Addiko Bank Ag · VIE:ADKO
Addiko Bank — H1 2022 Earnings Presentation
50 slides from Addiko Bank's earnings presentation, Aug 17, 2022
Slide 1: 1H22 Results Presentation
1H22 Results Presentation Herbert Juranek (CEO) Edgar Flaggl (CFO) Tadej Krašovec (CRO) Ganesh Krishnamoorthi (CMO & CIO) Constantin Gussich (Investor Relations) 17 August 2022
Slide 2: Executive Summary & Business Update
Executive Summary & Business Update Financials & Risk Update Outlook & Wrap-Up Additional Materials
Slide 3: Key Highlights 1H22
Key Highlights 1H22 • 1H22 net profit doubles to €12.6mn (1H21: €6.1mn), EPS at €0.65 − Second quarter result 2022 after tax of €6.1mn (€6.5mn in 1Q22) − Cost of Risk at -26bps with €-8.8mn due to prudent management overlay Earnings • Return on Tangible Equity (@14.1% CET1 ratio) at 4.2% (1H21: 1.8%
Slide 4: Comprehensive Assessment, ESG & Macro Environment
Regulatory Update, ESG & Macro Environment • The Comprehensive Assessment shows no capital shortfall, with Addiko Group remaining above the relevant thresholds AQR • The AQR led to a theoretical adjustment of the CET1 ratio of merely 15bps Comprehensive • This is the result of Addiko Group’s prudent
Slide 5: Focus Portfolio Development on Track with Sharpened Approach in SME
Focus Portfolio Development on Track with Sharpened Approach in SME Focus portfolio development Development during 1H22 Gross performing loans (€mn) YoY +8% +9% 2,641 • Transformation Program shows traction in 2,352 2,424 2,446 Zoom-in business development view 1,164 SME 1,040 1,092 1,057 • Focu
Slide 6: Solid Foundations to Becoming the Leading Specialist Bank for Consumer & SME
Solid Foundations to Becoming the Leading Specialist Bank for Consumer & SME Customers in CSEE Key Strategic Pillars Improving dynamics YoY €mn, digital users and clients in thousands YoY 694 +39% Consumer 498 66 -29% • Strengthening Digital USP 92 314 +84% • Net Customer growth New business 1
Slide 7: The Addiko Ecosystem for Consumer & SME Customers
The Addiko Ecosystem for Consumer & SME Customers Game changers drive the Addiko Consumer & SME Ecosystem 2023+ Plug & Play platform Digital Consumer 2022 lending Digital SME lending Cards & 2021 Payments Until Brand & USP refresh 2020 Shift to higher yielding BNPL Platform BNPL with FinTech partner
Slide 8: Financials & Risk Update
Executive Summary & Business Update Financials & Risk Update Outlook & Wrap-Up Additional Materials
Slide 9: Financial Performance 1H22 at a Glance
Financial Performance 1H22 at a Glance 5.60% Financial Performance 1H22 2Q21 3Q21 4Q21 1Q22 2Q22 5.10% €mn 62.5 4.60% 59.0 60.5 60.1 58.2 1H21 YoY 4.10% 17.9 17.3 19.1 NCI 16.8 17.0 3.60% Net Netinterest interest income income 84.6 84.2 +0.6% 3.02% 2.86% 2.87% NIM 2.85% 2.83% 3.10% Net fee Net & com
Slide 10: Capital Position Remains Strong
Capital Position Remains Strong Capital development transitional1 Capital requirement & guidance % CET1/TCR, YTD, RWAs transitional in €mn 14.60% RWA 3,625 €+139.1mn 3,764 €-36.0mn 3,728 SREP 2021 (valid as of 1 March 2022) 13.75% 0.71% • Pillar 2 Requirement (P2R) of 3.25% 3.50% 0.31% 0.78% 0.63% 0
Slide 11: Recent Capital Development
Recent Capital Development Capital development1 % CET1/TCR, YTD, RWA in €mn Addiko Group Zoom-in view Pro-forma 1.14% (as of 10 Aug. 2022) 0.05% 0.84% 0.51% 1.01% 0.48% 0.02% 0.18% 18.9% 21.6% 19.7% 18.8% 19.3% 19.8% CET1/ TCR fully-loaded Market value development of illustrative & highly affected C
Slide 12: Continued NPE Reduction
Continued NPE Reduction NPE volume & ratio development Quarterly NPE formation & exit €mn, YTD €mn, QTD 3Q21 4Q21 1Q22 2Q22 NPE ratio 3.5% 2.9% 2.8% 2.8% Formation 26.0 35.3 16.4 19.9 NPE ratio (on-balance loans)1 4.7% 4.0% 3.9% 3.8% 4.0 4.4 1.4 20.0 10.1 3.6 2.1 3.7 244 11.5 11.3 12.9 12.5 194 187
Slide 13: Cost of Risk at a Glance
Cost of Risk at a Glance Credit loss expenses on financial assets 1H22 YTD, €mn, positive number for release • 1H22 credit loss expenses 0.6 1.3 (0.0) of €-8.8mn resulting in - 0.26% cost of risk (on net Impairments (negative) loans): (10.6) Releases (positive) (8.8) (8.8) − Consumer: -0.73% − SME (
Slide 14: Addiko's Commitment to the Sustainable Development Goals
Addiko’s Commitment to the Sustainable Development Goals ESG in Addiko - It is the little things that count Next steps • CRO defined as ESG Environment Social Governance Officer in Addiko • Implementation plan for 21 initiatives defined Good governance • Roll-out during 2022, Together with our Socia
Slide 15: Outlook & Wrap-Up
Executive Summary & Business Update Financials & Risk Update Outlook & Wrap-Up Additional Materials
Slide 16: Transformation Program Status and Next Steps
Transformation Program • Transformation program leads to significant revenue growth combined with efficient cost management confirming that last year’s initiatives are bearing fruit Status • Outlook for the second half of 2022 revised upwards: Brand repositing with our brand ambassador Oskar to supp
Slide 17: Outlook
Outlook Outlook 2022 revised upwards to reflect higher income from strong business development as well as higher costs due to inflationary pressures: – Gross performing loans: c. €3.3bn with >10% growth in focus ➔ REVISED – Net Banking Income: above €240mn as a result of improved business activities
Slide 18: Additional Materials
Executive Summary & Business Update Financials & Risk Update Outlook & Wrap-Up Additional Materials
Slide 19: Addiko at a Glance
Addiko at a Glance Overview of Addiko Operating as one region - one bank 1H22, % of Group Assets (rounded) ✓ Fully licensed bank with HQ in Austria, focused 100% on Central ✓ and South Eastern Europe ✓ Addiko Bank AG is regulated by the Austrian Financial Market Austria ✓ (3%2) Authority (“FMA”)1 an
Slide 20: Clear Strategy to Transform Loan Book Towards Consumers & SMEs
Clear Strategy to Transform Loan Book Towards Consumers & SMEs Strategic pillars Near term – key insights Competitive specialist strategy • CSEE with higher growth CSEE compared mature markets in our market for our focus Pure-Play segments Consumer & SME • Still underserved niches 78% • Growth in fo
Slide 21: Simple Balance Sheet Composition 1H22
Simple Balance Sheet Composition 1H22 Assets Liabilities and Equity 1H22, €bn 1H22, €bn 5.7 5.7 Other ✓• Liquid balance sheet Other Assets 0.2 0.1 Liabilities ✓• Strong deposit base - LCR ratio: 246% (1Q22: 259%) 0.2 Due to Credit Institutions - Loan-deposit ratio 0.4 Direct (customer) : 72.6% (YE21
Slide 22: Acceleration of Growth in Focus Areas Consumer & SME
Acceleration of Growth in Focus Areas Consumer & SME Gross performing loans in focus segments Gross yield by segment1 Gross loans of focus segments as % of total gross performing loans 1H22 YTD QTD QTD Full year 2Q22 1Q22 2021 yield yield yield Consumer 7.0% 6.9% 7.0% 7.1% % in focus 40% 51% 56% 62%
Slide 23: Consumer and SME Lending Development
Consumer and SME Lending Development Consumer (from 1Q21 Micro shifted to SME) SME €mn, YTD €mn, YTD CAGR: 12.5% CAGR: 11.3% 1,431 1,476 1,342 1,312 1,306 1,332 1,370 1,389 1,188 1,164 1,059 1,040 1,055 1,092 1,103 1,057 1,106 1,028 928 774 791 646 Gross Performing Loans 2016 2017 2018 2019 2020 1Q2
Slide 24: Non-Focus Reduction Accelerated in Line with Transformation Program
Non-Focus Reduction Accelerated in Line with Transformation Program Non-Focus portfolio development Mortgages, Large Corp. & Public Fin. gross performing loans (€mn) YoY -16% -12% -24% -11% -33% 1,469 1,252 Large 1,105 Corp. & 724 841 Public 613 745 522 307 259 Mortgages 744 639 584 535 48
Slide 25: Addiko: Growth in Consumer Lending Slowly Returning
Addiko: Growth in Consumer Lending Slowly Returning Addiko market share – unsecured consumer loans (stock outstanding, 1H22E)1,2 • Consumer lending market size Bosnia & Serbia Croatia Herzegovina Slovenia Montenegro grew by +2.7% vs. 2021 Market Size, 7.4 9.7 4.3 4.1 1.0 • Serbian market with strong
Slide 26: Digital Lending Platforms in All Major Markets
Digital Lending Platforms in All Major Markets WebLoan Group Application Processing System (GAPS) Simple entry point for loan requests with Simple branch loan Application Processing System instant initial offer (final approval & closure in including CDE (Credit Decision Engine) branch) Achievements
Slide 27: Digital Transformation Reflected
Digital Transformation Reflected Digital capabilities YTD +15% YoY Registered Mobile Banking 150 188 197 230 242 +1% Mobile banking users (vs. PQ) Users (ths.)2 +13% YoY +1% Digital users (vs. PQ) 257 246 229 210 177 Bank@Work 26% (1Q22: 28%, YE21: 28%, 3Q21: 28%, 1H21: 28%) 37% Digital consumer loa
Slide 28: Financials: Financial Performance 1H22 in Detail
Financials: Financial Performance 1H22 in Detail Key financials P&L •1 Operating result at €32.3mn up 14.8 YoY%: in €mn YTD QTD − Net banking income up YoY and vPQ driven 1H22 (YTD) 1H21 (YTD) +/- PY 2Q22 1Q22 +/- PQ by strong development in Consumer & SME, Net interest income 84.6 84.2 0.6% 43.4 41
Slide 29: Financials: Key Performance Drivers 1H22
Financials: Key Performance Drivers 1H22 Net interest income Net fee and commission income €mn €mn NIM 287bp 296bp 285bp 287bp 302bp % of 38% 43% 40% 41% 44% NII +0.6% +2.7% +13.7% -2.3% +5.0% 84.2 84.6 +14.2% +1.0% +12.5% 42.2 41.3 43.4 31.6 36.1 16.8 17.0 19.1 1H21 (YTD) 1H22 (YTD) 2Q21 (QTD) 1Q22
Slide 30: Financials: Interest Income Dynamics
Financials: Interest Income Dynamics Interest income by quarter1 Gross yield by quarter2 €mn 2Q21 3Q21 4Q21 1Q22 2Q22 46.8 47.0 47.1 47.5 45.4 7.2% 7.0% 7.0% 7.0% 6.9% Consumer Other 6.9 6.7 6.9 7.2 6.6% 6.5% 6.5% 6.3% 6.5% Public & 6.4 new new new new new Large 1.9 business business business busine
Slide 31: Financials: Breakdown of Other Interest Income
Financials: Breakdown of Other Interest Income Treasury interest income by quarter €mn Other interest • Government securities in EU entities: Addiko adapted its 6.9 6.9 7.2 6.4 6.7 income (total) treasury strategy to hold its investments in high quality bonds in the EU entities until maturity for yi
Slide 32: Financials: Interest Expense Dynamics
Financials: Interest Expense Dynamics Interest expense by quarter Cost of funding by quarter1 €mn Treasury Deposits – 4.6 4.4 4.4 Credit 4.1 4.1 Group Cost 0.9 0.37% Institutions 0.9 0.9 of Funding2 0.35% 1.0 1.0 0.35% 0.34% 0.34% Direct 0.4 0.3 0.4 0.4 Direct Deposits 0.3 0.2 0.4 0.4 0.2 0.3 Deposi
Slide 33: Financials: Perspective on Interest Rate Sensitivity
Financials: Perspective on Interest Rate Sensitivity Estimated impact on NII and NIM for parallel interest rate shifts Interest binding structure of customer deposits €mn, calculated based on 1H22 balance sheet % of customer deposits, calculated based on 1H22 balance sheet D NIM +3bp +7bp +11bp 6.5
Slide 34: Financials: Commission Income Dynamics
Financials: Commission Income Dynamics Net fee and commission income by quarter Key highlights €mn 19.1 • Solid improvement of net commission income in 17.9 17.3 1.3 2Q22: up 13.7% vs. 2Q21 16.8 17.0 1.3 Non-Focus 1.3 1.1 1.6 and Other • Bancassurance up c. 60% YoY due to accelerated business activi
Slide 35: Financials: Other Income & Other Result
Financials: Other Income & Other Result Other income breakdown (YTD) €mn 1H21 1H22 Lower regulatory charges for recovery and resolution fund, 1 and newly charged costs for deposit guarantee scheme in Deposit guarantee -2.7 -4.0 Croatia 1 Bank levies and other taxes -1.8 -1.8 Recovery and Resolution
Slide 36: Financials: Development of Operating Expenses
Financials: Development of Operating Expenses Operating expenses development by quarter Administrative expenses €mn 1H22 YTD, €mn Other2 4.0 13% Advertising 4.1 13% Total: 15.7 1.4 €31.1mn IT Legal & Advisory 50% 5% 43.6 5.9 Depreciation 42.4 41.7 19% And 40.7 41.1 4.6 Premises Expenses Amortization
Slide 37: Financials: Balance Sheet
Financials: Balance Sheet Detailed balance sheet overview (YTD) €mn 2016 2017 2018 2019 2020 2021 1H22 Liquid Assets 3,287.6 2,582.5 2,211.8 2,034.5 2,121.8 2,406.5 2,179.1 Cash reserves 1,878.2 1,285.9 1,002.9 899.4 1,156.3 1,361.7 1,185.1 Investment Portfolio 1,409.4 1,296.6 1,208.9 1,135.1 965.5
Slide 38: Financials: Income Statement
Financials: Income Statement Detailed income statement overview (YTD) €mn New P&L logic 2016 2017 2018 2019 2020 2019 2020 2021 1H21 1H22 Interest income calculated using the effective interest method 232.2 226.0 209.6 207.4 194.3 207.4 194.3 185.5 92.4 92.3 Other interest income 6.0 8.3 4.2 3.4 2.6
Slide 39: Financials: Breakdown by Entity
Financials: Breakdown by Entity 1H22 YTD Addiko Bank d.d., Addiko Bank d.d., Addiko Bank d.d., Addiko Bank a.d., Addiko Bank a.d., Addiko Bank A.D., (€mn, IFRS) Zagreb Ljubljana Banja Luka Sarajevo Beograd Podgorica Net interest income 26.4 19.5 7.6 7.2 16.7 5.4 Net commission income 13.4 7.5 4.1 3.
Slide 40: Risk: Strong Risk Management Framework
Risk: Strong Risk Management Framework Non-performing loan portfolio (YTD) NPE Volumes, 1,229 761 606 404 329 277 244 244 230 238 238 194 187 183 €mn NPE Coverage Ratio1 61.7% 67.5% 67.0% 75.4% 73.2% 73.8% 73.2% 73.6% 75.6% 71.7% 71.2% 71.9% 72.2% 76.7% (Ex-Collateral) 14.3% NPE Ratio2 9.2% 8.1% 5.6
Slide 41: Risk: Robust Asset Quality in Portfolios
Risk: Robust Asset Quality in Portfolios Focus Non-Focus Consumer SME €mn, rounded €mn, rounded €mn, rounded > 90 1,825 1,836 days 1,766 1,770 32 1,691 46 61-90 48 24 29 48 1,634 49 41 39 > 90 1,576 1,579 days days 48 72 58 45 74 31-60 > 90 61-90 71 62 days days days < 30 61-90 1,316 31-60 days days
Slide 42: Risk: Provision Coverage Evolution
Risk: Provision Coverage Evolution Stage 1, 2 and 3 assets1 Business segments: Stage 1 & 2 (Performing) coverage €mn 1H22 (YTD) ECL coverage By Segment 1Q22 2021 1H21 4,761 4,717 238 238 4,474 4,456 4,477 Focus Focus 1.9% 1.9% 2.0% 2.5% 194 187 183 613 584 450 Consumer 2.9% 2.8% 2.8% 3.5% 490 483 SM
Slide 43: Risk: NPE Formation and Exit Dynamics
Risk: NPE Formation and Exit Dynamics NPE movements YE21 vs. 1H22 – group level €mn Previous risk framework (before 1.1.2016) New risk framework (from 1.1.2016) 194 26 183 3 (15) (25) 2021 NPE reduction NPE formation NPE reduction NPE formation 1H22 Quarterly NPE formation & exit - group level Consu
Slide 44: Low NPE Concentration, Well Provisioned and Carefully Managed
Low NPE Concentration, Well Provisioned and Carefully Managed Overview of Top 10 NPEs 1H22, Group of Borrowers, €mn Borrower Total Exposure Country Description Metal industry and mechanical NPE 1 9.5 Croatia engineering Coverage for Top 10 NPEs (1H22) NPE 2 4.7 Slovenia Tourism Coverage 65.5% 84.0%
Slide 45: Risk: Update on NPE and Cost of Risk Development
Risk: Update on NPE and Cost of Risk Development Focus Non-Focus3 €mn Consumer (from 1Q21 Micro shifted to SME) SME €mn €mn NPE Coverage Ratio (Excl. 84.8% 81.1% 78.8% 79.2% 70.4% 71.1% 64.1% 69.9% 68.5% 64.6% 72.4% 80.9% Collateral)1 6.4% 6.1% 5.9% 6.0% 4.5% 4.8% 4.6% 4.0% 4.0% 4.0% NPE Ratio2 3.5%
Slide 46: Risk: Tightly Monitored NPE Development
Risk: Tightly Monitored NPE Development Consumer (from 1Q21 Micro shifted to SME) SME Mortgages Large Corporates Public Finance €mn €mn €mn €mn €mn NPE Coverage Ratio1 84.8% 78.8% 79.2% 70.4% 64.1% 69.9% 71.6% 77.6% 80.1% 53.4% 53.5% 91.2% 49.6% 40.6% 45.7% 11.2% 9.4% 8.2% 4.5% 4.6% 4.0% 4.0% NPE Ra
Slide 47: Risk: CHF Loans Significantly Managed Down
Risk: CHF Loans Significantly Managed Down CHF portfolio overview CHF conversion across countries €mn % of Total Credit Risk 5.5% 4.4% 3.4% 1.9% 1.7% 1.3% 1.3% 1.3% • In the past, several legislation initiatives on CHF loans have been started Exposure 1 but eventually rejected, questioning the const
Slide 48: Update on Capital Position: Details
Update on Capital Position: Details Breakdown of capital position and capital requirements Transitional Addiko is using the standardized approach for its 18.8% IFRS 9 22.2% fully-loaded RWA calculation, with most of its RWAs stemming 20.3% 19.8% 20.4% 20.0% from credit risk 17.7% SREP 2021 (valid as
Slide 49: Update on Capital Position: Credit Risk RWA in Focus vs. Non-Focus
Update on Capital Position: Credit Risk RWA in Focus vs. Non-Focus Risk weighting for focus portfolio is in line with overall contribution to loan book Credit risk RWA Credit risk RWA: breakdown by segment1 1H22, €mn 1H22, €mn Public Finance Large Corporate 32 Consumer 235 3,083 3,067 Mortgages 298
Slide 50: Disclaimer
Disclaimer THESE RESULTS AND STATEMENTS (HEREINAFTER REFERRED TO AS “MATERIALS”) WERE CAREFULLY PREPARED BY ADDIKO BANK AG. HOWEVER, THE MATERIALS HAVE NOT BEEN INDEPENDENTLY VERIFIED. THEREFORE, ADDIKO BANK AG MAKES NO REPRESENTATION AND GIVES NO WARRANTY, NEITHER IMPLIED NOR EXPRESSED, AND ASSUMES