Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q1 2022 Earnings Presentation
56 slides from Erste Group Bank's earnings presentation, Apr 29, 2022
Slide 1: Erste Group investor presentation Q1 2022 results
Erste Group investor presentation Q1 2022 results 29 April 2022 Erste Group starts 2022 with strong topline performance 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 • 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 developments (1) – Setting the frame for today's presentation
Key developments (1) – Setting the frame for today’s presentation • Strong start to 2022 despite many challenges • Faster and more sizable than expected rate hikes in Czech Republic, Hungary and Romania to counter inflation • Economic growth robust during Q1 22 in CEE & Austria, but outlook lowered
Slide 5: Key developments (2) – Updated impact analysis of Ukraine war/Russia sanctions
Key developments (2) – Updated impact analysis of Ukraine war/Russia sanctions on Erste Group • Erste Group has no direct subsidiaries in Russia (RU), Ukraine (UA) or Belarus (BY) • Erste Group has only immaterial credit exposure (EUR ~50m gross) to RU, UA and BY, accordingly confirms FY2022 guidanc
Slide 6: Key developments (3) – Initial impact analysis of Ukraine war/Russia sanctions
Key developments (3) – Initial impact analysis of Ukraine war/Russia sanctions on Erste Group • Direct market exposures, including derivatives (trading book and banking book securities accounted at fair value) are negligible too, resulting in no material economic risk to the bank • No direct exposur
Slide 7: Key developments (4) – Ukraine war/Russia sanctions – macro view
Key developments (4) – Initial impact analysis of Ukraine war/Russia sanctions – macro view • Economic growth to slow in CEE & AT in 2022 Real GDP expectations for 2022 (in %)* • Elevated commodity prices expected to lead to higher production costs and to weigh on consumption Forecasts provided on F
Slide 8: Executive summary – Group income statement performance
Executive summary – Group income statement performance QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m) +26.4% -4.9% 472 29 132 70 208 449 48 49 449 23 40 42 7 9 24 355 Q4 21 Operating Operating Risk costs Other Taxes on Minorities Q1 22 1-3 21 Operating Operating Risk cos
Slide 9: Executive summary – Key income statement data
Executive summary – Key income statement data Net interest income & margin Operating result & cost/income ratio Cost of risk 2.14% in EUR m in EUR m in EUR m 1.99% 2.08% 2.14% 59 +10.4% 58.1% 60.7% 0.24% 0.13% 36 1,306 1,392 725 801 842 801 1,392 107 1,172 59 1-3 21 1-3 22 Q4 21 Q1 22 1-3 21 1-3 22
Slide 10: 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) +5.9% +5.9% 325,610 325,610 25 17 1,854 555 5,025 576 11,859 9,824 307,428 2,613 307,428 2,896 729 443 31/12/21 Cash Trading, Loans to Net loans Intangibles
Slide 11: Executive summary – Key balance sheet data
Executive summary – 31/12/21 Key balance sheet data 31/03/22 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn 85.6% 83.3% +2.8% 91.9% 90.9% 58.6% 56.9% 180.3 185.3 111.2 114.9 2.4% 2.3% Loan/deposit ratio Loans/total assets Net loans Credit RWA (B3FL) NPL
Slide 12: 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 12
Slide 13: 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 %) 5.8 5.6 5.7 11.7 4.8 4.3 9.5 10.2 3.8 4.2 9.2 3.9 4.0 3.8 3.6 3.3 3.5 3.5 6.9 7.5
Slide 14: 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 across the region until February; first slowdown in countries with Loan portfolio (in EUR billion) increasing interest rates (e.g. CZ) Housing loans Consumer loans • Demand for consumer l
Slide 15: Business update – Retail – what's happening on the ground? (2)
Business update – Retail – what‘s happening on the ground? (2) Number of George users • “Omicron-wave” with no significant impact on branch operations, (in million) branch traffic only slightly below pre-crisis levels +4% • Clients going digital: 7.8 8.1 • More than 8 million users onboarded to Geor
Slide 16: Corporates & Markets – what's happening on the ground?
Business update Corporates & Markets – what‘s happening on the ground? Corporate loan stock development • Dynamic loan development (gross, business line view, in EUR bn) • Loan volume grew by almost EUR 7bn yoy; highest growth again in our major markets in Austria, Romania and the +11.4% +3.7% +5.6%
Slide 17: 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 17
Slide 18: Operating trends: net loan stock & growth
Operating trends: net loan stock & growth – YoY 31/03/21 QoQ 31/12/21 Strong net loan growth continues in Q1 22 31/03/22 167.8 10.4% • Yoy growth strong and well balanced across all key Group 180.3 185.3 2.8% business segments: Corporates (+11.7%), Retail 35.9 (+11.3%); solid contribution by Savings
Slide 19: Operating trends: customer deposit stock & growth
Operating trends: customer deposit stock & growth – YoY 31/03/21 QoQ 31/12/21 Strong deposit growth, loan/deposit ratio at 83.3% 31/03/22 205.4 8.3% • Yoy growth due to exceptional inflows of Retail Group 210.5 222.4 5.6% (+9.7%) as well as Corporate deposits (+19.4%); 43.9 Savings Banks also strong
Slide 20: Operating trends: NII and NIM
Operating trends: NII and NIM – Q1 21 Q4 21 Rate hikes drive NII up Q1 22 1,172 1.99% • NII up yoy and qoq on solid volume growth and Group 1,306 2.08% 1,392 2.14% improved rate environment, primarily in CZ 149 1.36% AT/EBOe 164 1.42% 160 1.34% AT/SB 262 272 1.60% 1.60% • Year-on-year segment trends
Slide 21: Operating trends: operating income
Operating trends: operating income – YoY Q1 21 QoQ Q4 21 NII and fees drive revenue growth – trading & FV result weak Q1 22 1,829 11.4% • Revenues up yoy, pushed by exceptional NII Group 2,007 1.5% 2,036 (+18.8%) and fee (+14.0%) performance, offsetting 280 5.1% weak net trading & FV result AT/EBOe
Slide 22: Operating trends: operating expenses
Operating trends: operating expenses – YoY Q1 21 QoQ Q4 21 Costs driven up by higher deposit insurance contributions Q1 22 1,103 12.0% • Yoy increase due to higher deposit insurance Group 1,165 1,235 6.0% contributions; personnel expenses only moderately 191 up (+1.3%) 8.6% AT/EBOe 184 208 13.0% • Q
Slide 23: Operating trends: operating result and CIR
Operating trends: operating result and CIR – YoY Q1 21 QoQ Q4 21 Operating result up 10.4% yoy, CIR at 60.7% Q1 22 Operating result YoY & QoQ change Cost/income ratio 725 60.3% Group 842 10.4% 58.1% -4.8% 60.7% 801 89 68.4% AT/EBOe 128 -2.5% 59.1% -32.4% 70.7% 86 123 70.7% AT/SB 161 -32.0% 64.6% -47
Slide 24: Operating trends: risk costs
Operating trends: risk costs (abs/rel*) – Q1 21 Q4 21 Benign risk environment continues in Q1 22 – risk costs of 13 bps Q1 22 Group 36 107 0.08% 0.24% • No visible effects yet on risk costs from economic 59 0.13% slowdown following the war in Ukraine -5 -0.06% AT/EBOe 14 0.15% 10 0.10% • Qoq develop
Slide 25: Operating trends: asset quality – NPL ratio and coverage
Operating trends: asset quality – NPL ratio and coverage 31/03/21 31/12/21 NPL ratio at historic low, coverage ratio at comfortable level 31/03/22 2.6% 89.5% 90.9% • NPL ratio improves to 2.3% and NPL coverage Group 2.4% 2.3% 91.9% increases to 91.9% on accelerating loan growth 64.3% AT/EBOe 1.6% 1.
Slide 26: Operating trends: other result
Operating trends: other result – Q1 21 Q4 21 Other result characterised by resolution fund contributions Q1 22 -125 • Yoy development relatively stable as higher Group -83 -132 resolution fund contributions are offset by positive -16 valuation effects AT/EBOe -10 -20 • Qoq deterioration attributable
Slide 27: Operating trends: net result
Operating trends: net result – Q1 21 Q4 21 Net profit increases by 26.4% yoy Q1 22 355 • Yoy profitability improves mainly on substantially higher Group 472 operating income and, to a lesser extent, on lower 449 minority charges 49 • Qoq development driven by seasonally higher operating AT/EBOe 80 3
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 +5.8% +9.1% 34.0 32.5 32.1 Sub debt 35.3 Overnight deposits 34.8 5.0 Senior non-preferred bonds Term deposits
Slide 30: Wholesale funding and capital: LT funding
Wholesale funding and capital: LT funding – Stable LT funding needs in 2022 with recurrence of covered bond funding Maturity profile of debt in EUR bn 5.2 3.7 3.3 3.2 2.3 2.4 2.1 1.4 1.5 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-
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 (March 2022) Preliminary 3year MREL issuance plan (avg. p.a.) in EUR bn in EUR m 199 ~1,000 – 2,000 86 77 23 23 ~400-500 18 ~300-400 ~300-400 9 9 12 14 6 6
Slide 32: Wholesale funding and capital: CET1 ratio waterfall
Wholesale funding and capital: CET1 ratio waterfall – Fully loaded CET1 at 13.7% in % 14.50 -0.32 -0.30 CET1 Target 13.5% -0.13 -0.04 -0.01 13.70 Reg. Min CET1 10.3% (MDA threshold; P2G excluded) YE 21 ∆ RWA ∆ RWA Structural OCI Risk Costs CET1 other Q1 22 FX in MR • Reported fully loaded CET1 ratio
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 19.4% 19.1% 18.7% 18.6% 17.9% 23.8 23.9 24.8 24.3 135.5 16.3% 16.2% 23.4 128.5 129.6 16.0% 15.9% 127.1 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 Q1 22 key takeaways 2022 outlook • Strong start to 2022 despite many challenges • Real GDP to rise ~1-5% in 2022, inflation between ~5- Operating • Loan growth at +2.8% ytd 12% in Erste Group’s core CEE markets and Austria environment • Deposit growth
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: 2.1m geographically connected countries Employees: 9,746 Employees: 3,632 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 – 31/03/21 31/12/21 Commanding market shares across the CEE region 31/03/22 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 20.7% 22.6% 22.3% 26.0% AT 20.8% AT 23.0% AT 23.2% AT 25.0% 24.0% 21.6% 26.1% 12.0% CZ 24.6% CZ 21.3% CZ 26.8%
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 1-3 21 1-3 22 YOY-Δ Q1 21 Q4 21 Q1 22 YOY-Δ QOQ-Δ Net interest income 1,172.1 1,392.1 18.8% 1,172.1 1,306.2 1,392.1 18.8% 6.6% Interest income 1,208.0 1,623.2 34.4% 1,208.0 1,40
Slide 41: Additional information: group balance sheet
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Mar 21 Jun 21 Sep 21 Dec 21 Mar 22 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 53,954 48,421 47,125 45,495 46,225 -14.3% 1.6% 1.6% Financial assets held for trading 6,464 6,088 6,244 6,473 6,823 5.6% 5.4% 5.4% Der
Slide 42: Additional information: group balance sheet
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Mar 21 Jun 21 Sep 21 Dec 21 Mar 22 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 2,192 2,412 2,193 2,474 2,917 33.1% 17.9% 17.9% Derivatives 1,631 1,392 1,364 1,624 1,988 21.9% 22.5%
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 Q1 2022 Q1 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 32.15% (MPE) resolution approach Interim MREL Target**: • In Q2 2021, Erste Group
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) 184.2 189.3 184.2 189.3 189.3 176.1 179.8 176.1 179.8 3.3 2.2 184.2 0.2 171.8 4.4
Slide 47: Additional information: financial and trading assets
Additional information: financial and trading assets* – LCR at excellent 161.1% By geography By debtor type Liquidity buffer +17.1% in EUR bn in EUR bn 53.5 50.9 100% 80.8 78.6 7.9% 7.2% 7.0% 78.1 45.7 13.1 9.1% 9.1% 10.6% 12.1 28.6% 27.7% 25.9% 11.1 0.9 0.7 5.2 5.6 0.7 3.9 5.6 5.9 6.1 6.3 6.3 83.0%
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) – Social Banking
Additional information: ESG update (1) – Social Banking Impact highlights Starting Entrepreneurs Microfinance Businesses • 6,027 financed customers • 8,885 financed customers • 21,671 education participants • 14,583 provided loans • EUR 184m disbursed loans • EUR 122m disbursed loans • ~29,700 prese
Slide 50: Additional information: ESG update (2) Priority ESG objectives and commitments
Additional information: ESG update (2) Priority ESG objectives and commitments Lead green transition of economies in CEE Targets Erste Group strives to be a leading institution contributing to • Reach 25% green investments in our Climate action the future green economy of the CEE region. That means
Slide 51: Additional information: ESG update (3) Role model in climate action
Additional information: ESG update (3) Our ambition to be a role model in climate action Our progress in reducing emissions Our steps towards climate neutrality Reduced Scope 1+2 emissions by 43% between • Transition of our operations to green buildings with an 2016 and 2021 interim target of more t
Slide 52: Additional information: ESG update (4) Financed emissions
Additional information: ESG update (4) Financed emissions show low emissions intensity Financed emissions as of 31.12.2021 (78% loans to First time disclosure on Scope 3 financed emissions customers portfolio; excl. credit institutions, sovereigns) following the PCAF standards, Scope 3 emissions 11.
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 AA AA Ratings assessment. In 2022, Sustainalytics improved its assessment of Erste Group by 3.2 points and LOW RISK LOW RISK confirmed the ‘low risk’ catego
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 ** 8.13% 5.99% Sparkassen Beteiligungs Identified Trading ** 8.13% Gmbh & Co KG BlackRock Inc. 1.64% Rest of world 10.60%
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