Erste Group Bank Ag · VIE:EBS
Erste Group Bank — H1 2011 Earnings Presentation
39 slides from Erste Group Bank's earnings presentation, Jul 29, 2011
Slide 1: H1 2011 results presentation
Erste Group Bank AG H1 2011 results presentation 29 July 2011, Vienna Net profit raises to EUR 496.3m driven by strong operating profit and lower risk costs Andreas Treichl, Chief Executive Officer Franz Hochstrasser, Deputy Chief Executive Officer Manfred Wimmer, Chief Financial Officer Bernhard Sp
Slide 2: Retail market leadership in the eastern part of the EU
Erste Group – Retail market leadership in the eastern part of the EU Erste Group Slovakia Czech Republic Clients: 2.4m The leading retail bank with 16.9 m customers Clients: 5.2m Retail loans: 25.9% One of the leading corporate banks Retail loans: 25.2% Retail dep.: 26.6% Retail dep.: 28.7% Branches
Slide 3: Operating environment: macro trends – What happened in CEE in Q2 2011?
Operating environment: macro trends – What happened in CEE in Q2 2011? − Continued strong exports have boosted Capacity utilisation capacity utilisation − Full recovery in manufacturing expected to be achieved 90% after slump in 2009 85% − Increase in investment expenditures likely in order to meet
Slide 4: Despite lower ratings, CEE is seen as less risky than Southern or even Western Europe
Despite lower ratings, CEE is seen as less risky than Southern or even Western Europe Country Rating (S&P) Austria AAA Czech Republic A France AAA Slovakia A+ Slovenia AA Poland A- Belgium AA+ Romania BB+ Italy A+ Hungary BBB- Croatia BBB- Spain AA Ukraine B+ Ireland BBB+ Portugal BBB- Greece CC Sou
Slide 5: Despite lower ratings, CEE is seen as less risky than Southern or even Western Europe
Despite lower ratings, CEE is seen as less risky than Southern or even Western Europe Country Rating (S&P) 5y CDS Spread Austria AAA 87 Czech Republic A 93 France AAA 115 Slovakia A+ 121 Slovenia AA 139 Poland A- 164 Belgium AA+ 182 Romania BB+ 235 Italy A+ 285 Hungary BBB- 298 Croatia BBB- 310 Spai
Slide 6: Recent CEE Government Bonds led by Erste are trading tighter than better-rated Belgium, Spain, Italy
Recent CEE Government Bonds led by Erste are trading tighter than better-rated Belgium, Spain, Italy Country / Bond Outstanding /S&P Spread to German Bunds (as of 07/28/11) Belgium 09/28/2021 (AA+) 167 Spain 10/31/2020 (AA) 283 Spain 04/30/2016 (AA) 347 Italy 07/25/2016 (A+) 349 Italy 08/24/2020 (A+
Slide 7: Erste Group is the Leading Bookrunner for corporate and sovereign bonds in Austria/CEE
Erste Group is the Leading Bookrunner1) for corporate and sovereign bonds in Austria/CEE September 2010 1x 2010 / 2x 2011 June 2011 − Sovereign bonds Sovereigns & − Sovereign issuers from CEE will Agencies Romania Czech Republic Slovak Republic continue to tap markets EUR 2,000,000,000 EUR 3,750,000
Slide 8: Operating environment: Macro outlook – CEE to grow much ahead of euro zone average
Operating environment: Macro outlook – CEE to grow much ahead of euro zone average − CEE to experience different growth patterns in line with levels of export dependency and Real GDP growth in CEE 8 2011 euro zone avg. country-specific issues 6 4.0 4.0 3.0 − AT: to build on solid 2010 performance 2.
Slide 9: Net profit and EPS up yoy
Net profit and EPS up yoy Cash earnings per share* − Net profit grew by 5.2% yoy to EUR 496.3m, driven by declining risk costs and solid 2.5 2.10 operating result 2.0 1.89 2.03 − Other operating result was a negative EUR 260.2m, 1.82 1.41 1.5 in EUR profoundly impacted by banking taxes of EUR 95.6m
Slide 10: Operating income up strongly qoq, flat yoy
Operating income up strongly qoq, flat yoy − Operating income up 3.1% qoq, flat yoy in H1 2011 − NII flat yoy in H1 2011, qoq increase of 7.6% broadly based across all segments except Romania − Net commission income declined by 1.0% to EUR 954.9m in H1 2011 due to lower contribution from securities
Slide 11: Operating costs flat qoq, slightly up yoy
Operating costs flat qoq, slightly up yoy − Operating expenses flat qoq, up by only 1.5% yoy in H1 2011 − Personnel expenses increased by 4.7% (+4.0% FX-adjusted) yoy in H1 2011 on severance payments in Czech Republic and full consolidation of an IT subsidiary in H2 10 − Other administrative expense
Slide 12: Loan book review – Loan demand still to recover across segments
Loan book review – Loan demand still to recover across segments − Customer loans increased by 1.0% yoy; up Customer loans by main segments * 0.9% qoq 150 131.0 131.5 132.7 132.8 134.1 − Private Individual portfolios in Austria and SLSP 18.7 120 19.0 18.4 18.7 18.9 slightly growing in EUR billion − I
Slide 13: Risk costs decreased by 13.3% yoy
Risk costs decreased by 13.3% yoy − Risk costs down from 169 bps in H1 2010 to NPL ratios in key segments 143 bps in H1 2011 19.2% 20% − Diverging picture across segments: 15.5% 15% − In Austria (-15.8%), Czech Republic (-25.9%) and Slovakia (-39.2%) risk costs declined faster in H1 10% 7.7% 2011 th
Slide 14: Asset quality review – Net exposure to euro zone periphery
Asset quality review – Net exposure to euro zone periphery Total net exposure of Erste Group (excl. savings banks) to selected European countries Sovereign Bank Other Total net exposure in EUR million Dec 10 Jun 11 Dec 10 Jun 11 Dec 10 Jun 11 Dec 10 Jun 11 Greece 626,1 404,7 172,0 138,4 5,8 5,2 803,
Slide 15: Customer deposit review – Continued deposit growth
Customer deposit review – Continued deposit growth − Customer deposits grew by 3.2% in H1 2011 Customer deposit trends by main segments (+1.4% qoq) − In Q2, visible inflows especially in in EB Oe and in HU 116.6 115.3 117.0 119.2 120.8 125 5.8 5.7 6.1 6.3 5.4 − Retail & SME deposits increased by 1.9
Slide 16: Erste Group's funding profile – Retail deposits remained a key pillar in the funding mix
Erste Group’s funding profile – Retail deposits remained a key pillar in the funding mix − Customer deposits remained the primary Evolution of Erste Group's funding mix source of funding − Providing a solid funding base in all local currencies − Reflected in loan/deposit ratio improvement to 111.0%
Slide 17: Erste Group's capital position (1) – Retained earnings drive capital growth
Erste Group’s capital position (1) Retained earnings drive capital growth − Total equity (IFRS) increased by EUR 394m (+2.3%) ytd reflecting: − Retained earnings of EUR 595m − Dividend payout in May 2011 of EUR 442m to shareholders and owners of participation capital − Shareholders’ equity rose by +
Slide 18: Erste Group's capital position (2)
Erste Group’s capital position (2) Strong capital position and conservative asset mix Core tier 1 ratio Core tier 1 ratio excl. part capital (total risk) (total risk) 9.5% 9.2% 8.3% 8.0% 7.7% 6.9% Dec 09 Dec 10 Jun 11 Dec 09 Dec 10 Jun 11 Core tier 1 ratio (total risk) = tier 1 capital excl. hybrid
Slide 19: Erste Group fulfils all legal thresholds required by EBA and Basel III
Erste Group fulfils all legal thresholds required by EBA and Basel III Erste Group‘s core tier 1 ratio - according to EBA stress test - according to Basel III (based in 2010 results, adverse scenario) (based on 2010 results, valid in 2019) 8.6% 8.1% 7.2% 7.2% Basel III threshold of 7% - valid in 201
Slide 20: Local banks prove strength of business model
Local banks prove strength of business model - Net profit in Austria, Czech Republic and Slovakia post double-digit growth rates - Ukraine and Serbia report clearly positive results - Croatia much improved ahead of EU accession - Romania remains positive despite the crisis - Hungary in the red due t
Slide 21: Erste Bank Oesterreich – local result
Erste Bank Oesterreich – local result [EUR Mio] 01-06/2011 01-06/2010 Var. % Net interest income 194,2 193,9 0,1 - Risk provisions for loans and advances (44,8) (62,1) (27,9) Net fee and commission income 127,0 126,0 0,8 Net trading result 3,7 5,4 (31,2) General administrative expenses (191,4) (193,
Slide 22: Ceska sporitelna – local result
Ceska sporitelna – local result [EUR m] 01-06/2011 01-06/2010 Var. % Net interest income 633,1 585,6 8,1 - Risk provisions for loans and advances (149,6) (207,0) (27,7) Net fee and commission income 249,2 232,8 7,0 Net trading result 56,4 53,5 5,5 General administrative expenses (383,1) (367,5) 4,3
Slide 23: BCR – local result
BCR – local result [EUR m] 01-06/2011 01-06/2010 Var. % Net interest income 391,7 459,3 (14,7) - Risk provisions for loans and advances (226,4) (234,6) (3,5) Net fee and commission income 72,3 74,2 (2,6) Net trading result 42,8 53,4 (19,8) General administrative expenses (207,4) (193,4) 7,2 Other op
Slide 24: Slovenska sporitelna – local result
Slovenska sporitelna – local result [EUR m] 01-06/2011 01-06/2010 Var. % Net interest income 232,7 218,7 6,4 - Risk provisions for loans and advances (44,4) (69,8) (36,3) Net fee and commission income 60,7 54,4 11,5 Net trading result 4,8 3,7 32,3 General administrative expenses (113,8) (116,9) (2,6
Slide 25: Erste Bank Hungary – local result
Erste Bank Hungary – local result [EUR m] 01-06/2011 01-06/2010 Var. % Net interest income 194,8 196,1 (0,7) - Risk provisions for loans and advances (152,8) (112,7) 35,6 Net fee and commission income 52,8 52,4 0,8 Net trading result 20,6 25,3 (18,5) General administrative expenses (108,7) (107,8) 0
Slide 26: Erste Bank Croatia – local result
Erste Bank Croatia – local result [EUR m] 01-06/2011 01-06/2010 Var. % Net interest income 141,0 113,5 24,2 - Risk provisions for loans and advances (49,6) (37,6) 31,9 Net fee and commission income 37,7 27,4 38,0 Net trading result 9,8 8,3 17,4 General administrative expenses (77,3) (59,2) 30,5 Othe
Slide 27: Erste Bank Serbia – local result
Erste Bank Serbia – local result [EUR m] 01-06/2011 01-06/2010 Var. % Net interest income 19,4 13,7 41,3 - Risk provisions for loans and advances (4,5) (4,6) (3,2) Net fee and commission income 5,6 5,1 9,5 Net trading result 0,0 0,9 (98,9) General administrative expenses (16,9) (15,4) 9,5 Other oper
Slide 28: Erste Bank Ukraine – local result
Erste Bank Ukraine – local result [EUR m] 01-06/2011 01-06/2010 Var. % Net interest income 18,7 25,0 (25,2) - Risk provisions for loans and advances (6,5) (14,8) (56,0) Net fee and commission income 1,2 0,8 47,1 Net trading result 7,3 6,0 22,3 General administrative expenses (23,4) (21,4) 9,1 Other
Slide 29: Group income statement (IFRS) – Net profit up by 5.2% yoy
Group income statement (IFRS) – Net profit up by 5.2% yoy in EUR million 1-6 11 1-6 10 Change Q2 11 Q1 11 Q2 10 Net interest income 2,689.8 2,684.8 0.2% 1,394.1 1,295.7 1,361.2 Risk provisions for loans and advances (940.0) (1,084.2) (13.3%) (479.9) (460.1) (553.0) Net fee and commission income 954.
Slide 30: Group balance sheet (IFRS) – Loan-to-deposit ratio improved further to 111.0%
Group balance sheet (IFRS) – Loan-to-deposit ratio improved further to 111.0% in EUR million Jun 11 Dec 10 Change Cash and balances with central banks 6,605 5,839 13.1% Loans and advances to credit institutions 13,373 12,496 7.0% Loans and advances to customers 134,078 132,729 1.0% Risk provisions f
Slide 31: Group balance sheet (IFRS) – Stronger balance sheet driven by deposits and earnings
Group balance sheet (IFRS) – Stronger balance sheet driven by deposits and earnings in EUR million Jun 11 Dec 10 Change Deposits by banks 23,324 20,154 15.7% Customer deposits 120,817 117,016 3.2% Debt securities in issue 32,566 31,298 4.1% Derivative financial instruments 7,033 7,996 (12.0%) Tradin
Slide 32: Outlook
Outlook − CEE economies set to continue economic recovery in H2 2011 − All of Erste Group’s CEE markets are expected to post GDP growth in 2011 − Austria, Czech Republic and Slovakia to perform well, banking markets to grow − Romania and Hungary also growing 2011, but banking markets still sluggish
Slide 33: H1 2011 executive summary
H1 2011 executive summary – Solid net profit despite challenging banking environment − Accelerating operating performance in Q2 11 − Q2 11 operating result benefited from record NII and stable qoq costs − H1 2011 operating income up to EUR 3,893.4m on solid performance of all line items − H1 2011 op
Slide 34: Appendix
Appendix Half year Results 2011 29 July 2011 34 Press Conference
Slide 35: Segment review – Core segments
Segment review – Core segments Retail & SME GCIB Group Markets Corporate Center Total group in EUR million 1-6 11 1-6 10 1-6 11 1-6 10 1-6 11 1-6 10 1-6 11 1-6 10 1-6 11 1-6 10 Net interest income 2,312.8 2,290.5 259.7 293.0 65.6 56.8 51.7 44.5 2,689.8 2,684.8 Risk provisions for loans and advances
Slide 36: Core segment – Austria
Core segment – Austria Erste Bank Oesterreich drives improvement in Austria Savings banks EB Oesterreich Austria in EUR million 1-6 11 1-6 10 1-6 11 1-6 10 1-6 11 1-6 10 Net interest income 483.4 477.3 316.3 319.4 799.7 796.6 Risk provisions for loans and advances (123.1) (135.9) (65.2) (87.7) (188.
Slide 37: Core segment Central and Eastern Europe (1)
Core segment Central and Eastern Europe (1) – Diverging trends in operating performance … Czech Republic Romania Slovakia Hungary in EUR million 1-6 11 1-6 10 1-6 11 1-6 10 1-6 11 1-6 10 1-6 11 1-6 10 Net interest income 590.0 536.1 354.9 415.2 221.3 209.5 189.1 185.9 Risk provisions for loans and a
Slide 38: Core segment Central and Eastern Europe (2)
Core segment Central and Eastern Europe (2) – … and risk cost levels across the region continued Croatia Serbia Ukraine CEE in EUR million 1-6 11 1-6 10 1-6 11 1-6 10 1-6 11 1-6 10 1-6 11 1-6 10 Net interest income 127.9 117.6 18.2 12.4 11.6 17.0 1,513.1 1,493.8 Risk provisions for loans and advance
Slide 39: H1 2011 financial highlights
H1 2011 financial highlights – Operating result has performed well in most segments in EUR million 1-6 11 1-6 10 Change Q2 11 Q1 11 Q2 10 Retail & SME 1,566.9 1,569.8 (0.2%) 803.5 763.4 831.4 Austria 424.1 419.8 1.0% 224.5 199.6 219.7 EB Oesterreich 185.6 193.8 (4.2%) 97.3 88.3 98.7 Savings banks 23