-9 07 highlights ERSTE GROUP − Net profit contribution decreases by 16.8% yoy − Due to a net loss of EUR 3.2m in Q3 07 based on Treasury & IB 1-9 07 1-9 06 Change exceptionally low trading results and negative m-t-m Operating income 196.1 186.8 5.0% valuation
Slide 23: Core segment Central and Eastern Europe (1) – Positive operating trends
Core segment Central and Eastern Europe (1)* – Positive operating trends in all major subsidiaries ERSTE GROUP Czech Republic Romania Slovakia Hungary in EUR million 1-9 07 1-9 06 1-9 07 1-9 06 1-9 07 1-9 06 1-9 07 1-9 06 Net interest income 601.5 515.7 399.7 0.0 219.8 166.4 183.9 179.6 Risk provisi
Slide 24: Core segment Central and Eastern Europe (2) – Revenue growth supports positive results
Core segment Central and Eastern Europe (2)* – Revenue growth supports positive results ERSTE GROUP Croatia Serbia Ukraine CEE in EUR million 1-9 07 1-9 06 1-9 07 1-9 06 1-9 07 1-9 06 1-9 07 1-9 06 Net interest income 115.3 80.4 11.5 5.5 6.5 0.0 1,538.2 947.5 Risk provisions (11.7) (10.3) 0.5 (1.6)
Slide 25: CEE/Czech Republic – 1-9 07 highlights
CEE/Czech Republic – 1-9 07 highlights ERSTE GROUP − Net profit contribution up 12.4% yoy (10.7%)* − Supported by 19.2% (17.4%) increase in operating result Czech Republic 1-9 07 1-9 06 Change − NII up strongly by 16.6% yoy (15.0%) − Driven by continued strong volume growth: retail loans Operating i
Slide 26: CEE/Romania – 1-9 07 highlights
CEE/Romania – 1-9 07 highlights ERSTE GROUP − BCR consolidated since 12 October 2006 − NII improves by 5.1% qoq to EUR 399.7m Romania 1-9 07 1-9 06 Change − Continued repricing of retail deposits Operating income 664.7 0.0 na − Loans to customers up 14.2% qoq (31.4% ytd) − NIM on interest-bearing as
Slide 27: CEE/Slovakia – 1-9 07 highlights
CEE/Slovakia – 1-9 07 highlights ERSTE GROUP − Net profit contribution improves by 22.1% (10.1%)* − NII continues to grow strongly, up 32.1% (19.1%) Slovakia 1-9 07 1-9 06 Change − Based on sustained loan demand (customer loans Operating income 305.4 242.7 25.8% grew by 30% yoy) driven by retail mor
Slide 28: CEE/Erste Bank Hungary – 1-9 07 highlights
CEE/Erste Bank Hungary – 1-9 07 highlights ERSTE GROUP − Net profit contribution improves substantially qoq by 30% − Up 3.3% yoy supported by strong HUF (-2.3%)* Hungary 1-9 07 1-9 06 Change − FY 07 guidance of +15% net profit in local results confirmed (adjusted for NII accrual correction of EUR 8m
Slide 29: CEE/Erste Bank Croatia – 1-9 07 highlights
CEE/Erste Bank Croatia – 1-9 07 highlights ERSTE GROUP − Net profit contribution nearly doubles (up 96.2%) * Croatia 1-9 07 1-9 06 Change − First time consolidation of Diners Club Adriatic, Operating income 176.9 114.9 54.0% Croatia (DCA) and change in scope of consolidation affect key operating lin
Slide 30: CEE/Erste Bank Serbia 1-9 07 highlights
CEE/Erste Bank Serbia 1-9 07 highlights ERSTE GROUP − Net profit contribution improves by EUR 12.3m or 84.7% yoy (79.7%) Serbia 1-9 07 1-9 06 Change − Comparison with 2006 affected by restructuring Operating income 16.1 7.6 >100.0% process Operating expenses (20.3) (20.5) (1.1%) − Positive trend in
Slide 31: CEE/Erste Bank Ukraine 1-9 07 highlights
CEE/Erste Bank Ukraine 1-9 07 highlights ERSTE GROUP − Strong operating growth continues − Development programme covering 12 Ukraine 1-9 07 1-9 06 Change specific projects progressing as planned Operating income 7.4 0.0 na − Number of branches increases to 50 Operating expenses (15.4) 0.0 na − Comme
Slide 32: Core segments Int'l Business and Corp. Center – 1-9 07 highlights
Core segments Int’l Business and Corp. Center – 1-9 07 highlights ERSTE GROUP − International Business − Corporate Center − Stable operating performance (+0.6%) − 2006 NII boosted by positive contribution from capital − Net profit declines by 8.8% increase − Mainly due to weaker other result and a r
Slide 33: Presentation topics
Presentation topics ERSTE GROUP − 1-9 07 highlights − Financial statements − Segment reporting − Asset quality − Outlook and targets − Appendix 1-9 2007 Results Analyst presentation & Conference call 30 October 2007 33
Slide 34: Group asset quality – NPL coverage at comfortable levels
Group asset quality1 – NPL coverage at comfortable levels ERSTE GROUP Low risk Mgmt attention Substandard Non-performing Total exposure Risk provisions NPL coverage Sep 07 Dec 06 Sep 07 Dec 06 Sep 07 Dec 06 Sep 07 Dec 06 Sep 07 Dec 06 Sep 07 Dec 06 Sep 07 Dec 06 Austria 85,213 81,200 10,322 10,119 1
Slide 35: Presentation topics
Presentation topics ERSTE GROUP − 1-9 07 highlights − Financial statements − Segment reporting − Asset quality − Outlook and targets − Appendix 1-9 2007 Results Analyst presentation & Conference call 30 October 2007 35
Slide 36: Outlook – Guidance 2007 and 2008 confirmed
Outlook – Guidance 2007 and 2008 confirmed ERSTE GROUP Guidance 2007 confirmed: − Group net profit expected to increase by at least 25% − Despite higher integration costs at BCR − Driven by faster and more extensive headcount reduction − Despite substantially changed market environment − Despite hig
Slide 37: Outlook – Enhanced financial targets to 2009
Outlook – Enhanced financial targets to 2009 ERSTE GROUP 2007: > 25% Net profit(1) growth 2008: > 20% 2009: > 25% Cost/income ratio Below 55% in 2009 Return on equity(2) 18 - 20% in 2009 (1) Net profit after minorities (2) Based on a Tier 1 ratio of at least 7% 1-9 2007 Results Analyst presentation
Slide 38: Presentation topics
Presentation topics ERSTE GROUP − 1-9 07 highlights − Financial statements − Segment reporting − Asset quality − Outlook and targets − Appendix 1-9 2007 Results Analyst presentation & Conference call 30 October 2007 38
Slide 39: Overview of international exposures – Credit risk by regions
Overview of international exposures Credit risk by regions* ERSTE GROUP Low risk Mgmt attention Substandard Non-performing Total exposure in EUR million Sep 07 Dec 06 Sep 07 Dec 06 Sep 07 Dec 06 Sep 07 Dec 06 Sep 07 Dec 06 Share of total Share of total Core market 114,778 104,644 17,598 15,954 2,948
Slide 40: Overview of international exposures (cont) – Credit risk by industry sectors
Overview of international exposures (cont) Credit risk by industry sectors* ERSTE GROUP Low risk Mgmt attention Substandard Non-performing Total exposure in EUR million Sep 07 Dec 06 Sep 07 Dec 06 Sep 07 Dec 06 Sep 07 Dec 06 Sep 07 Dec 06 Share of total Share of total Banking and insurance 55,506 51
Slide 41: Summary financials of CEE subsidiaries
Summary financials of CEE subsidiaries Results (IFRS) as reported by local entities* ERSTE GROUP 97.99% 69.17% 100.00% 99.94% in EUR million 1-9 07 1-9 06 Change 1-9 07 1-9 06 Change 1-9 07 1-9 06 Change 1-9 07 1-9 06 Change Net profit after minorities 289.6 262.0 10.5% 219.6 181.3 21.2% 94.8 81.8 1
Slide 42: Financials (IFRS) of CEE subsidiaries – Česká spořitelna
Financials (IFRS) of CEE subsidiaries Česká spořitelna * ERSTE GROUP in EUR million 1-9 07 1-9 06 Change Net interest income 636.3 553.0 15.1% Risk provisions for loans and advances (49.3) (33.0) 49.4% Net fee and commission income 254.4 240.5 5.8% Net trading result 41.9 39.2 6.9% General administr
Slide 43: Financials of CEE subsidiaries – Banca Comercială Română
Financials (IFRS) of CEE subsidiaries (cont) Banca Comercială Română (post restruct.costs) * ERSTE GROUP in EUR million 1-9 07 1-9 06 Change Net interest income 413.3 370.4 11.6% Risk provisions for loans and advances (30.5) (21.8) 39.6% Net fee and commission income 179.7 123.4 45.6% Net trading re
Slide 44: Financials of CEE subsidiaries – Slovenská sporiteľňa
Financials (IFRS) of CEE subsidiaries (cont) Slovenská sporiteľňa * ERSTE GROUP in EUR million 1-9 07 1-9 06 Change Net interest income 226.2 186.1 21.6% Risk provisions for loans and advances (25.2) (10.6) >100.0% Net fee and commission income 69.8 67.8 3.0% Net trading result 15.8 16.9 (6.4%) Gene
Slide 45: Financials of CEE subsidiaries – Erste Bank Hungary
Financials (IFRS) of CEE subsidiaries (cont) Erste Bank Hungary * ERSTE GROUP in EUR million 1-9 07 1-9 06 Change Net interest income 189.6 192.4 (1.4%) Risk provisions for loans and advances (36.3) (26.7) 35.9% Net fee and commission income 94.4 61.4 53.8% Net trading result 28.7 23.3 22.7% General
Slide 46: Financials of CEE subsidiaries – Erste Bank Croatia
Financials (IFRS) of CEE subsidiaries (cont) – Erste Bank Croatia * ERSTE GROUP in EUR million 1-9 07 1-9 06 Change Net interest income 116.7 84.4 38.3% Risk provisions for loans and advances (11.3) (10.3) 10.6% Net fee and commission income 36.0 20.8 73.1% Net trading result 13.1 13.6 (4.0%) Genera
Slide 47: Financials of CEE subsidiaries – Erste Bank Serbia
Financials (IFRS) of CEE subsidiaries (cont) – Erste Bank Serbia * ERSTE GROUP in EUR million 1-9 07 1-9 06 Change Net interest income 12.6 6.2 >100.0% Risk provisions for loans and advances 0.5 (9.5) na Net fee and commission income 3.6 2.9 23.7% Net trading result 0.9 (0.7) na General administrati
Slide 48: Financials of CEE subsidiaries – Erste Bank Ukraine
Financials (IFRS) of CEE subsidiaries (cont) – Erste Bank Ukraine * ERSTE GROUP in EUR million 1-9 07 1-9 06 Change Net interest income 14.8 3.5 >100.0% Risk provisions for loans and advances (7.0) (0.4) >100.0% Net fee and commission income 0.6 0.0 >100.0% Net trading result 2.3 0.0 >100.0% General
Slide 49: Erste Group historic financials – Quarterly income statement (IFRS)
Erste Group historic financials – Quarterly income statement (IFRS) ERSTE GROUP in EUR million Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Net interest income 730.7 724.0 757.8 779.7 927.8 903.7 953.8 986.6 Net fee and commission income 334.9 342.2 355.5 338.8 409.4 438.9 446.0 469.3 Net trading
Slide 50: Erste Group historic financials – Quarterly balance sheet (IFRS)
Erste Group historic financials – Quarterly balance sheet (IFRS) ERSTE GROUP in EUR million Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Cash and balances with central banks 2,728 2,787 2,658 2,355 7,378 6,861 6,753 7,311 Loans and advances to credit institutions 16,858 18,604 19,890 18,3
Slide 51: Quarterly segment reporting – Overview of main segments
Quarterly segment reporting – Overview of main segments ERSTE GROUP in EUR million Austria Central and Eastern Europe Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Net interest income 411.2 415.2 398.9 408.2 412.6 319.7 496.8 473.5 516.0 548.7 Risk provisions (93.3) (60.6) (80.0) (66.1
Slide 52: Quarterly segment reporting – Austria sub-segments
Quarterly segment reporting – Austria sub-segments ERSTE GROUP in EUR million Savings Banks Retail & Mortgage Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Net interest income 222.5 217.6 206.5 213.5 221.6 133.6 137.9 136.6 136.0 135.7 Risk provisions (46.1) (38.0) (43.1) (39.5) (42.9)
Slide 53: Quarterly segment reporting – CEE sub-segments (1)
Quarterly segment reporting – Central and Eastern Europe sub-segments (1) ERSTE GROUP in EUR million Czech Republic Romania Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Net interest income 170.9 189.9 191.8 195.2 214.4 0.0 127.8 119.4 136.7 143.6 Risk provisions (10.4) (20.0) (14.3) (
Slide 54: Quarterly segment reporting – CEE sub-segments (2)
Quarterly segment reporting – Central and Eastern Europe sub-segments (2) ERSTE GROUP in EUR million Croatia Serbia Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Net interest income 25.7 30.7 33.9 40.3 41.1 2.4 3.7 3.6 3.4 4.6 Risk provisions (3.0) (2.0) (2.4) (3.5) (5.8) (0.5) (1.7) (
Slide 55: Group capital adequacy – Tier 1 and solvency ratios within target ranges
Group capital adequacy* – Tier 1 and solvency ratios within target ranges ERSTE GROUP in EUR million 1998 1999 2000 2001 2002 2003 2004 2005 2006 Sep 07 Tier 1 Capital pursuant to Austrian Banking Act 1,611 1,753 2,125 2,337 3,800 3,912 4,377 5,112 6,185 5,814 Total own funds pursuant to 1 Austrian
Slide 56: Shareholder structure – Total number of shares: 316,280,012
Shareholder structure – Total number of shares: 316,280,012 ERSTE GROUP By investor By region Austria Verein Others Capital Research 4.9% Continental Europe 2.7% and Mgmt. DIE ERSTE 11.7% > 5.0% österreichische Spar-Casse Privatstiftung 30.5% UK & Ireland 12.7% Austria 53.8% Institutional investors
Slide 57: Investor relations contacts
Investor relations contacts ERSTE GROUP − Erste Bank, Graben 21, 1010 Vienna Fax +43 (0)5 0100-13112 E-mail: investor.relations@erstebank.at Internet: www.erstebank.com Reuters: ERST.VI Bloomberg: EBS AV Datastream: O:ERS ISIN: AT0000652011 − Investor relations Gabriele Werzer Tel: +43 (0)5 0100-112