Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q2 2022 Earnings Presentation
56 slides from Erste Group Bank's earnings presentation, Aug 1, 2022
Slide 1: Erste Group investor presentation Q2 2022 results
Erste Group investor presentation Q2 2022 results 1 August 2022 Strong business performance in an uncertain environment Willi Cernko, 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 • Key developments and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 3
Slide 4: Key highlights – Setting the frame for today's presentation
Key highlights – Setting the frame for today’s presentation • Continued strong business and financial performance in H1 22 • Economic growth robust during H1 22 in CEE & Austria, but outlook clouded by uncertainties • Higher than expected loan growth (+6.3% ytd), driven by AT, SK, RO and HR, corpora
Slide 5: Executive summary – Group income statement performance
Executive summary – Group income statement performance QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m) +53.3% +23.9% 36 84 182 58 1,137 144 109 28 23 116 688 356 185 918 449 74 Q1 22 Operating Operating Risk costs Other Taxes on Minorities Q2 22 1-6 21 Operating Operating
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 +10.3% in EUR m in EUR m 2.16% 2.14% 2.15% 83 2.07% 1,861 60.7% 1,688 2,837 49.8% 0.13% 2,449 -0.18% 1,392 1,445 1,060 801 59 -26 -85 1-6 21 1-6 22 Q1 22 Q2 22 1-6 21
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) +6.4% +6.4% 327,093 327,093 47 63 905 373 106 11,275 14,992 7,703 307,428 4,780 3,348 307,428 532 2,677 31/12/21 Cash Trading, Loans to Net loans Intangibles
Slide 8: Executive summary – Key balance sheet data
Executive summary – 31/12/21 Key balance sheet data 30/06/22 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn 85.6% 84.9% +6.3% 91.8% 90.9% 58.6% 58.6% 180.3 191.5 111.2 118.1 2.4% 2.2% Loan/deposit ratio Loans/total assets Net loans Credit RWA (B3FL) NPL
Slide 9: Presentation topics
Presentation topics • Key developments and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 9
Slide 10: Macroeconomic update – Lower economic growth accompanied by high inflation in 2022
Macroeconomic update – 2022 2023 Lower economic growth accompanied by high inflation in 2022 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (avg, in %) 5.6 5.5 5.5 14.3 5.5 5.1 4.9 12.4 4.2 11.4 10.9 3.8 4.0 3.5 1.9 10.0 3.0 2.9 2.5 2
Slide 11: Business update – Retail – what's happening on the ground? (1)
Business update – Retail – what‘s happening on the ground? (1) • Demand for housing loans continued to be strong, especially Loan portfolio in Austria, Slovakia and Romania; however significant drop in (incl. savings banks, in EUR billion) new business in Czech Republic due to interest rate Housing
Slide 12: Business update – Retail – what's happening on the ground? (2)
Business update – Retail – what‘s happening on the ground? (2) Number of George users • Clients going digital (in million) • Usage of digital channels continues to increase; 8.4 million users onboarded to George across 6 markets +7% • Digital product offering continuously extended; digital sales 7.8
Slide 13: Corporates & Markets – what's happening on the ground?
Business update Corporates & Markets – what‘s happening on the ground? Corporate loan stock development • Loan demand is growing constantly (gross, business line view, in EUR bn) • Loan volume grew by more than EUR 5bn yoy; highest growth in Austria, Romania and Slovakia; increase in all +11.4% +14.
Slide 14: Presentation topics
Presentation topics • Key developments and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 14
Slide 15: Operating trends: net loan stock & growth
Operating trends: net loan stock & growth – YoY 30/06/21 QoQ 31/03/22 Strong net loan growth continues in Q2 22 30/06/22 172.1 11.3% • Yoy growth dynamics more pronounced in Group 185.3 191.5 3.4% Corporates (+15.6%) than in Retail (+9.2%); solid 36.2 contribution by Savings Banks (+8.5%) 6.9% AT/EB
Slide 16: Operating trends: customer deposit stock & growth
Operating trends: customer deposit stock & growth – YoY 30/06/21 QoQ 31/03/22 Strong deposit growth, loan/deposit ratio at 84.9% 30/06/22 206.3 9.3% • Yoy growth across business lines, exceptional Group 222.4 1.4% 225.5 inflows from Corporates (+24.0%), Retail (+5.1%) 45.0 4.0% and Savings Banks (+6
Slide 17: Operating trends: NII and NIM
Operating trends: NII and NIM – Q2 21 Q1 22 Volume growth and rate hikes drive NII up Q2 22 1,277 2.13% • NII up yoy and qoq on solid volume growth and Group 1,392 2.14% 1,445 2.15% improved rate environment in CZ, HU and RO 173 1.59% • 2022 outlook upgraded to low double-digit growth, AT/EBOe 160 1
Slide 18: Operating trends: operating income
Operating trends: operating income – YoY Q2 21 QoQ Q1 22 NII and fees drive revenue growth – trading & FV result weak Q2 22 1,962 7.6% • Revenues up yoy, pushed by exceptional NII Group 2,036 3.6% 2,110 (+13.2%) and fee (+7.2%) performance, offsetting 308 1.1% weak net trading & FV result AT/EBOe 29
Slide 19: Operating trends: operating expenses
Operating trends: operating expenses – YoY Q2 21 QoQ Q1 22 Costs normalise, supported by Sberbank reversal Q2 22 1,000 5.0% • Yoy increase due to higher personnel expenses Group 1,235 -15.0% 1,050 (+6.0%) and higher IT costs AT/EBOe 159 208 -8.0% • Qoq development attributable to booking of deposit
Slide 20: Operating trends: operating result and CIR
Operating trends: operating result and CIR – YoY Q2 21 QoQ Q1 22 Operating result up 10.2% yoy, CIR at 49.8% Q2 22 Operating result YoY & QoQ change Cost/income ratio 962 51.0% Group 10.2% 60.7% 801 1.060 32.4% 49.8% 148 51.8% AT/EBOe 86 10.8% 70.7% 165 90.7% 47.1% 189 57.1% AT/SB -8.0% 79.8% 84 107
Slide 21: Operating trends: risk costs
Operating trends: risk costs (abs/rel*) – Q2 21 Q1 22 Partial release of general provisions led to net release Q2 22 Group 47 59 0.11% 0.13% • Underlying credit risk performance of retail and -85 -0.18% corporate customers remained strong in Q2 22 20 0.22% despite an uncertain business environment A
Slide 22: Operating trends: asset quality – NPL ratio and coverage
Operating trends: asset quality – NPL ratio and coverage 30/06/21 31/03/22 NPL ratio at historic low, coverage ratio at comfortable level 30/06/22 2.5% 91.4% 91.9% • NPL ratio improves to 2.2% and NPL coverage Group 2.3% 2.2% 91.8% remains on 91.8% on slight reduction of NPL volume 1.6% 64.6% 63.8%
Slide 23: Stress scenario: stop of Russian gas imports (1)
Stress scenario: stop of Russian gas imports (1) – Analysis of natural gas situation in the CEE region Natural gas share in overall energy mix Gas storage vs annual consumption 97 34 30 30 24 26 25 63 23 58 18 51 48 44 38 27 30 24 16 13 11 16 11 14 6 10 5 3 6 EU DE AT CZ SK RO HU HR DE AT CZ SK RO H
Slide 24: Stress scenario: stop of Russian gas imports (2)
Stress scenario: stop of Russian gas imports (2) – Macro forecasts and impact on risk costs YE2022 YE2023 • No gas from Russia scenario disruptive, but manageable for CEE Eurozone region overall Real GDP growth, in % 1 -3 Inflation rate (HICP) 8 3 • Risk costs of approx. 90bps in 2022, approx. 85bps
Slide 25: Cyclical industries analysis
Cyclical industries analysis – Cyclical industries most exposed to UA geopolitical conflict Industry Exposure Risk Mitigation Metals EUR 4.5bn • One of the most energy-intensive industries (eg. in steel-making, • 2021 was a very profitable year for the metals industry gas is used to reach the needed
Slide 26: Operating trends: other result
Operating trends: other result – Q2 21 Q1 22 Other result impacted by “windfall profit” tax in HU Q2 22 -45 • Yoy development mainly driven by newly introduced Group -132 -96 windfall profit tax in HU AT/EBOe -20 -7 • Qoq improvement attributable to bookings of 3 recovery and resolution fund contrib
Slide 27: Operating trends: net result
Operating trends: net result – Q2 21 Q1 22 Net profit increases by 22.3% yoy Q2 22 563 • Yoy profitability up on higher operating income and net Group 449 688 releases of risk provisions 90 • Qoq development additionally reflects improved other AT/EBOe 33 result and reversal of deposit insurance con
Slide 28: Presentation topics
Presentation topics • Key developments and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Wholesale funding and capital • Key takeaways and outlook • Additional information Page 28
Slide 29: Wholesale funding and capital: debt vs interbank funding
Wholesale funding and capital: debt vs interbank funding – Stable wholesale funding reliance, as customer deposits grow strongly Debt securities issued Interbank deposits in EUR bn in EUR bn -2.8% +15.0% 32.1 31.2 30.2 Sub debt 36.7 Overnight deposits 5.4 Senior non-preferred bonds 34.6 Term deposit
Slide 30: Wholesale funding and capital: LT funding
Wholesale funding and capital: LT funding – Weathering volatile markets with successful Tier 2 issuance Maturity profile of debt in EUR bn 5.3 4.4 3.7 3.5 2.5 2.4 1.6 1.5 1.4 1.2 0.6 0.1 0.0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034+ Senior unsec. bonds Senior non-preferred bo
Slide 31: Wholesale funding and capital: MREL update
Wholesale funding and capital: MREL update – All resolution groups successfully completed their inaugural MREL issuances MREL resolution groups (June 2022) Preliminary 3year MREL issuance plan (avg. p.a.) in EUR bn in EUR m 199 ~1,000 – 2,000 87 75 24 24 19 ~400-500 ~300-400 ~300-400 10 9 13 12 ~100
Slide 32: Wholesale funding and capital: CET1 ratio waterfall
Wholesale funding and capital: CET1 ratio waterfall – Fully loaded CET1 at 14.2% in % 14.50 -0.69 0.88 -0.31 CET1 Target 13.5% 14.19 RWA -0.23 0.13 0.15 -0.24 Reg. Min CET1 10.4% (MDA threshold; P2G excluded) YE 21 ∆ RWA ∆ RWA Profit Dividend accrual OCI Minorities CET1 other Q2 22 Structural FX in
Slide 33: Wholesale funding and capital: capital & RWA
Wholesale funding and capital: capital & RWA – Risk-weighted assets increase on business effects and market risk Basel 3 capital Risk-weighted assets Basel 3 capital ratios in EUR bn in EUR bn 19.1% 18.7% 18.6% 18.5% 17.9% 25.6 135.5 138.2 16.2% 24.8 16.0% 15.9% 15.8% 23.8 23.9 24.3 128.5 129.6 15.4
Slide 34: Presentation topics
Presentation topics • Key developments and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 34
Slide 35: Conclusion – Key takeaways and outlook for 2022
Conclusion – Key takeaways and outlook for 2022 H1 22 key takeaways 2022 outlook • Continued strong business performance • Real GDP to rise ~2-5% in 2022, inflation between ~7- Operating • Loan growth at +6.3% ytd 14% in Erste Group’s core CEE markets and Austria environment • Deposit growth at +7.1
Slide 36: Presentation topics
Presentation topics • Key developments and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 36
Slide 37: 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 in 7 Customers: 4.5m Customers: 2.0m geographically connected countries Employees: 9,818 Employees: 3,633 CZ Bra
Slide 38: 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 Acting as Prosperi
Slide 39: Additional information: market shares
Additional information: market shares – 30/06/21 31/03/22 Commanding market shares across the CEE region 30/06/22 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 21.1% 23.0% 22.8% 26.2% AT 20.7% AT 23.3% AT 23.6% AT 27.1% 24.1% 21.5% 26.3% 12.3% CZ 24.7% CZ 20.9% CZ 27.1%
Slide 40: Additional information: income statement
Additional information: income statement – Year-to-date and quarterly view Year-to-date view Quarterly view in EUR million 1-6 21 1-6 22 YOY-Δ Q2 21 Q1 22 Q2 22 YOY-Δ QOQ-Δ Net interest income 2,448.7 2,837.0 15.9% 1,276.5 1,392.1 1,444.9 13.2% 3.8% Interest income 2,434.1 3,508.1 44.1% 1,226.1 1,62
Slide 41: Additional information: group balance sheet (assets)
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Jun 21 Sep 21 Dec 21 Mar 22 Jun 22 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 48,421 47,125 45,495 46,225 42,818 -11.6% -5.9% -7.4% Financial assets held for trading 6,088 6,244 6,473 6,823 6,110 0.4% -5.6% -10.4
Slide 42: Additional information: group balance sheet (liabilities and equity)
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Jun 21 Sep 21 Dec 21 Mar 22 Jun 22 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 2,412 2,193 2,474 2,917 3,005 24.6% 21.5% 3.0% Derivatives 1,392 1,364 1,624 1,988 1,989 42.9% 22.5% 0
Slide 43: Additional information: regulatory capital position/requirement (SREP)
Additional information: regulatory capital position/requirement (SREP) – Capital requirements (SREP) for 2022 slightly up on higher CCyB Erste Group Consolidated Erste Group Unconsolidated ECB Capital Relief Fully loaded Fully loaded Measures 1) Fully loaded Fully loaded 2020 2021 Q2 2022 Q2 2022 YE
Slide 44: Additional information: Multiple point of entry resolution strategy
Additional information: Multiple point of entry resolution strategy – MREL compliance at Point of Entry Levels (bail-in) Ownership Structure 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 spořite
Slide 45: Additional information: MREL details Austrian resolution group
Additional information: MREL details Austrian resolution group: MREL requirement based on RWA fulfilled MREL capacity based on TREA (RWA)* Key take-aways in % • Erste Group’s setup is based on a multiple point of entry 34.17% (MPE) resolution approach • In Q2 2022, Erste Group Bank AG received its M
Slide 46: 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) 189.3 195.4 189.3 195.4 195.4 179.8 184.2 179.8 184.2 3.3 2.4 3.2 0.2 176.1 4.3 4.
Slide 47: Additional information: financial and trading assets
Additional information: financial and trading assets* – LCR at excellent 154.3% By geography By debtor type Liquidity buffer +12.2% in EUR bn in EUR bn 54.5 50.9 7.4% 7.0% 6.5% 100% 78.3 78.1 48.6 73.3 13.8 8.5% 10.6% 12.8% 12.1 28.0% 11.5 25.9% 24.2% 0.9 0.8 0.7 4.8 4.1 5.2 5.6 5.6 5.9 6.2 6.2 6.3
Slide 48: 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 Ca
Slide 49: Additional information: ESG update (1) – ESG Compass of Erste Group
Additional information: ESG update (1) – ESG Compass of Erste Group Supporting the well-being in our region through socio-environmental objectives Priority Objectives Our Promise Leading Green Transition Customers providing prosperity to our clients in Erste Group strives to be a role an inclusive,
Slide 50: Additional information: ESG update (2) – main ESG pillars
Additional information: ESG update (2) – main ESG pillars Sustainability is embedded into the DNA of the organisation Sustainable Working Finance together mobilize financial resources and customer advice for actively participate in public initiatives and thus social-ecological goals and support cust
Slide 51: Additional information: ESG update (3) – ESG targets
Additional information: ESG update (3) ESG targets 37% Erste Group through its Social Banking 25% green investments by 2026 in our continues to be the leader in offering financial services to NGOs, start-ups and individuals in difficult situations. women in B/B-1 positions corporate book to be reach
Slide 52: Additional information: ESG update (4) 2021
Additional information: ESG update (4) 2021 Environment NET ZERO JOURNEY GREEN FINANCING Scope 1+2 decrease of emissions (tonnes of CO2e) Green bonds arranged and own pathway towards climate neutrality 2023 emissions Arranged: EUR 4.5 bn 2017 76,677 (sovereigns & fin. institutions) + EUR 2bn corpora
Slide 53: Additional information: ESG update (5) – ESG ratings and indices
Additional information: ESG update (5) ESG ratings and indices 2020 2021 In 2019, Erste Group Bank AG received a rating of ‘AA’ in the MSCI ESG Ratings AA AA assessment. In 2022, Sustainalytics improved by 3.2 points its assessment of Erste Group and LOW RISK LOW RISK confirmed in ‘low risk’ categor
Slide 54: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Unidentified * Erste Foundation direct Unidentified * Identified Trading ** 8.98% 5.90% Sparkassen Beteiligungs Identified Trading ** 8.98% Gmbh & Co KG BlackRock Inc. 1.64% Rest of world 10.94%
Slide 55: Additional information: segment structure
Additional information: segment 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 • H
Slide 56: 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