Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q1 2018 Earnings Presentation
46 slides from Erste Group Bank's earnings presentation, May 4, 2018
Slide 1: Erste Group investor presentation Q1 18 results (unaudited)
Erste Group investor presentation Q1 18 results (unaudited) 4 May 2018 Strong risk performance drives net profit growth, guidance confirmed Andreas Treichl, CEO Erste Group Gernot Mittendorfer, CFO Erste Group Willibald Cernko, 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 • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 3
Slide 4: Executive summary – Group income statement performance
Executive summary – Group income statement performance QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m) +1.2% 49 +26.8% 115 329 70 333 25 333 9 19 7 120 81 80 262 34 47 Q4 17 Operating Operating Risk costs Other Taxes on Minorities Q1 18 1-3 17 Operating Operating Risk cos
Slide 5: 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 2.33% 2.27% 2.41% 0.17% 2.27% 66.1% 64.5% 66 61 -0.22% 1,083 1,124 1,083 1,051 -2.1% 599 587 587 587 -54 -54 1-3 17 1-3 18 Q4 17 Q1 18 1-3 17 1-3 18
Slide 6: 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) +4.2% +4.2% 230,018 230,018 13 278 169 293 1,328 2,527 4,337 2,818 855 4,638 3,449 220,659 220,659 483 31/12/17 Cash Trading, Loans to Net loans Intangibles
Slide 7: Executive summary – Key balance sheet data
Executive summary – 31/12/17 Key balance sheet data 31/03/18 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn +1.8% 92.4% 91.5% 72.5% 63.2% 61.8% 139.5 142.1 68.8% 89.2 92.9 4.0% 3.7% Loan/deposit ratio Loans/total assets Net loans Credit RWA NPL coverage
Slide 8: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 8
Slide 9: Business environment – Strong economic outlook for 2018
2018 Business environment – 2019 Strong economic outlook for 2018 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (ave, in %) 5.7 4.7 4.6 3.9 4.2 3.7 4.1 3.5 3.4 3.3 3.5 3.5 3.3 1.8 2.8 2.9 3.0 2.8 2.7 2.8 2.8 2.9 3.1 1.1 2.8 2.4 0.8 0
Slide 10: Business environment – CZ further increases key policy rate to 75bps in February 2018
Business environment – 3M Interbank 10YR GOV CZ further increases key policy rate to 75bps in February 2018 Austria Czech Republic Romania 1.87% 1.87% 4.36% 4.46% 0.75% 1.63% 4.46% 0.57% 0.75% 3.66% 0.53% 0.58% 1.85% 1.85% 1.76% -0.33% -0.33% 0.86% 0.62% -0.33% -0.33% 0.86% 0.28% 0.65% 1-3 17 1-3 18
Slide 11: Business environment – CZK appreciates amid rising rates, RON depreciates yoy
Business environment – CZK appreciates amid rising rates, RON depreciates yoy EUR/CZK EUR/RON -6.0% -1.0% -0.6% +3.0% +0.8% -0.3% 27.0 25.4 25.7 25.4 25.5 25.3 4.52 4.66 4.62 4.66 4.67 4.65 1-3 17 1-3 18 Q4 17 Q1 18 31/12/17 31/03/18 1-3 17 1-3 18 Q4 17 Q1 18 31/12/17 31/03/18 • Czech National Bank
Slide 12: Business environment – Market shares: mostly stable or increasing shares across the region
31/03/17 Business environment – 31/12/17 Market shares: mostly stable or increasing shares across the region 31/03/18 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 19.9% 20.0% 19.0% 19.9% AT 20.2% AT 21.0% AT 19.5% AT 20.2% 22.9% 19.7% 25.1% 11.8% CZ 23.2% CZ 20.6% CZ 2
Slide 13: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 13
Slide 14: Business performance: performing loan stock & growth
YoY 31/03/17 Business performance: performing loan stock & growth – QoQ 31/12/17 Performing loans continue to grow in Q1 18 31/03/18 130.8 7.4% • Rising performing loan volume trend continued in Q1 18 Group 137.7 140.5 2.0% across most geographies; yoy loan growth particularly strong 29.9 in CZ (sup
Slide 15: Business performance: customer deposit stock & growth
YoY 31/03/17 Business performance: customer deposit stock & growth – QoQ 31/12/17 Deposit build-up continues in Q1 18 31/03/18 144.7 7.3% • Exceptional deposit growth across all geographies despite Group 151.0 155.3 2.9% zero interest rate environment as retail and corporate clients 32.5 park cash i
Slide 16: Business performance: NII and NIM – NII advances 3.0% yoy
Business performance: NII and NIM – Q1 17 Q4 17 NII advances 3.0% yoy, seasonally down qoq Q1 18 1,051 2.33% Group 1,124 2.41% 1,083 2.27% • Yoy increase driven by higher NII in CZ resulting from 155 1.59% increased business volumes, rising interest rates and CZK AT/EBOe 150 1.50% appreciation 152 1
Slide 17: Business performance: operating income
YoY Q1 17 Business performance: operating income – QoQ Q4 17 Operating income up yoy on better NII and fees Q1 18 1,618 2.1% • Yoy up on higher NII and fees, offset lower net trading result Group 1,732 -4.6% 1,652 • Qoq decline mainly due to lower net trading result, partially 263 2.7% offset by imp
Slide 18: Business performance: operating expenses
YoY Q1 17 Business performance: operating expenses – QoQ Q4 17 Expenses up yoy on headcount and higher deposit insurance charge Q1 18 1,018 4.6% • Yoy cost increase mainly driven by higher personnel Group 1,145 1,065 -7.0% headcount and higher deposit insurance contributions 176 2.4% • Qoq down on h
Slide 19: Business performance: operating result and CIR
YoY Q1 17 Business performance: operating result and CIR – QoQ Q4 17 Positive revenue trends overshadowed by higher PEREX Q1 18 Operating result YoY & QoQ change Cost/income ratio 599 63.0% Group -2.1% 66.1% 587 -0.1% 587 64.5% 87 66.9% AT/EBOe 86 3.3% 68.0% 90 4.6% 66.7% 95 73.9% AT/SB 96 -10.0% 75
Slide 20: Business performance: risk costs (abs/rel)
Q1 17 Business performance: risk costs (abs/rel*) – Q4 17 Improved asset quality results in releases of risk provisions Q1 18 66 0.19% • Yoy and qoq improvement due to continued asset quality Group 61 0.17% -54 -0.22% improvements, particularly in Corporate business; net -11 -0.15% releases in most
Slide 21: Business performance: non-performing loans and NPL ratio
31/03/17 Business performance: non-performing loans and NPL ratio – 31/12/17 NPL ratio improves further, now standing at 3.7% 31/03/18 6,698 4.9% • NPL volume declined further to EUR 5.5bn in Q1 18 as NPL Group 5,776 4.0% 5,464 3.7% inflows remained moderate 711 2.3% AT/EBOe 631 2.0% 620 1.9% • NPL
Slide 22: Business performance: allowances for loans and NPL coverage
31/03/17 Business performance: allowances for loans and NPL coverage – 31/12/17 NPL provision coverage improves to 72.5% 31/03/18 4,526 67.6% • NPL provision coverage improves at group level, Group 3,977 68.8% 3,963 72.5% exceptionally strong in CZ, RO, SK, HU and RS 423 59.5% AT/EBOe 360 57.1% 388
Slide 23: Business performance: other result
Q1 17 Business performance: other result – Q4 17 Other result declines yoy due to lower securities sales Q1 18 -99 • Yoy other operating result remained stable, but gains/losses Group -75 -124 from financial instruments declined by EUR 24.1m -9 • Qoq deterioration due to one-off gain from sale of AT
Slide 24: Business performance: net result
Q1 17 Business performance: net result – Q4 17 Net profit advances due to net releases Q1 18 262 • Yoy profitability improved on net releases of risk provisions Group 329 across most geographies 333 63 • Qoq stable as better risk performance offsets higher tax AT/EBOe 57 charge and contributions int
Slide 25: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 25
Slide 26: Assets and liabilities: YTD overview
Assets and liabilities: YTD overview – Loan/deposit ratio down to 91.5% at Mar 18 (Dec 17: 92.4 %) Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 230.0 230.0 220.7 100% 220.7 2.9 100% 25.2 9.9% 11.0% 3.4 21.0 7.4% 1.6% 9.1% 1.3% 21.8 16.3 43.6 19.4% 19.0% 42.
Slide 27: Assets and liabilities: customer loans by country of risk
Assets and liabilities: customer loans by country of risk – Net customer loans up 1.8% and NPLs down 5.4% in Q1 18 Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +6.8% +7.4% -18.4% 139.5 142.0 137.7 140.5 6.7 133.0 3.5 3.7 130.8 3.6 3.7 0.2 3.3 6.8 6.9 6.6 1.1 6.
Slide 28: Assets and liabilities: financial and trading assets
Assets and liabilities: financial and trading assets * – LCR at excellent 149.4% By geography By debtor type Liquidity buffer in EUR bn in EUR bn -5.1% 42.0 26.7% 27.4% 39.4 39.9 100% 24.9% 25.6% 9.4% 9.2% 9.2% 9.8 7.3% 7.8% 7.6% 8.6 9.0 55.5 54.3 0.9 51.2 3.0 0.8 0.8 46.1 3.3 3.3 5.0 5.0 5.2 5.5 4.
Slide 29: Assets and liabilities: customer deposit funding
Assets and liabilities: customer deposit funding – Customer deposits grow by 2.9% qoq, up 7.3% yoy By customer type By product type Highlights in EUR bn in EUR bn • Continued deposit inflows driven by Retail +7.3% segment with highest demand for overnight deposits amid low interest rate environment
Slide 30: Assets and liabilities: debt vs interbank funding
Assets and liabilities: debt vs interbank funding – Declining wholesale funding reliance, as customer deposits grow strongly Debt securities issued Interbank deposits in EUR bn in EUR bn -2.6% -8.5% 27.1 26.4 22.9 25.1 Sub debt 21.0 Overnight deposits Senior unsec. bonds 6.4 5.9 5.4 3.7 Term deposit
Slide 31: Assets and liabilities: LT funding
Assets and liabilities: LT funding – Limited LT funding needs Maturity profile of debt in EUR bn 3.0 3.1 2.7 2.1 2.0 2.0 1.3 1.4 1.2 0.8 0.6 0.6 0.1 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030+ Senior unsec. bonds Covered bonds Capital exc Tier 1 Debt CEE • In January 2018 Erste
Slide 32: Assets and liabilities: capital position
Assets and liabilities: capital position – B3FL CET1 ratio at 12.5% post IFRS9 Basel 3 capital (phased-in) Risk-weighted assets (phased-in) Basel 3 capital ratios (phased-in) in EUR bn in EUR bn 18.7% 18.5% 18.4% 18.0% 17.7% 19.9 19.9 20.3 20.1 110.8 110.0 114.0 19.0 103.6 106.8 3.4 14.0% 13.8% 2.7
Slide 33: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 33
Slide 34: Conclusion – Outlook 2018
Conclusion – Outlook 2018 • Real GDP growth of approx. 3-5% expected in 2018 in CEE and Austria Macro outlook • Real GDP growth to be driven by solid domestic demand, as real wage growth and 2018 low unemployment support economic activity in CEE • Solid public finances across CEE • Dividend proposal
Slide 35: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 35
Slide 36: Additional information: new segmentation
Additional information: new segmentation – 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 • Local Large Corporate • Asset/Liability Manag
Slide 37: 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 17 1-3 18 YOY-Δ Q1 17 Q4 17 Q1 18 YOY-Δ QOQ-Δ Net interest income 1,051.3 1,082.6 3.0% 1,051.3 1,123.9 1,082.6 3.0% -3.7% Interest income 1,397.8 1,695.8 21.3% 1,397.8 1,400
Slide 38: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 24,731 25,842 22,104 21,796 25,246 2.1% 15.8% 15.8% Financial assets held for trading 7,827 7,206 6,850 6,349 6,603 -15.6% 4.0% 4.0% D
Slide 39: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 4,314 3,960 3,551 3,423 2,940 -31.9% -14.1% -14.1% Derivatives 3,855 3,646 3,206 2,934 2,384 -38.1% -1
Slide 40: Additional information: regulatory capital position
Additional information: regulatory capital position – Capital requirements (SREP) for 2018; Erste target of 12.75%+ unchanged • As buffers are phasing in in 2018, P2G declines Erste Group Consolidated Erste Group Unconsolidated Phased-in Fully loaded Phased-in Fully loaded 2016 2017 2018e 2019e 2017
Slide 41: 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) 139.6 142.3 143.5 146.0 142.3 143.5 146.0 146.0 137.5 137.5 139.6 142.3 143.5 5.8
Slide 42: 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: 4.7m Customers: 2.2m in 7 geographically connected Employees: 10,135 Employees: 4,164 countries CZ Br
Slide 43: 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 local cur
Slide 44: Additional information: 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 45: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Unidentified * Erste Foundation 1 Unidentified * 9.3% 11.2% Savings Banks & 9.3% Identified Trading ** Identified Trading ** Savings Banks 3.2% Foundations 2 Rest of world 3.2% Austria BlackRock
Slide 46: 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