Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q3 2014 Earnings Presentation
47 slides from Erste Group Bank's earnings presentation, Oct 30, 2014
Slide 1: Erste Group investor presentation Q3 2014 results
Erste Group investor presentation Q3 2014 results 30 October 2014 Asset quality improvement gains momentum as AQR confirms solid capital base Andreas Treichl, CEO Erste Group Gernot Mittendorfer, CFO Erste Group Andreas Gottschling, 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) 431 146 141 430 26 138 -554 1.118 35 46 803 -1,033 447 403 42 -1.484 Q2 14 Operating Operating Risk costs Other Taxes on Minorities Q3 14 income expenses result income 1
Slide 5: Executive summary – Group income statement performance: 1-9 14 one-off summary
Executive summary – Group income statement performance: 1-9 14 one-off summary One-offs with effect on regulatory capital One-offs with no effect on regulatory capital • Additional risk provisions of about EUR 400m in Romania • Write-down of intangible assets related to Romania • Fully booked in 1-9
Slide 6: 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 +34.5% in EUR m 2.68% 2.64% -0.2% 2.61% 2.68% 1,675 2.75% 53.9% 52.3% 3,516 2,339 2,334 3,370 1,245 1,120 1,126 798 808 879 1.35% 432 1-9 13 1-9 14 Q2 14 Q3
Slide 7: 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) 817 2,013 200,118 200,118 2,354 1,291 218 1,912 1,059 1,133 196,973 1,211 507 985 196,973 53 31/12/13 Cash Trading, Loans to Net loans Intangibles Other 30/0
Slide 8: Executive summary – Key balance sheet data
Executive summary – 31/12/13 Key balance sheet data 30/09/14 Loan/deposit & loan/TA ratio Net loans & credit RWA* NPL coverage ratio & NPL ratio in EUR bn +0.4% 98.0% 100.3% 68.8% 119.9 120.5 63.1% 59.9% 61.2% 84.9 87.2 9.6% 8.9% Loan/deposit ratio Loans/total assets Net loans Credit RWA NPL coverag
Slide 9: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 9
Slide 10: Business environment – Slower export performance offset by improved domestic demand in 2014
2013 Business environment – 2014 Slower export performance offset by improved domestic demand in 2014 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (ave, in %) 4.4 3.5 3.3 3.3 2.5 2.5 4.0 2.2 1.4 1.8 1.5 1.5 1.6 1.1 1.1 1.6 0.8 1.2 2
Slide 11: Business environment – Historic low interest rate environment poses challenges
Business environment – 3M Interbank 10YR GOV Historic low interest rate environment poses challenges Austria Czech Republic Romania 5.41% 4.81% 4.84% 4.25% 1.94% 1.68% 1.99% 1.73% 4.46% 2.45% 1.66% 1.32% 1.78% 1.34% 2.54% 2.14% 0.21% 0.25% 0.30% 0.47% 0.36% 0.36% 0.35% 0.17% 1-9 13 1-9 14 Q2 14 Q3 1
Slide 12: Business environment – Limited currency volatility, except one-off CZK devaluation
Business environment – Limited currency volatility, except one-off CZK devaluation in November 2013 EUR/CZK EUR/RON +6.8% +0.6% +0.3% +0.9% -0.2% -1.4% 25.7 27.5 27.4 27.6 27.4 27.5 4.41 4.45 4.43 4.41 4.47 4.41 1-9 13 1-9 14 Q2 14 Q3 14 31/12/13 30/09/14 1-9 13 1-9 14 Q2 14 Q3 14 31/12/13 30/09/14
Slide 13: Business environment – Market shares: stability in AT, CZ and SK, challenges in RO, HU
30/09/13 Business environment – 30/06/14 Market shares: stability in AT, CZ and SK, challenges in RO, HU 31/08/14 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 19.1% 17.0% 18.3% 21.4% AT 19.0% AT 17.5% AT 18.2% AT 20.1% 23.7% 19.0% 27.2% 9.8% CZ 23.5% CZ 18.9% CZ 26.5%
Slide 14: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 14
Slide 15: Business performance: performing loan stock & growth
YoY 30/09/13 Business performance: performing loan stock & growth – QoQ 30/06/14 Solid qoq increase in performing loan stock 30/09/14 Business line view (BL) Geographic view (geo) 117.0 27.1 -0.1% AT/EBOe 27.3 2.0% Group 115.7 1.0% 1.1% 116.9 27.6 11.4 -3.8% 44.1 -0.4% AT/OA 10.6 Retail 43.5 3.6% 43
Slide 16: Business performance: customer deposit stock & growth
YoY 30/09/13 Business performance: customer deposit stock & growth – QoQ 30/06/14 Deposit decline overstated by EUR 1.8bn CZ one-off 30/09/14 Business line view Geographic view 122.0 30.0 -1.0% Group 120.2 -1.6% AT/EBOe 29.7 -0.2% 29.7 0.0% 120.1 5.1 -18.7% 64.2 -1.5% AT/OA 5.3 Retail 63.1 -22.0% 63
Slide 17: Business performance: NII and NIM
Business performance: NII and NIM – Q3 13 Q2 14 NII stable qoq, down yoy on lower volumes and CZK effect Q3 14 Business line view Geographic view 1.176 2.71% 144 1.46% Group 1.120 2.61% AT/EBOe 159 1.74% 1.126 2.68% 152 1.73% 559 4.53% 102 1.17% Retail 545 4.49% AT/OA 100 1.18% 550 4.53% 104 1.40% 1
Slide 18: Business performance: operating income
Q3 13 Business performance: operating income – Q2 14 Operating income decline due to lower trading result qoq, lower NII yoy Q3 14 Business line view Geographic view Highlights 1,780 1,780 • Decline in group operating income driven by Group 1,731 Group 1,731 lower NII yoy and lower net trading and f
Slide 19: Business performance: operating expenses
Q3 13 Business performance: operating expenses – Q2 14 Cost decline slightly exaggerated in Q3 14 Q3 14 Business line view Geographic view Highlights 964 964 • Group operating expenses declined yoy on Group 933 Group 933 lower personnel expenses and on 887 887 460 146 discontinuation of customer sto
Slide 20: Business performance: operating result and CIR
Q3 13 Business performance: operating result and CIR – Q2 14 Operating result stable, cost/income ratio improved Q3 14 Business line view Geographic view 816 54.2% 816 54.2% Group 798 53.9% Group 798 53.9% 808 52.3% 808 52.3% 386 54.4% 90 61.9% Retail 380 54.1% AT/EBOe 103 58.9% 383 54.4% 102 60.2%
Slide 21: Business performance: risk costs (abs/rel)
Q3 13 Business performance: risk costs (abs/rel*) – Q2 14 Higher risk costs on additional provisions in Romania Q3 14 Business line view Geographic view 461 1.42% 6 0.09% Group 432 1.35% AT/EBOe 35 0.49% 879 2.75% 10 0.14% 131 4.03% 105 0.90% AT/OA 70 2.24% Retail 61 0.52% 3.40% 70 2.23% 398 35 0.72
Slide 22: Business performance: non-performing loans and NPL ratio
30/09/13 Business performance: non-performing loans and NPL ratio – 30/06/14 Asset quality improvement gains momentum 30/09/14 Business line view Geographic view 12,448 9.6% 1,025 3.6% Group 11,996 9.4% AT/EBOe 1,018 3.6% 11,422 8.9% 1,002 3.5% 1,363 10.7% 3,650 7.6% AT/OA 1,568 12.9% Retail 3,420 7
Slide 23: Business performance: allowances for loans and NPL coverage
30/09/13 Business performance: allowances for loans and NPL coverage – 30/06/14 NPL coverage rises to multi-year high of 68.8% 30/09/14 Business line view Geographic view 7,837 63.0% 681 66.5% Group 7,674 64.0% AT/EBOe 697 68.4% 7,864 68.8% 682 68.1% 770 56.5% 2,480 67.9% AT/OA 841 53.6% Retail 2,36
Slide 24: Business performance: other result
Q3 13 Business performance: other result – Q2 14 Q3 14 driven by Hungarian consumer loan law Q3 14 Business line view Geographic view Highlights -136 -136 • QOQ improvement in group other result due Group -1.147 Group -1.147 to goodwill impairments in Q2 14; Q3 14 -344 -344 other result still burden
Slide 25: Business performance: net result
Q3 13 Business performance: net result – Q2 14 Q3 14 net loss due to HU one-off and higher risk costs in Romania Q3 14 Net result by business line Net result by geography Highlights 128 128 • QOQ improvement in net result, significant Group -1.033 Group -1.033 one-offs (goodwill, taxes) in Q2 14, Q3
Slide 26: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 26
Slide 27: Assets and liabilities: YTD overview
Assets and liabilities: YTD overview – Loan/deposit ratio balanced at 100.3% Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 200.1 197.0 200.1 197.0 100% 6.5 3.2% 100% 9.3 8.0 4.6% 4.1% 8.5 4.3% 17.3 16.5 8.6% 8.4% 51.3 51.1 25.6% 25.9% 8.4 7.2 4.2% 3.6% 122.4
Slide 28: Assets and liabilities: customer loans by country of risk
Assets and liabilities: customer loans by country of risk – Second consecutive quarter of increase in performing loans, NPLs decline Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +0.4% +1.3% -7.1% 121.7 119.9 120.5 2.8 117.0 115.4 116.9 12.4 12.3 6.2 2.7 3.1 2.8
Slide 29: Assets and liabilities: allowances for customer loans
Assets and liabilities: allowances for customer loans – Increase in allowances despite decline in NPL volume Quarterly development (EUR m) Highlights • Higher allocations due to booking of +1.4% additional provisions in Romania • Higher qoq level of use due to higher qoq NPL sales (EUR 341.3m vs EUR
Slide 30: Assets and liabilities: financial and trading assets
Assets and liabilities: financial and trading assets * – LCR at comfortable 106% (YE 13: 107%) By geography (EUR bn) By debtor type Liquidity buffer (EUR bn) -3.3% 46.6 44.9 43.4 100% 24.3% 7.9 11.9% 12.3% 11.2% 7.8 8.2 21.5% 2.1 12.4% 12.6% 12.1% 20.3% 2.1 3.8 3.1 2.1 17.8% 1.3 4.8 4.6 5.0 44.5 40.
Slide 31: Assets and liabilities: intangibles
Assets and liabilities: intangibles – Significant reduction in intangibles to only 14.6% of book value Quarterly development of intangibles (EUR bn) Highlights • Extraordinary intangible write-downs 2.8 amounted to EUR 931.7m -40.3% (thereof goodwill of EUR 420.9m and value 2.4 of customer relations
Slide 32: Assets and liabilities: customer deposit funding
Assets and liabilities: customer deposit funding – Decline in customer deposits driven by EUR 1.8bn Czech one-off By customer type By product type Highlights -1.9% • YTD decline driven mainly by: 122.0 122.4 • Final deconsolidation of Czech pension fund 122.4 120.1 122.0 120.1 0.5 0.9 (EUR 1.8bn), o
Slide 33: Assets and liabilities: debt vs interbank funding
Assets and liabilities: debt vs interbank funding – Decline in both issued debt and interbank funding Debt securities issued (EUR bn) Interbank deposits (EUR bn) -5.8% 32.3 33.1 31.2 23.2 3.5 3.6 Sub debt 1.2 4.0 Overnight deposits 1.2 0.4 Suppl. capital -4.7% 0.4 1.1 Term deposits 0.4 Hybrid issues
Slide 34: Assets and liabilities: ST vs LT funding
Assets and liabilities: ST vs LT funding – Limited LT funding needs, solid ST funding collateral coverage Maturity profile of debt (EUR bn) Wholesale funding outflow (<1y) v collateral coverage 3.8 205.0% 3.6 165.1% 156.6% 2.8 141.2% 2.5 2.5 2.5 116.3% 41.5 37.0 1.7 31.6 33.9 1.5 27.9 1.4 24.0 23.6
Slide 35: Assets and liabilities: capital position
Assets and liabilities: capital position – CET 1-ratio (fully loaded) at 10.5%, supported by minority capital uplift Basel 2.5/Basel 3 capital (EUR bn) Risk-weighted assets (EUR bn) Basel 2.5/Basel 3 capital ratios Basel 2.5 Basel 3 Basel 2.5 Basel 3 Basel 2.5 Basel 3 Phased-in Phased-in Phased-in 1
Slide 36: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 36
Slide 37: Conclusion – Outlook
Conclusion – Outlook • For Erste Group (consolidated): • Risk costs of EUR 2.1-2.4 billion depending on booking of Hungarian consumer loan law impact (EUR 350-400m, EUR 360.8m of which have already been booked) in risk provisions or other operating result; any costs related to the unlikely, but stil
Slide 38: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 38
Slide 39: Additional information: new segmentation – Business line and geographic view
Additional information: new segmentation – Business line and geographic view Erste Group – Business segments Group ALM & Savings Large Commercial Other Group Intragroup Corporate Retail SME Local CC Banks Corporates Real Estate Corporate Markets Elimination Center (ALM&LCC) (AT/SB) (LC) (CRE) (OC) (
Slide 40: 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 1-9 13 1-9 14 YOY-Δ Q3 13 Q2 14 Q3 14 YOY-Δ QOQ-Δ Net interest income 3,515.8 3,369.6 -4.2% 1,175.9 1,119.7 1,126.0 -4.2% 0.6% Net fee and commission income 1,343.7 1,372.7 2.2%
Slide 41: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 11,852 9,301 10,373 7,267 8,010 -32.4% -13.9% 10.2% Financial assets - held for trading 14,219 12,283 13,610 12,954 11,641 -18.1% -5.2
Slide 42: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities - held for trading 7,154 6,475 7,042 7,152 8,488 18.6% 31.1% 18.7% Derivatives 6,706 6,087 6,341 6,347 7,563 12.8% 24.2
Slide 43: 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) 129.5 127.7 127.5 127.7 128.3 129.5 127.7 127.5 127.7 128.3 129.5 127.7 127.5 127.
Slide 44: 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: 5.1m Customers: 2.4m in 7 geographically connected Employees : 10,443 Employees : 4,252 countries Bra
Slide 45: Additional information: strategy – A real customer need is the reason for all business
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 46: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region 2.5% 9.1% 12.7% 4.0% 22.6% 4.1% 7.8% 1.0% 41.6% 9.7% 7.8% 51.6% 25.5% Erste Stiftung, direct Institutional investors Austria UK & Ireland Other Erste Stiftung, indirect * UNIQA Versicherungsvere
Slide 47: Investor relations details
Investor relations details • Erste Group Bank AG, Milchgasse 1 (mezzanine floor), 1010 Vienna Fax : +43 (0)5 0100-13112 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