Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q4 2023 Earnings Presentation
52 slides from Erste Group Bank's earnings presentation, Feb 29, 2024
Slide 1: Q4 2023 preliminary results presentation
Q4 2023 preliminary results presentation Vienna, 29 February 2024 Strong profitability drives up capital Willi Cernko, CEO Erste Group Stefan Dörfler, CFO Erste Group Alexandra Habeler-Drabek, CRO Erste Group
Slide 2: 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 CORRECTNES
Slide 3: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 3
Slide 4: Operating and risk performance drive record net profit
EXECUTIVE SUMMARY: P&L PERFORMANCE Operating and risk performance drive record net profit QoQ net profit development YTD net profit development in EUR m in EUR m +38.5% -16.1% 445 136 820 172 7 318 143 156 1,981 421 2,998 230 688 51 26 2,165 Q3 23 Operating Operating Risk costs Other Taxes on Minori
Slide 5: Upgraded 2023 guidance outperformed
EXECUTIVE SUMMARY: P&L DASHBOARD Upgraded 2023 guidance outperformed Net interest margin Cost/income ratio Risk cost ratio in % in % in bps 2.50 2.50 G23: <50% G23: <10 bps 2.45 2.47 28 30 2.25 51.9 49.7 49.8 -4 -2 0 46.2 44.7 Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 Q4 22 Q1
Slide 6: Healthy growth in customer loans and deposits
EXECUTIVE SUMMARY: BALANCE SHEET PERFORMANCE Healthy growth in customer loans and deposits YTD total asset development YTD equity & total liability development in EUR bn in EUR bn +4.1% 337.2 337.2 0.0 0.3 3.2 5.7 0.3 7.9 3.0 323.9 1.0 3.9 8.8 5.9 323.9 1.0 31/12/22 Cash Trading, Loans to Net loans
Slide 7: Exemplary balance sheet metrics
EXECUTIVE SUMMARY: BALANCE SHEET DASHBOARD Exemplary balance sheet metrics Loan/deposit ratio Loan & deposit growth Asset quality in % yoy, in % in % 12.1 96.7 96.7 G23: ~5% 94.6 94.3 9.4 85.1 90.2 7.0 89.3 87.4 3.7 G23: ~ 2% 85.1 85.0 6.4 7.1 6.9 2.8 2.0 2.1 2.0 2.3 3.9 2.0 1.4 Q4 22 Q1 23 Q2 23 Q3
Slide 8: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 8
Slide 9: Weak economy in 2023, moderate recovery in 2024
MACROECONOMIC AND BUSINESS UPDATE: ECONOMIC FORECASTS * Weak economy in 2023, moderate recovery in 2024 Real GDP growth Consumer price inflation Unemployment rate 2023 in % avg, in % avg, in % 2024 17.6 9.4 8.8 3.3 2.6 2.5 2.5 12.5 2.0 2.0 2.0 2.4 10.7 10.5 10.5 6.0 5.9 5.5 5.5 6.3 6.0 1.4 1.1 5.1 5
Slide 10: Retail loans up in 2023
MACROECONOMIC AND BUSINESS UPDATE: RETAIL BUSINESS Retail loans up in 2023 Slightly growing loan book amid economic slowdown Housing and consumer loans − Housing loan demand stabilisation continued at low levels; sustainable growth trend in EUR bn likely to be triggered by lower interest rates − New
Slide 11: Corporates and Markets division maintains momentum
MACROECONOMIC AND BUSINESS UPDATE: CORPORATES & MARKETS BUSINESS Corporates and Markets division maintains momentum Loan growth >5% yoy, demand continues to be weak Net loan stock of Corporate segment − Loan growth moderated somewhat across all business lines in H2 23; customer deposits remained vol
Slide 12: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 12
Slide 13: CEE delivered loan growth of >5% in 2023
OPERATING TRENDS: NET LOAN STOCK AND GROWTH CEE delivered loan growth of >5% in 2023 Net loan stock Growth rates Consolidated loan growth amounted to 2.8% in 2023 − Retail business performed well, growing by 3.7% year-on-year 202.1 0.8% (EUR +2.6bn), particularly in CZ and HR Group 206.2 2.8% 207.8
Slide 14: Customer deposits up by 3.9% in 2023
OPERATING TRENDS: CUSTOMER DEPOSIT STOCK AND GROWTH Customer deposits up by 3.9% in 2023 Customer deposits Growth rates Erste Group’s favourable deposit mix is a key competitive advantage – overweight retail, sight, EUR deposits 224.0 -1.3% Group 235.8 3.9% 232.8 Key Q4 23 deposit drivers 46.8 0.8%
Slide 15: NII was key income driver in 2023, growing 21.5%
OPERATING TRENDS: NET INTEREST INCOME (NII) AND NET INTEREST MARGIN (NIM) NII was key income driver in 2023, growing 21.5% Net interest income Net interest margin NII grows 15.3% yoy, qoq consolidation driven by: − Moderately rising deposit pass-through rates, especially in Austria 1,565 2.25% (now
Slide 16: Net fee income sets another quarterly record, up 7.6% in 2023
OPERATING TRENDS: NET FEE AND COMMISSION INCOME Net fee income sets another quarterly record, up 7.6% in 2023 Net fee income by segment Net fee income by fee type in EUR m in EUR m +12.8% +5.9% 702 702 663 33 6 663 17 643 632 6 643 632 24 622 34 622 17 28 6 29 6 69 27 18 24 67 29 6 57 64 Other 26 23
Slide 17: Costs developed in line with guidance in 2023
OPERATING TRENDS: OPERATING EXPENSES Costs developed in line with guidance in 2023 Operating expenses by segment Operating expenses by type in EUR m +11.9% in EUR m +12.7% 1,345 1,345 1,242 84 1,242 1,194 49 1,230 1,202 26 1,194 1,230 1,202 162 Residual other admin 19 79 22 69 71 Other 82 99 68 94 1
Slide 18: Best ever cost/income ratio in 2023, solid outlook for 2024
OPERATING TRENDS: OPERATING RESULT AND COST/INCOME RATIO (CIR) Best ever cost/income ratio in 2023, solid outlook for 2024 Operating result Cost/income ratio in EUR m in % +22.4% 1,489 1,432 14 78 14 1,354 Other 73 1,257 118 138 75 3 1,106 13 RS 107 129 50 7 108 62 111 HR 136 103 140 98 128 152 HU 9
Slide 19: 2023 risk costs come in at 6 bps, solid outlook for 2024
OPERATING TRENDS: CREDIT RISK/RISK COSTS 2023 risk costs come in at 6 bps, solid outlook for 2024 Risk costs by segment * Risk cost ratio * in EUR m in bps 156 78 141 0 Other G24: <25 bps RS HR 28 30 HU SK 15 9 6 RO 2 -2 0 CZ -4 AT/OA -21 -8 AT/SB AT/EBOe 2019 2020 2021 2022 2023 Q4 22 Q1 23 Q2 23 Q
Slide 20: Slight increase in NPL ratio from historic low
OPERATING TRENDS: CREDIT RISK/ASSET QUALITY Slight increase in NPL ratio from historic low NPL ratio NPL coverage ratio NPL ratio edges up slightly from historic low − Primarily driven by small, well collateralised residential real estate 2.0 in % 94.6 in % projects at the mostly minority-owned savi
Slide 21: Real estate snapshot
OPERATING TRENDS: CREDIT RISK/EXPOSURE HIGHLIGHT: REAL ESTATE (RE) Real estate snapshot Sound lending standards − Income producing projects (>80%) − Ring-fenced, A-class buildings in prime locations with risk-mitigating structures − Highly collateralised business with conservative valuation approach
Slide 22: Other result impacted by one-offs
OPERATING TRENDS: OTHER RESULT Other result impacted by one-offs Other result by segment Other result by accounting categories in EUR m in EUR m Other 24 RS 0 0 -7 HR -22 -27 -49 HU -7 -49 SK 0 -36 RO -138 -54 CZ -157 AT/OA -157 AT/SB AT/EBOe -99 -274 -274 -279 -279 Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 Q4
Slide 23: 2023 ROTE at 17.2%, 2024 ROTE target confirmed at ~15%
OPERATING TRENDS: NET RESULT, EARNINGS PER SHARE (EPS) & RETURN ON TANGIBLE EQUITY (ROTE) 2023 ROTE at 17.2%, 2024 ROTE target confirmed at ~15% Net result by segment EPS & ROTE in EUR m in EUR +32.9% 896 820 Other 688 RS 20.2% 19.1% 594 HR 518 HU 14.6% 14.7% 1.98 1.90 12.2% SK 1.54 RO 1.39 CZ 1.10
Slide 24: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 24
Slide 25: MREL and long-term liquidity needs drive wholesale funding
WHOLESALE FUNDING AND CAPITAL: ISSUED DEBT AND INTERBANK FUNDING MREL and long-term liquidity needs drive wholesale funding Liabilities and equity Debt securities Interbank deposits Comments in EUR bn in EUR bn in EUR bn Core customer deposits from Retail and SME stable yoy 337.2 323.9 Yoy increase
Slide 26: MREL issuance progresses to plan
WHOLESALE FUNDING AND CAPITAL: MREL UPDATE (MINIMUM REQUIREMENT FOR OWN FUNDS AND ELIGIBLE LIABILITIES) MREL issuance progresses to plan MPE resolution groups MREL issuance plan (by year-end 2024) 199 ~ 750–1,500 in EUR bn, in EUR m 91 as of Dec 2023 ~1,000-1,250 73 27 26 22 ~350-500 15 13 ~ 250-350
Slide 27: 2023 funding plan successfully executed, 2024 volumes in similar range
WHOLESALE FUNDING AND CAPITAL: LONG TERM FUNDING 2023 funding plan successfully executed, 2024 volumes in similar range Maturity profile of debt 8.4 in EUR bn 6.4 5.0 5.1 3.9 3.9 2.8 1.1 0.9 0.7 0.3 0.3 0.0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036+ Debt CEE Tier 2 Covered bon
Slide 28: Strong organic capital generation trumps RWA development
WHOLESALE FUNDING AND CAPITAL: CAPITAL AND RISK-WEIGHTED ASSETS (RWA) Strong organic capital generation trumps RWA development… Basel 3 capital Risk-weighted assets in EUR bn +1.8% in EUR bn 143.9 146.2 147.7 148.0 146.5 6.3 5.9 5.6 6.3 7.0 14.9 14.7 14.6 14.8 14.8 +11.1% 28.1 29.1 27.7 26.2 26.4 3.
Slide 29: …and paves the way for second SBB (EUR 500m)
WHOLESALE FUNDING AND CAPITAL: COMMON EQUITY TIER 1 (CET1), TIER 1 AND TOTAL CAPITAL RATIOS …and paves the way for second SBB (EUR 500m) CET 1 ratio development (final) Basel 3 capital ratios (final) in % in % 19.9 15.66 19.0 0.11 18.7 0.88 0.54 18.2 18.0 0.14 0.04 0.07 17.3 2.09 16.4 16.1 15.8 15.5
Slide 30: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 30
Slide 31: Robust outlook for 2024
FINANCIAL OUTLOOK Robust outlook for 2024 Variable 2024 guidance Key assumptions/additional comments Real GDP > 2% Moderately improving economic outlook Loans ~ +5% Higher loan demand on better economic outlook, declining interest rates NII ~ -3% NII consolidation after 2 years of historic upswing F
Slide 32: Appendix
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX: ERSTE GROUP BASICS, ERSTE GROUP DETAILED FINANCIALS & ERSTE GROUP ESG PROFILE Page 32
Slide 33: Banking leadership in Central and Eastern Europe (1)
APPENDIX: ERSTE GROUP‘S GEOGRAPHIC FOOTPRINT Banking leadership in Central and Eastern Europe (1) Czech Republic Slovakia Customers: 4.5m Customers: 2.0m Hungary Employees: 9,829 Employees: 3,520 Customers: 1.0m Branches: 366 Branches: 178 Employees: 3,359 Retail loan share: 26.7% Retail loan share:
Slide 34: Banking leadership in Central and Eastern Europe (2)
APPENDIX: ERSTE GROUP STRATEGY Banking leadership in Central and Eastern Europe (2) Eastern part of EU Focus on CEE, limited exposure to other Europe Retail Corporate Capital Public Interbank banking banking markets sector business Acting as Financial SME and large Focus on customer Financing Focus
Slide 35: Commanding market shares across the CEE region
APPENDIX: MARKET SHARES Commanding market shares across the CEE region Gross retail loans Retail deposits Gross corporate loans Corporate deposits 21.3% 23.9% 24.3% 24.1% AT 21.3% AT 24.2% AT 23.8% AT 23.5% 25.3% 26.1% 22.5% 13.1% CZ 26.4% CZ 25.2% CZ 22.7% CZ 14.2% 26.7% 24.9% 22.7% 13.1% 24.5% 27.
Slide 36: Strong track record of profitability
APPENDIX: ERSTE GROUP FINANCIALS/PROFIT AND LOSS ACCOUNT Strong track record of profitability Year-to-date view Quarterly view in EUR million 2022 2023 YOY-Δ Q4 22 Q3 23 Q4 23 YOY-Δ QOQ-Δ Net interest income 5,950.6 7,227.9 21.5% 1,565.4 1,861.2 1,805.6 15.3% -3.0% Interest income 8,622.7 15,044.7 7
Slide 37: Strong balance sheet dominated by customer loans
APPENDIX: ERSTE GROUP FINANCIALS/BALANCE SHEET/ASSETS Strong balance sheet dominated by customer loans Quarterly data Change in EUR million Dec 22 Mar 23 Jun 23 Sep 23 Dec 23 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 35,685 43,305 32,810 31,922 36,685 2.8% 2.8% 14.9% Financial assets held for trading
Slide 38: Liabilities dominated by retail deposits
APPENDIX: ERSTE GROUP FINANCIALS/BALANCE SHEET/ EQUITY AND LIABILITIES Liabilities dominated by retail deposits Quarterly data Change in EUR million Dec 22 Mar 23 Jun 23 Sep 23 Dec 23 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 3,264 3,139 2,788 2,428 2,304 -29.4% -29.4% -5.1% Derivativ
Slide 39: Capital requirements for 2023 slightly up on higher buffers
APPENDIX: REGULATORY CAPITAL POSITION/REQUIREMENT (SREP – SUPERVISORY REVIEW AND EVALUATION PROCESS) Capital requirements for 2023 slightly up on higher buffers Erste Group Consolidated Erste Group Unconsolidated Fully loaded Fully loaded 2021 2022 Q4 2023 YE 2024 2021 2022 Q4 2023 YE 2024 Pillar 1
Slide 40: MREL compliance at point of entry level (bail-in)
APPENDIX: MULTIPLE POINT OF ENTRY (MPE) RESOLUTION STRATEGY MREL compliance at point of entry level (bail-in) 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 spořitelna sporiteľňa Hungary Croatia Ro
Slide 41: Austrian resolution group: MREL requirement based on RWA fulfilled
APPENDIX: DETAILS ON AUSTRIAN RESOLUTION GROUP Austrian resolution group: MREL requirement based on RWA fulfilled MREL capacity based on TREA (RWA)* Key take-aways Erste Group adopted multiple point of entry (MPE) in % 38.72% resolution approach − In Q2 23, Erste Group Bank AG received its MREL requ
Slide 42: Erste Group benefits from a highly diversified loan book
APPENDIX: GROSS CUSTOMER LOANS BY RISK CATEGORY, CURRENCY AND INDUSTRY Erste Group benefits from a highly diversified loan book Gross customer loans by industry By currency By business segment 211.9 in EUR bn 206.1 3.7 0.1 1% 1% 0% 0.1 1% 1% Other Other 3.4 2.6 1% 1% 3.3 23% 22% 29% 28% 5.4 4.2 CHF
Slide 43: Financial asset portfolio creates strong net interest income tailwinds
APPENDIX. FINANCIAL ASSET DRILL-DOWN Financial asset portfolio creates strong net interest income tailwinds Financial assets – geographic view Financial assets – accounting view AC by issuer and currency in EUR bn -2.9% 56.4 54.8 51.9 3% 3% 5% 11.8 11.9 15% 7% 10.9 2.1 16% 1% 1.0 2.1 6% 4.0 1.0 1.2
Slide 44: Erste Group's embedded ESG strategy as a key to success
APPENDIX: ESG PROFILE (1)/ESG STRATEGY OF ERSTE GROUP Erste Group’s embedded ESG strategy as a key to success GREEN TRANSITION SOCIAL INCLUSION • We aim to achieve a net zero status for our • We promote financial inclusion through our portfolio by 2050. social banking activities, thereby • We streng
Slide 45: Erste Group's ESG targets
APPENDIX: ESG PROFILE (3) Erste Group’s ESG targets Leading the Green Transition Promoting Social Inclusion Sustainable 25% of sustainable corporate financing in 2026 Social EUR 1bn Social Banking financing by 2030 Finance 15% of sustainable retail mortgages in 2027 Banking 200,000 jobs created or p
Slide 46: Environment
APPENDIX: ESG PROFILE (4)/ENVIRONMENT Environment Net zero operations Sustainable finance Operational emissions (in tonnes CO2e): New corporate financing of → pathway towards net zero 2030 environmental objectives Committed amount (total), Dec 23 in EUR m 54,596 Construction and real estate 2,096 53
Slide 47: Net-zero target setting to meet 1.5 degree climate scenarios
APPENDIX: ESG PROFILE (4)/ENVIRONMENT – NET-ZERO TARGET SETTING Net-zero target setting to meet 1.5 degree climate scenarios1 Portfolio decarbonization interim targets 2030 Volume Baseline Targets as of Dec 23 Scenario/ Emissions Sector Metric Methodology pathway scope Year Value 2030 reduction in E
Slide 48: Erste Group has strong ESG ratings
APPENDIX: ESG PROFILE (5)/ESG RATINGS AND INDICES Erste Group has strong ESG ratings 2022 2023 Erste Group maintains rating of AA in the MSCI ESG Ratings assessment. AA AA (5.9) (5.5) Erste Group’s assessment by Sustainalytics in the low risk category was confirmed. Low Risk Low Risk 15.3 / 100 16.4
Slide 49: Erste Group benefits from strong and well-diversified shareholder base
APPENDIX. SHAREHOLDER STRUCTURE Erste Group benefits from strong and well-diversified shareholder base By investor By region Erste Foundation direct 5.64% 2.21% 4.05% Sparkassen Beteiligungs 0.57% 0.57% GmbH & Co KG 2.65% 2.65% 11.90% Foundations 17.57% Wiener Städtische 33.08% Austria Versicherungs
Slide 50: Erste Group Bank AG boasts strong issuer ratings
APPENDIX: CREDIT RATINGS Erste Group Bank AG boasts strong issuer ratings Weighted Macro Profile SACP - Stand-Alone Credit Profile VR - Viability Rating Strong a (Individual Rating ) + ▲ a Financial Profile Anchor bbb+ Asset Risk baa1 Business position Strong +1 Capital baa1 SRF - Support Rating Flo
Slide 51: Geographical/operating and business segment view
APPENDIX: SEGMENT REPORTING 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 − Holding
Slide 52: Erste Group IR contact details
APPENDIX: INVESTOR RELATIONS CONTACTS AND SHARE INFO Erste Group IR contact details IR Team Role Phone Email Catherina Frass IR Assistant +4350100 17731 catherina.frass@erstegroup.com Gerald Krames IR Manager +4350100 12751 gerald.krames@erstegroup.com Peter Makray IR Manager +4350100 16878 peter.ma