Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q3 2023 Earnings Presentation
52 slides from Erste Group Bank's earnings presentation, Oct 30, 2023
Slide 1: Q3 2023 results presentation
Q3 2023 results presentation Vienna, 30 October 2023 Continued strong operating and risk performance 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: Operating and risk performance drive net profit
EXECUTIVE SUMMARY: P&L PERFORMANCE Operating and risk performance drive net profit QoQ net profit development YTD net profit development in EUR m in EUR m +40.2% -8.5% 293 31 14 28 235 896 29 1,582 408 2,310 165 820 51 42 22 1,647 Q2 23 Operating Operating Risk costs Other Taxes on Minorities Q3 23
Slide 5: On track to deliver upgraded 2023 guidance
EXECUTIVE SUMMARY: P&L DASHBOARD On track to deliver upgraded 2023 guidance Net interest margin Cost/income ratio Risk cost ratio in % in % in bps 2.50 2.50 G23: <50% G23: <10 bps 2.45 37 28 30 2.24 2.25 51.9 51.6 49.7 -4 -2 46.2 44.7 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q
Slide 6: Encouraging loan trends, stable core customer deposits
EXECUTIVE SUMMARY: BALANCE SHEET PERFORMANCE Encouraging loan trends, stable core customer deposits YTD total asset development YTD equity & total liability development in EUR bn in EUR bn +4.1% 337.2 337.2 0.0 0.3 2.4 4.0 5.2 0.4 9.7 323.9 323.9 0.8 11.8 5.6 3.8 3.7 31/12/22 Cash Trading, Loans to
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 12.1 96.8 96.7 96.7 G23: ~5% 94.6 94.3 9.4 12.0 90.2 7.0 87.4 3.7 G23: ~ 2% 85.5 85.1 85.0 6.4 7.1 6.9 2.0 2.0 2.1 2.0 2.0 1.4 Q3 2
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, moderate recovery in 2024
MACROECONOMIC AND BUSINESS UPDATE: ECONOMIC FORECASTS * Slower growth in 2023, moderate recovery in 2024 Real GDP growth Consumer price inflation Unemployment rate 2023 in % avg, in % avg, in % 2024 17.9 9.5 9.0 12.7 6.9 6.6 3.3 3.2 3.5 10.9 10.7 10.4 6.0 6.0 5.6 5.7 2.6 2.5 2.1 2.6 2.6 8.1 4.6 4.5
Slide 10: Retail loans up year-to-date
MACROECONOMIC AND BUSINESS UPDATE: RETAIL BUSINESS Retail loans up year-to-date Slightly growing loan book amid economic slowdown Housing and consumer loans − Housing loan demand stabilisation continued at low levels; increasing demand in in EUR bn certain countries (CZ, RO) and for renovation loans
Slide 11: Corporates and Markets division maintains earnings momentum
MACROECONOMIC AND BUSINESS UPDATE: CORPORATES & MARKETS BUSINESS Corporates and Markets division maintains earnings momentum Loans moderately up Net loan stock of Corporate segment − Loan growth moderated somewhat across all sub-segments; customer deposits down qoq on large opportunistic placements
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: Up-tick in underlying loan growth
OPERATING TRENDS: NET LOAN STOCK AND GROWTH Up-tick in underlying loan growth Net loan stock Growth rates Improving underlying loan growth Q3 23 − Retail loans grew by 4.6% year-on-year (+EUR 3.2bn), primarily in 198.8 0.6% SK and HR, still sluggish in Austrian segments Group 204.9 3.7% 206.2 − Corp
Slide 14: Customer deposit volumes remain stable
OPERATING TRENDS: CUSTOMER DEPOSIT STOCK AND GROWTH Customer deposit volumes remain stable Customer deposits Growth rates Erste Group’s favourable deposit mix is a key competitive advantage – overweight retail, sight, EUR deposits 232.5 -2.2% Group 241.1 1.4% 235.8 Key Q3 23 deposit drivers 47.5 -1.
Slide 15: NII momentum remains healthy, guidance upgraded to > +20%
OPERATING TRENDS: NET INTEREST INCOME (NII) AND NET INTEREST MARGIN (NIM) NII momentum remains healthy, guidance upgraded to > +20% Net interest income Net interest margin NII grows 20.2% yoy, up 3.9% qoq, driven by: − Higher short and long term interest rates 1,548 2.24% Group 1,792 2.46% − Moderat
Slide 16: Robust fee performance continues, reaching new quarterly high
OPERATING TRENDS: NET FEE AND COMMISSION INCOME Robust fee performance continues, reaching new quarterly high Net fee income by segment Net fee income by fee type in EUR m in EUR m +7.8% +4.9% 663 663 643 632 643 632 615 622 34 6 615 622 17 28 6 29 6 27 18 24 36 6 29 6 57 64 24 20 26 23 23 25 54 57
Slide 17: Costs develop in line with expectations
OPERATING TRENDS: OPERATING EXPENSES Costs develop in line with expectations Operating expenses by segment Operating expenses by type in EUR m in EUR m +9.7% -2.3% 1,242 1,230 1,242 1,230 1,194 1,202 1,194 1,202 49 79 82 68 19 22 69 99 94 Residual other admin 1,096 65 23 1,096 150 1 24 59 Other 113
Slide 18: Cost/income ratio guidance confirmed at <50% for 2023
OPERATING TRENDS: OPERATING RESULT AND COST/INCOME RATIO (CIR) Cost/income ratio guidance confirmed at <50% for 2023 Operating result Cost/income ratio in EUR m in % +44.9% 1,489 1,432 14 78 14 Other 73 1,257 138 1,106 13 118 RS 107 1,028 50 7 108 62 111 HR 10 140 128 136 61 98 HU 55 93 103 131 250
Slide 19: Parameter updates contribute to higher risk costs in Q3 23
OPERATING TRENDS: CREDIT RISK/RISK COSTS Parameter updates contribute to higher risk costs in Q3 23 Risk costs by segment * Risk cost ratio * in EUR m in bps 184 78 156 141 Other G23: <10 bps RS HR 37 28 30 HU SK 15 9 RO 2 -3 -4 -2 CZ AT/OA AT/SB AT/EBOe 2018 2019 2020 2021 2022 Q3 22 Q4 22 Q1 23 Q2
Slide 20: Asset quality parameters remain stable at excellent levels
OPERATING TRENDS: CREDIT RISK/ASSET QUALITY Asset quality parameters remain stable at excellent levels NPL ratio NPL coverage ratio NPL ratio stable at historic low of 2% − No significant increase in hard defaults due to geopolitical crises and 2.0 in % 96.8 in % economic slowdown Group 2.0 96.7 2.0
Slide 21: Other result continues to perform well
OPERATING TRENDS: OTHER RESULT Other result continues to perform well Other result by segment Other result by accounting categories in EUR m in EUR m Other 24 RS 0 HR -22 -7 0 -27 -49 HU -22 -7 -49 SK 0 RO -138 -89 -89 -54 CZ -157 AT/OA -157 AT/SB AT/EBOe -99 -274 -274 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23
Slide 22: 2023 ROTE guidance confirmed at >15%
OPERATING TRENDS: NET RESULT, EARNINGS PER SHARE (EPS) & RETURN ON TANGIBLE EQUITY (ROTE) 2023 ROTE guidance confirmed at >15% Net result by segment EPS & ROTE in EUR m in EUR +60.7% 896 820 Other RS 20.2% 19.1% 594 HR 518 HU 14.6% 510 13.6% 1.98 12.2% 1.90 SK RO 1.39 CZ 1.19 1.10 AT/OA AT/SB AT/EBO
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: MREL drives wholesale funding, core customer deposits stable
WHOLESALE FUNDING AND CAPITAL: ISSUED DEBT AND INTERBANK FUNDING MREL drives wholesale funding, core customer deposits stable Liabilities and equity Debt securities Interbank deposits Comments in EUR bn in EUR bn in EUR bn Higher customer deposit volumes mainly driven by 337.2 increased corporate an
Slide 25: 2023 funding plan successfully executed
WHOLESALE FUNDING AND CAPITAL: LONG TERM FUNDING 2023 funding plan successfully executed Maturity profile of debt 8.0 6.4 4.8 4.7 3.8 3.1 2.8 1.1 0.9 0.4 0.7 0.2 0.3 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035+ Debt CEE Tier 2 Covered bonds Senior non-preferred bonds Senior unse
Slide 26: MREL issuance progresses to plan
WHOLESALE FUNDING AND CAPITAL: MREL UPDATE (MINIMUM REQUIREMENT FOR OWN FUNDS AND ELIGIBLE LIABILITIES) MREL issuance progresses to plan MPE resolution groups 3-year MREL issuance plan 198 ~1,000 – 3,000 in EUR bn, in EUR m, 93 as of Jun 2023 average pa 77 28 26 ~500-1,000 21 15 13 ~300-600 11 10 ~3
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 143.9 146.2 147.7 148.0 140.8 5.9 5.6 7.0 6.3 5.8 14.7 14.6 14.8 14.9 14.6 28.1 27.7 25.2 26.2 26.4 3.8 3.9 3.6 3.5 3.6 2.2 2.4 2.2 2.2
Slide 28: Strong profitability drives capital build
WHOLESALE FUNDING AND CAPITAL: COMMON EQUITY TIER 1 (CET1), TIER 1 AND TOTAL CAPITAL RATIOS Strong profitability drives capital build CET 1 ratio development (pro forma, final) Basel 3 capital ratios (final) in % in % 19.0 18.7 0.60 14.96 18.2 0.23 0.11 17.9 18.0 0.06 1.60 16.4 14.20 16.1 15.8 15.5
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, targeting ROTE of ~15% for 2024
FINANCIAL OUTLOOK Another upgrade of 2023 guidance, targeting ROTE of ~15% for 2024 Previous ‘23 New ‘23 Variable Key assumptions/additional comments guidance guidance Real GDP > 0% > 0% Unchanged economic outlook Loans ~ +5% ~ +5% Guidance confirmed on slightly improving growth patterns NII ~ +20%
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: 9,924 Employees: 3,564 Customers: 1.0m Branches: 369 Branches: 186 Employees: 3,346 Retail loan share: 26.4% 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 21.3% 23.9% 24.0% 26.1% AT 21.4% AT 24.2% AT 23.8% AT 24.2% 25.3% 26.6% 22.4% 14.1% CZ 26.3% CZ 25.4% CZ 22.7% CZ 16.9% 26.4% 25.3% 22.6% 15.2% 24.5% 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 1-9 22 1-9 23 YOY-Δ Q3 22 Q2 23 Q3 23 YOY-Δ QOQ-Δ Net interest income 4,385.2 5,422.3 23.7% 1,548.2 1,792.2 1,861.2 20.2% 3.9% Interest income 5,820.9 11,125.
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 Sep 22 Dec 22 Mar 23 Jun 23 Sep 23 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 44,552 35,685 43,305 32,810 31,922 -28.3% -10.5% -2.7% 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 Sep 22 Dec 22 Mar 23 Jun 23 Sep 23 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 3,175 3,264 3,139 2,788 2,428 -23.5% -25.6% -12.9% Derivati
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 Q3 2023 YE 2023 2021 2022 Q3 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 % 37.64% 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 210.3 in EUR bn 206.1 3.7 0.1 2% 0% 0.1 1% 1% 1% 3.4 Other Other 3.3 2.5 1% 22% 1% 29% 28% 5.3 4.3 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 +8.7% 56.4 52.4 51.9 3% 2% 4% 11.8 15% 7% 10.7 10.9 2.1 18% 1% 0.9 1.0 6% 4.0 1.0 3.5
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), Sep 23 in EUR m 2020 54,491 Const
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 (Q3 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 Erste Foundation direct 4.05% 5.58% 2.29% Sparkassen Beteiligungs 0.57% 0.57% GmbH & Co KG 2.24% 2.24% 11.90% Foundations 17.83% Wiener Städtische Austria 33.13% Versicherungs
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