Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q2 2023 Earnings Presentation
52 slides from Erste Group Bank's earnings presentation, Jul 31, 2023
Slide 1: Q2 2023 results presentation
Q2 2023 results presentation Vienna, 31 July 2023 Strong bottom line paves way for increased capital return 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: Revenue growth and net releases of risk costs drive net profit
EXECUTIVE SUMMARY: P&L PERFORMANCE Revenue growth and net releases of risk costs drive net profit QoQ net profit development YTD net profit development in EUR m in EUR m +31.0% +51.0% 187 3 53 67 123 60 896 267 1,014 301 1,490 12 12 594 164 1,137 Q1 23 Operating Operating Risk costs Other Taxes on M
Slide 5: 2023 guidance upgraded again
EXECUTIVE SUMMARY: P&L DASHBOARD 2023 guidance upgraded again Net interest margin Cost/income ratio Risk cost ratio in % in % in bps 2.50 G23: <50% G23: <10 bps 2.45 37 28 2.24 2.25 51.9 51.6 2.15 49.8 49.7 -4 -2 46.2 -18 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Q2 22 Q3 22 Q4 22
Slide 6: Loan growth edges up again, deposit inflows drive liabilities
EXECUTIVE SUMMARY: BALANCE SHEET PERFORMANCE Loan growth edges up again, deposit inflows drive liabilities YTD total asset development YTD equity & total liability development in EUR bn in EUR bn +6.2% 344.0 344.0 0.0 0.1 1.4 2.8 4.7 0.5 15.0 17.1 323.9 323.9 0.5 2.9 5.1 3.2 31/12/22 Cash Trading, L
Slide 7: Balance sheet metrics strong across the board
EXECUTIVE SUMMARY: BALANCE SHEET DASHBOARD Balance sheet metrics strong across the board Loan/deposit ratio Loan & deposit growth Asset quality in % yoy, in % in % 13.0 96.8 96.7 12.1 94.6 94.3 11.3 91.8 90.2 9.4 12.0 7.0 G23: ~ 2% 84.9 85.5 85.1 85.0 9.3 7.1 2.2 2.0 2.1 G23: ~5% 6.4 6.9 2.0 2.0 Q2
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: Slower growth in 2023, growth acceleration in 2024
MACROECONOMIC AND BUSINESS UPDATE: ECONOMIC FORECASTS * Slower growth in 2023, growth acceleration in 2024 Real GDP growth Consumer price inflation Unemployment rate 2023 in % avg, in % avg, in % 2024 18.6 9.3 9.0 4.2 4.1 13.3 6.3 6.3 5.8 5.7 6.9 6.6 3.8 12.0 10.7 10.4 4.6 4.5 2.8 2.5 2.6 2.6 7.4 3.
Slide 10: Retail loan demand slowly picking up again
MACROECONOMIC AND BUSINESS UPDATE: RETAIL BUSINESS Retail loan demand slowly picking up again Slightly growing loan book amid economic slowdown Housing and consumer loans − Housing loan demand stabilising at low levels; increasing demand in certain in EUR bn countries (CZ, HR) and for renovation loa
Slide 11: Mixed corporate volume trends, strong Markets deal flow
MACROECONOMIC AND BUSINESS UPDATE: CORPORATES & MARKETS BUSINESS Mixed corporate volume trends, strong Markets deal flow Solid deposit inflows, flat loan stock Net loan stock of Corporate segment − Financing of large corporates as well as small and medium enterprises mostly flat during 2023, with fo
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: Loan demand in slow recovery mode
OPERATING TRENDS: NET LOAN STOCK AND GROWTH Loan demand in slow recovery mode Net loan stock Growth rates Net loan growth driven by Retail and Corporates − Retail loans grew by 2.8% year-to-date (+ EUR 2.0bn) 191.5 1.1% Group 202.7 − Corporate loans up 3.5% year-to-date (+EUR 2.6bn), but down from 7
Slide 14: Expanding deposit base underscores funding strength
OPERATING TRENDS: CUSTOMER DEPOSIT STOCK AND GROWTH Expanding deposit base underscores funding strength Customer deposits Growth rates Erste Group’s favourable deposit mix is a key competitive advantage – overweight retail, sight, EUR deposits 225.5 1.3% Group 238.1 6.9% 241.1 Key Q2 23 deposit driv
Slide 15: NII momentum remains healthy, guidance upgraded
OPERATING TRENDS: NET INTEREST INCOME (NII) AND NET INTEREST MARGIN (NIM) NII momentum remains healthy, guidance upgraded Net interest income Net interest margin NII grows 24.0% yoy, up 1.3% qoq, driven by higher interest rate 1,445 2.15% Group 1,769 2.50% 2.46% 1,792 2023 NII growth guidance upgrad
Slide 16: Robust fee performance continues
OPERATING TRENDS: NET FEE AND COMMISSION INCOME Robust fee performance continues Net fee income by segment Net fee income by fee type in EUR m in EUR m +5.4% -1.7% 643 632 643 632 615 622 615 622 600 28 6 29 6 600 27 18 6 6 6 20 26 23 25 28 36 29 57 24 23 65 24 57 22 55 56 52 59 50 Other 47 58 51 51
Slide 17: Cost inflation driven by staff expenses, in line with expectations
OPERATING TRENDS: OPERATING EXPENSES Cost inflation driven by staff expenses, in line with expectations Operating expenses by segment Operating expenses by type in EUR m in EUR m +17.1% -1.0% 1,242 1,230 1,242 1,230 1,194 1,194 49 79 82 68 19 22 99 Residual other admin 1,096 65 1,050 1,096 150 1 1,0
Slide 18: Cost/income ratio target upgraded to <50% for 2023
OPERATING TRENDS: OPERATING RESULT AND COST/INCOME RATIO (CIR) Cost/income ratio target upgraded to <50% for 2023 Operating result Cost/income ratio in EUR m in % +35.1% 1,432 73 14 Other 1,257 118 1,106 13 RS 1,060 10 1,028 50 7 108 62 111 10 140 128 HR 51 61 98 55 93 HU 92 76 103 131 135 250 60.5
Slide 19: Another quarter of net releases triggers further guidance upgrade
OPERATING TRENDS: CREDIT RISK/RISK COSTS Another quarter of net releases triggers further guidance upgrade Risk costs by segment * Risk cost ratio * in EUR m in bps 184 78 141 Other RS G23: <10 bps 37 HR 28 HU SK 15 9 RO 2 -4 -2 -3 CZ AT/OA -21 -18 -8 AT/SB AT/EBOe Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 2018
Slide 20: Asset quality improves again
OPERATING TRENDS: CREDIT RISK/ASSET QUALITY Asset quality improves again NPL ratio NPL coverage ratio NPL ratio improves to historic best (<2%) − No significant increase in hard defaults due to geopolitical crisis and 2.2 in % 91.8 in % economic slowdown Group 2.1 94.3 2.0 96.7 − NPL volume declines
Slide 21: Strong other result contributes to profitability
OPERATING TRENDS: OTHER RESULT Strong other result contributes to profitability Other result by segment Other result by accounting categories in EUR m in EUR m Other 24 RS -16 HR -22 -7 0 HU -71 -22 -7 SK 0 RO -138 -89 -89 -54 CZ -96 -96 AT/OA -157 -157 AT/SB AT/EBOe -99 -274 -274 Q2 22 Q3 22 Q4 22
Slide 22: 2023 ROTE guidance upgraded to >15%
OPERATING TRENDS: NET RESULT, EARNINGS PER SHARE (EPS) & RETURN ON TANGIBLE EQUITY (ROTE) 2023 ROTE guidance upgraded to >15% Net result by segment EPS & ROTE in EUR m in EUR +30.2% 896 Other RS 20.2% 688 594 HR 17.1% 518 HU 14.6% 510 13.6% 1.98 12.2% SK RO 1.49 1.39 CZ 1.19 1.10 AT/OA AT/SB AT/EBOe
Slide 23: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 23
Slide 24: Stable wholesale funding as customer deposits grow strongly
WHOLESALE FUNDING AND CAPITAL: ISSUED DEBT AND INTERBANK FUNDING Stable wholesale funding as customer deposits grow strongly Liabilities and equity Debt securities Interbank deposits Comments in EUR bn in EUR bn in EUR bn Higher customer deposit volumes mainly driven by 344.0 non-core institutional
Slide 25: Stable LT funding needs in 2023
WHOLESALE FUNDING AND CAPITAL: LONG TERM FUNDING Stable LT funding needs in 2023 Maturity profile of debt 6.9 6.3 4.8 4.7 3.8 3.1 2.8 0.9 1.0 0.9 0.7 0.2 0.1 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035+ Debt CEE Capital exc Tier 1 Covered bonds Senior non-preferred bonds Senior
Slide 26: MREL issuance update
WHOLESALE FUNDING AND CAPITAL: MREL UPDATE (MINIMUM REQUIREMENT FOR OWN FUNDS AND ELIGIBLE LIABILITIES) MREL issuance update MPE resolution groups 3-year MREL issuance plan 204 ~1,000 – 3,000 in EUR bn, in EUR m, 93 as of Jun 2023 average pa 81 28 25 ~500-1,000 19 13 13 ~300-600 11 10 ~300-400 7 6 ~
Slide 27: RWAs mainly up on increased exposure
WHOLESALE FUNDING AND CAPITAL: CAPITAL AND RISK-WEIGHTED ASSETS (RWA) RWAs mainly up on increased exposure Basel 3 capital Risk-weighted assets in EUR bn in EUR bn 143.9 146.2 147.7 138.2 140.8 5.9 7.0 6.3 5.5 5.8 14.7 14.8 14.9 14.5 14.6 28.1 25.6 25.2 26.2 26.4 3.8 3.8 3.6 3.5 3.6 2.2 2.2 2.2 2.2
Slide 28: Strong capital levels underpin enhanced capital return
WHOLESALE FUNDING AND CAPITAL: COMMON EQUITY TIER 1 (CET1), TIER 1 AND TOTAL CAPITAL RATIOS Strong capital levels underpin enhanced capital return CET 1 ratio development Basel 3 capital ratios (final) in % in % 14.92 0.09 19.0 0.40 0.23 18.5 0.16 18.2 18.0 17.9 14.20 1.03 0.40 16.4 15.8 15.8 15.5 1
Slide 29: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 29
Slide 30: Another upgrade of 2023 guidance
FINANCIAL OUTLOOK Another upgrade of 2023 guidance Previous New Variable Key assumptions/additional comments guidance guidance Real GDP > 0% > 0% Unchanged economic outlook Loans ~ +5% ~ +5% Guidance confirmed as loan demand is slowly recovering NII ~ +15% ~ +20% Significant euro zone rate hikes dri
Slide 31: Appendix: Erste Group basics, detailed financials and ESG profile
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 31
Slide 32: 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: 9,992 Employees: 3,566 Customers: 1.0m Branches: 389 Branches: 187 Employees: 3,328 Retail loan share: 26.3% Retail loan share:
Slide 33: 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 34: 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 21.4% 23.9% 23.7% 26.5% AT 21.2% AT 24.1% AT 24.0% AT 24.4% 25.1% 26.9% 21.7% 14.6% CZ 25.4% CZ 25.7% CZ 22.1% CZ 15.6% 26.3% 25.5% 22.5% 17.8% 24.6% 28.
Slide 35: 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 1-6 22 1-6 23 YOY-Δ Q2 22 Q1 23 Q2 23 YOY-Δ QOQ-Δ Net interest income 2,837.0 3,561.1 25.5% 1,444.9 1,769.0 1,792.2 24.0% 1.3% Interest income 3,508.1 7,153.3
Slide 36: 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 Jun 22 Sep 22 Dec 22 Mar 23 Jun 23 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 42,818 44,552 35,685 43,305 32,810 -23.4% -8.1% -24.2% Financial assets held for tra
Slide 37: 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 Jun 22 Sep 22 Dec 22 Mar 23 Jun 23 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 3,005 3,175 3,264 3,139 2,788 -7.2% -14.6% -11.2% Derivativ
Slide 38: 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 Q2 2023 YE 2023 2021 2022 Q2 2023 YE 2023 Pillar 1
Slide 39: 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
Slide 40: 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 % 37.65% resolution approach − In Q2 23, Erste Group Bank AG received its MREL requ
Slide 41: 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 208.9 in EUR bn 206.1 0% 3.6 0.1 1% 1% 3.4 0.1 1% 1% Other Other 3.3 2.8 1% 22% 1% 29% 28% 5.2 4.0 23% CHF
Slide 42: 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 +9.3% 56.8 50.3 51.9 3% 2% 3% 11.7 14% 7% 10.9 1.3 18% 1% 10.1 5% 0.9 1.0 1.7 4.1 3.6
Slide 43: Erste Group supports the well-being in the CEE region
APPENDIX: ESG PROFILE (1)/ESG COMPASS OF ERSTE GROUP Erste Group supports the well-being in the CEE region Priority objectives Our promise Leading Green Transition Customers Providing prosperity to our clients Erste Group strives to be a in an inclusive, secure and role model and leading sustainable
Slide 44: Sustainability is embedded into the DNA of Erste Group
APPENDIX: ESG PROFILE (2) /MAIN ESG PILLARS Sustainability is embedded into the DNA of Erste Group Sustainable Working Finance together mobilise financial resources and customer advice actively participate in public initiatives and for social-ecological goals and support customers thus make a positi
Slide 45: Erste Group has set itself ambitious ESG targets
APPENDIX: ESG PROFILE (3) Erste Group has set itself ambitious ESG targets 25% Erste Group through its Social Banking green investments by 2026 in our corporate book to be reached continues to be the leader in offering financial services to NGOs, start-ups 37% and individuals in difficult situations
Slide 46: Environment
APPENDIX: ESG PROFILE (4)/ENVIRONMENT Environment Net zero operations Green Investments Scope 1+2 decrease of emissions (tonnes of CO2e) New corporate financing of pathway towards climate neutrality 2023 environmental objectives 2017 76,677 Committed amount (total), June 23 in EUR m 2020 54,491 Cons
Slide 47: Net-zero target setting to move towards 1.5 degree climate scenarios
APPENDIX: ESG PROFILE (4)/ENVIRONMENT – NET-ZERO TARGET SETTING Net-zero target setting to move towards 1.5 degree climate scenarios Portfolio decarbonization interim targets 2030 Portfolio selection Metric Baseline 2022 Target Reduction Volume covered (Q2 23)* Housing mortgages kgCO2e/m² 53.3 30.5
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) In 2022, Erste Group improved its assessment by Sustainalytics by 3.6 points, Low Risk Low Risk low risk category con
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 5.58% 2.87% 4.78% 0.57% 0.57% 1.91% Erste Foundation direct 1.91% 11.90% Sparkassen Beteiligungs 17.85% Austria Gmbh & Co KG 33.30% 3.11% Foundations North America Wiener Städ
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