Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q1 2020 Earnings Presentation
60 slides from Erste Group Bank's earnings presentation, Apr 30, 2020
Slide 1: Erste Group investor presentation Q1 2020 results
Erste Group investor presentation Q1 2020 results 30 April 2020 Coronavirus lockdowns intercept strong start to the year, make outlook uncertain 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 • Update on coronavirus situation • The starting point • Mitigating measures • Erste Group’s response • Credit risk • Q1 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Key takeaways and outlook • Additional information
Slide 4: The starting point (1) – CEE fared comparatively well
The starting point (1) – In terms of virus spread CEE fared comparatively well so far • First tentative steps to slowly exit all-encompassing lockdowns in countries such as the Czech Republic and Austria 34.8 % of population tested % of positive tests 23.2 19.9 19.2 18.3 12.3 13.0 9.6 10.4 8.4 9.0 6
Slide 5: The starting point (2) – CEE in better shape than 2007/08
The starting point (2) – CEE is in much better shape today than in 2007/08 Economy Banking markets Subsidiary banks • Strong labour markets • Deposit overhang & excess liquidity on • Fully self-funded business model as • Unemployment rates at historic lows in system level in all key markets opposed
Slide 6: The monetary policy reaction
The monetary policy reaction – A combination of rate cuts and quantitative easing Type of measures • ECB cut its key rate to 0% in 2016; cut the deposit rate by 10 bps to -0.5% in 2019 • ECB has massively increased its asset purchase programme of EUR 20bn per month by another EUR 870bn by YE 2020 (7
Slide 7: The regulatory reaction
The regulatory reaction – Pragmatism paired with dividend restrictions Type of measures • FMA recommends banks to refrain from dividend payment and share buyback for six months • Potential recalibration of SRB and OSII buffers • Reduced countercyclical capital buffer from 1.75% to 1.00% • Restrictio
Slide 8: The political/fiscal reaction
The political/fiscal reaction – Lockdowns followed by fiscal support measures across CEE Loan moratoria/payment holidays Loan guarantees, bridge loans Labour market support (eg short-time work schemes) Tax incentives (Cuts, holidays, deferrals)
Slide 9: The political/fiscal reaction – Details on moratoria
The political/fiscal reaction – Details on moratoria Opt-in / Retail / Partici- Upfront Main characteristics Period out Corp pation* loss in Q1 • Statutory Retail Up to 3 Retail: 2% Opt-in None • Interest charged during deferral period & paid after the moratoria Micro months Micro: 12% • Statutory R
Slide 10: The political/fiscal reaction – Details on loan guarantees
The political/fiscal reaction – Details on loan guarantees Main characteristics Guarantee Interest Period Subsidised • EUR 9bn programme for loans and guarantees for enterprises, especially SMEs Up to 100% (varies by 2-5 years • Bridging loans in case of liquidity shortages products) 80-90% Subsidis
Slide 11: Our response to Coronavirus
Our response to Coronavirus – Erste Group is there for its customers, communities and employees Employees Retail customers Corporate customers Communities Majority of employees in home Branches remaining open & Expanding client advisory & Supporting health care workers, office extending online servi
Slide 12: Credit risk – Key drivers of risk costs, RWAs and asset quality
Credit risk – Key drivers of risk costs, RWAs and asset quality amid lockdowns • Q1 20 risk costs not yet impacted by macro deterioration, in line with ESMA and EBA guidance • Q1 20 risk costs of 15bps benefitted from NPL recoveries (EUR 65.1 m), primarily in Romania • COVID-19 allocations of EUR 61
Slide 13: Credit risk – Gross credit exposure overview
Credit risk – Gross credit exposure overview Gross credit exposure by NACE code Key industry exposures (gross) of which Industry / as of Mar- Savings Comments Category 20 Transport & comms Tourism Banks Other 3% 2% • Around 40% of the exposure is with 5 Construction 4% Metals € 3.8bn € 0.8bn large i
Slide 14: Presentation topics
Presentation topics • Update on coronavirus situation • The starting point • Mitigating measures • Erste Group’s response • Credit risk • Q1 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Key takeaways and outlook • Additional information
Slide 15: Executive summary – Group income statement performance
Executive summary – Group income statement performance QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m) -4.8% -37.6% 247 377 235 109 95 4 235 35 199 97 95 66 1 7 20 11 Q4 19 Operating Operating Risk costs Other Taxes on Minorities Q1 20 1-3 19 Operating Operating Risk cost
Slide 16: 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 2.18% 2.18% 2.20% 2.18% 66.8% 0.20% 0.15% 60.3% 62 -15.9% 739 82 656 1,229 1,229 1,229 552 552 62 1,161 -36 1-3 19 1-3 20 Q4 19 Q1 20 1-3 19 1-3 20
Slide 17: 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) +7.0% +7.0% 1,210 262,898 262,898 849 47 180 957 575 2,676 759 8,365 12,337 7,563 245,693 245,693 901 31/12/19 Cash Trading, Loans to Net loans Intangibles M
Slide 18: Executive summary – Key balance sheet data
Executive summary – 31/12/19 Key balance sheet data 31/03/20 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn 92.2% 88.4% +0.5% 80.9% 65.2% 61.3% 160.3 161.1 77.1% 100.4 102.4 2.5% 2.4% Loan/deposit ratio Loans/total assets Net loans Credit RWA NPL coverag
Slide 19: Presentation topics
Presentation topics • Update on coronavirus situation • The starting point • Mitigating measures • Erste Group’s response • Credit risk • Q1 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Key takeaways and outlook • Additional information
Slide 20: Business environment – Recession in 2020; rebound expected 2021
Business environment – 2020 2021 Recession in 2020 due to Coronavirus; rebound expected in 2021 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (avg, in %) 5.8 6.0 4.5 3.9 4.6 4.5 3.1 3.0 3.4 3.4 3.3 3.4 2.5 3.2 2.9 2.8 2.9 0.7 1.0 1.2
Slide 21: Business environment – Policy rate cuts
3M Interbank Business environment – 10YR GOV Policy rate cuts in CZ, RO and RS; HU increased the O/N lending rate Austria Czech Republic Romania 0.42% 2.15% 2.18% 2.15% 4.80% 4.34% 4.34% 1.85% 4.34% -0.15% -0.13% -0.15% 2.01% 1.45% 1.42% 1.45% 2.94% 2.89% 2.87% -0.31% 2.87% -0.41% -0.40% -0.41% 1-3
Slide 22: Business environment – CEE currencies weakened versus the euro
Business environment – CEE currencies have weakened versus the euro since COVID-19 outbreak EUR/CZK EUR/RON -0.1% +0.3% +7.5% +1.3% +0.6% +1.0% 25.7 25.7 25.6 25.7 25.4 27.3 4.74 4.80 4.77 4.80 4.79 4.83 1-3 19 1-3 20 Q4 19 Q1 20 31/12/19 31/03/20 1-3 19 1-3 20 Q4 19 Q1 20 31/12/19 31/03/20 • CZK re
Slide 23: Business environment – Stable market shares across the region
Business environment – 31/03/19 31/12/19 Stable market shares across the region 31/03/20 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 20.5% 21.8% 20.2% 21.7% AT 20.8% AT 22.0% AT 20.6% AT 22.0% 23.6% 21.2% 25.6% 12.3% CZ 23.8% CZ 21.0% CZ 25.3% CZ 12.2% 23.8% 21.3% 25.
Slide 24: Presentation topics
Presentation topics • Update on coronavirus situation • The starting point • Mitigating measures • Erste Group’s response • Credit risk • Q1 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Key takeaways and outlook • Additional information
Slide 25: Business performance: performing loan stock & growth
Business performance: performing loan stock & growth – YoY 31/03/19 QoQ 31/12/19 Performing loans continued to grow 31/03/20 150.7 6.4% • Yoy development attributable to Corporates (+9.1%) and Group 159.3 160.3 0.7% Retail (+3.8%); solid contribution from Savings Banks 32.9 • Qoq growth driven by Co
Slide 26: Business performance: customer deposit stock & growth
Business performance: customer deposit stock* & growth – YoY 31/03/19 QoQ 31/12/19 Deposit build-up continues in Q1 20 31/03/20 166.2 9.3% • Continuation of exceptional deposit growth across most Group 173.8 181.7 4.5% geographies despite zero/low interest rate environment as 35.8 retail and corpora
Slide 27: Business performance: NII and NIM
Business performance: NII and NIM – Q1 19 Q4 19 NII increases 5.9% yoy, flat qoq Q1 20 1,161 2.18% • Yoy NII growth (+5.9%) mainly due to strong CZ, AT/OA and Group 1,229 2.20% 1,229 2.18% Savings Banks performance 156 1.51% • Qoq NII flat as improvements in Holding ALM (segment AT/EBOe 166 1.57% Ot
Slide 28: Business performance: operating income
Business performance: operating income – YoY Q1 19 QoQ Q4 19 Trading and FV result weigh on operating performance Q1 20 1,772 -6.1% • Yoy development solely due to negative contribution from Group 1,862 -10.7% trading/FV result despite higher NII (+5.9%) and fee income 1,663 (+3.4%) 263 AT/EBOe 288
Slide 29: Business performance: operating expenses
Business performance: operating expenses – YoY Q1 19 QoQ Q4 19 Cost discipline results in lower OPEX yoy and qoq Q1 20 1,116 -0.4% • Yoy costs slightly down despite wage inflation Group 1,122 -1.0% 1,111 • Qoq improvement mainly on seasonally higher marketing and 192 -1.6% personnel expenses in Q4 d
Slide 30: Business performance: operating result and CIR
Business performance: operating result and CIR – YoY Q1 19 QoQ Q4 19 CIR at 66.8% in Q1 20 Q1 20 Operating result YoY & QoQ change Cost/income ratio 656 63.0% Group 739 -15.9% 60.3% -25.4% 66.8% 552 71 73.0% AT/EBOe 94 30.2% -1.3% 67.4% 93 67.1% 126 69.1% AT/SB -52.9% 74.1% 109 -45.3% 60 83.1% 72 55
Slide 31: Business performance: risk costs
Business performance: risk costs (abs/rel*) – Q1 19 Q4 19 Risk costs do not yet reflect deteriorated macro environment Q1 20 -36 -0.09% • Q1 20 risk costs not yet impacted by macro deterioration, in Group 82 0.20% line with ESMA and EBA guidance 62 0.15% • Q1 20 risk costs of 15bps benefitted from N
Slide 32: Business performance: non-performing loans and NPL ratio
Business performance: non-performing loans and NPL ratio – 31/03/19 31/12/19 NPL ratio improves further to 2.4% 31/03/20 4,691 3.0% • NPL volume declines to EUR 3.9bn in Q1 20, resulting in Group 4,142 2.5% 3,944 2.4% lowest NPL ratio since going public in 1997, supported by: 540 1.6% • Continued re
Slide 33: Business performance: allowances for loans and NPL coverage
Business performance: allowances for loans and NPL coverage – 31/03/19 31/12/19 NPL coverage rises to 80.9% 31/03/20 3,480 74.5% • NPL coverage rises yoy and qoq due to NPL stock decrease Group 3,174 77.1% 3,171 80.9% 348 64.6% • Year-on-year segment trends: AT/EBOe 290 58.0% 299 62.5% • reduction i
Slide 34: Business performance: other result
Business performance: other result – Q1 19 Q4 19 Other result improves qoq Q1 20 -130 • Yoy other operating result remained stable despite doubling Group -224 -129 of SK banking tax and higher contributions into resolution -12 funds AT/EBOe 7 • Qoq improvement driven by non-recurrence of Slovak -17
Slide 35: Business performance: net result
Business performance: net result – Q1 19 Q4 19 Net profit declines on trading/FV result Q1 20 377 • Yoy development driven by negative development in Group 247 trading/FV result and higher risk costs 235 • Qoq profitability impacted by deterioration of trading/FV result 39 AT/EBOe 65 and full-year b
Slide 36: Presentation topics
Presentation topics • Update on coronavirus situation • The starting point • Mitigating measures • Erste Group’s response • Credit risk • Q1 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Key takeaways and outlook • Additional information
Slide 37: Assets and liabilities: YTD overview
Assets and liabilities: YTD overview – Loan/deposit ratio at 88.4% (Dec 19: 92.2%) Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 262.9 262.9 100% 3.3 100% 245.7 23.0 4.4% 8.8% 245.7 5.3% 1.0% 2.4 20.7 7.9% 1.3% 10.7 13.1 18.0% 44.3 47.0 17.9% 9.4% 23.1 24.3
Slide 38: Assets and liabilities: customer loans by country of risk
Assets and liabilities: customer loans by country of risk – Net customer loans up 0.4%, NPLs down 4.8% in Q1 20 Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +0.5% +0.7% 160.3 161.1 159.3 160.3 152.0 5.2 5.4 150.7 5.2 5.4 4.8 8.5 9.3 4.7 8.4 9.3 7.8 1.9 6.8 6.9
Slide 39: Assets and liabilities: financial and trading assets
Assets and liabilities: financial and trading assets* – LCR at excellent 146.2% By geography By debtor type Liquidity buffer +2.6% in EUR bn in EUR bn 42.0 41.4 42.5 100% 27.0% 11.8% 11.8% 9.2% 10.5 24.6% 10.5 10.0 9.4% 9.4% 9.6% 23.3% 65.3 0.7 0.6 0.7 3.5 3.6 3.4 55.5 52.2 5.0 5.7 5.8 4.9 5.2 5.3 7
Slide 40: Assets and liabilities: customer deposit funding
Assets and liabilities: customer deposit funding – Customer deposits* up 4.8% in Mar 20, driven by corporates By customer type By product type Highlights in EUR bn in EUR bn • Continued deposit inflows driven by +4.8% Corporate segment (esp. public sector deposits) and Retail segment with highest 18
Slide 41: Assets and liabilities: debt vs interbank funding
Assets and liabilities: debt vs interbank funding – Reduced wholesale funding reliance, as customer deposits grow strongly Debt securities issued Interbank deposits in EUR bn in EUR bn +57.6% -3.2% 30.4 29.4 20.3 20.7 28.7 Sub debt Overnight deposits 6.0 Senior non-preferred bonds 4.7 5.7 Term depos
Slide 42: Assets and liabilities: LT funding – stable needs in 2020
Assets and liabilities: LT funding – Stable LT funding needs in 2020 Maturity profile of debt in EUR bn 3.4 3.0 2.7 2.7 2.4 2.1 2.1 1.4 1.4 1.0 0.8 0.7 0.1 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032+ Senior unsec. bonds Senior non-preferred bonds Covered bonds Capital exc Tier
Slide 43: Assets and liabilities: LT funding – Targeting MPE approach
Assets and liabilities: LT funding – Targeting MPE approach Resolution strategy Austrian resolution group • Direct presence in 7 geographically connected countries • Major entities within the Austrian resolution group*: • Erste Group’s setup suggests a multiple point of entry (MPE) • Erste Group Ban
Slide 44: Assets and liabilities: LT funding – Limited MREL-related issuance
Assets and liabilities: LT funding – Limited MREL-related issuance activity MREL resolution groups (2019) Preliminary 5-year issuance plan (avg pa) in EUR bn in EUR m 152 ~3,500-5,000 in all seniorities 76 57 21 19 16 ~400-500 ~200-300 ~100-300 ~100-300 8 7 10 7 9 6 ~100-150 AT CZ SK RO HR HU Holdin
Slide 45: Assets and liabilities: capital position
Assets and liabilities: capital position – CET1 ratio at 13.1% Basel 3 capital Risk-weighted assets Basel 3 capital ratios in EUR bn in EUR bn 18.5% 18.3% 18.2% 17.7% 17.7% 21.3 21.8 21.5 22.0 21.3 117.2 118.8 121.4 118.6 120.5 15.0% 14.8% 14.8% 14.4% 2.9 14.3% 2.9 14.3 3.2 14.9 2.8 14.7 3.4 13.7% 1
Slide 46: Presentation topics
Presentation topics • Update on coronavirus situation • The starting point • Mitigating measures • Erste Group’s response • Credit risk • Q1 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Key takeaways and outlook • Additional information
Slide 47: Conclusion – Key takeaways and outlook for 2020
Conclusion – Key takeaways and outlook for 2020 Q1 20 key takeaways 2020 outlook • COVID-19 lockdowns redefine macro outlook • Macro environment remained intact till mid-March Operating • CEE-wide concerted fiscal mitigation efforts • From mid-March COVID-19 lockdowns caused environment • First tent
Slide 48: Presentation topics
Presentation topics • Update on coronavirus situation • The starting point • Mitigating measures • Erste Group’s response • Credit risk • Q1 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Key takeaways and outlook • Additional information
Slide 49: Additional information: segment structure
Additional information: segment structure – 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 • Large Corporate • Asset/Liability Management
Slide 50: Additional information: income statement
Additional information: income statement – Year-to-date and quarterly view Year-to-date view Quarterly view in EUR million 1-3 19 1-3 20 YOY-Δ Q1 19 Q4 19 Q1 20 YOY-Δ QOQ-Δ Net interest income 1,160.9 1,229.0 5.9% 1,160.9 1,229.5 1,229.0 5.9% 0.0% Interest income 1,356.6 1,391.7 2.6% 1,356.6 1,404.6
Slide 51: Additional information: group balance sheet – assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Mar 19 Jun 19 Sep 19 Dec 19 Mar 20 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 16,382 16,843 15,638 10,693 23,031 40.6% >100.0% >100.0% Financial assets held for trading 6,331 6,464 7,215 5,760 7,706 21.7% 33.8% 3
Slide 52: Additional information: group balance sheet – liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Mar 19 Jun 19 Sep 19 Dec 19 Mar 20 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 2,277 2,518 2,751 2,421 3,322 45.9% 37.2% 37.2% Derivatives 1,979 2,125 2,411 2,005 2,945 48.8% 46.9%
Slide 53: Additional information: regulatory capital position/requirement (SREP)
Additional information: regulatory capital position/requirement (SREP) – Capital requirements (SREP) for 2020; Erste Group target of 13.5% unchanged • Combined impact of countercyclical buffers amounts to 30 bps in 2020 Erste Group Consolidated Erste Group Unconsolidated ECB Capital Relief Phased-in
Slide 54: 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) 161.1 163.4 164.3 161.1 163.4 164.3 163.4 164.3 155.4 158.7 155.4 158.7 161.1 4.5
Slide 55: 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: 9,859 Employees: 4,041 countries CZ Bra
Slide 56: 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 57: 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 C
Slide 58: 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 Included in the Vienna Stock Exchange’s sustainability and business model, Erste Group is in fact
Slide 59: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Unidentified * Erste Foundation 1 Unidentified * Identified Trading ** 10.03% 11.41% Identified Trading ** 10.03% Savings Banks & Savings Banks Rest of world Austria BlackRock Inc. 2.02% 2.02% F
Slide 60: 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