Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q1 2023 Earnings Presentation
56 slides from Erste Group Bank's earnings presentation, Apr 28, 2023
Slide 1: Q1 2023 results presentation
Q1 2023 results presentation Vienna, 28 April 2023 Revenue momentum and risk performance drive guidance upgrade 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, net release of risk costs push net profit up
EXECUTIVE SUMMARY: P&L PERFORMANCE Revenue growth, net release of risk costs push net profit up QoQ net profit development YTD net profit development in EUR m in EUR m +32.3% +14.7% 80 7 142 162 117 70 49 64 594 462 178 199 55 594 518 449 Q4 22 Operating Operating Risk costs Other Taxes on Minoritie
Slide 5: Flying start to 2023 drives guidance upgrade
EXECUTIVE SUMMARY: P&L DASHBOARD Flying start to 2023 drives guidance upgrade Net interest margin Cost/income ratio Risk cost ratio in % in % in bps 60.7 2.50 G23: ~51% G23: <25bps 37 28 2.24 2.25 51.9 51.6 13 2.14 2.15 49.8 49.7 -4 -18 Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Q1
Slide 6: Customer deposits jump while loan growth slows
EXECUTIVE SUMMARY: BALANCE SHEET PERFORMANCE Customer deposits jump while loan growth slows YTD total asset development YTD equity & total liability development in EUR bn in EUR bn +5.9% 342.9 342.9 0.6 0.0 0.2 1.2 2.3 0.5 8.9 1.8 14.1 7.6 323.9 323.9 0.1 1.1 31/12/22 Cash Trading, Loans to Net loan
Slide 7: Balance sheet metrics remain strong
EXECUTIVE SUMMARY: BALANCE SHEET DASHBOARD Balance sheet metrics remain strong Loan/deposit ratio Loan & deposit growth Asset quality in % yoy, in % in % 13.0 96.8 12.1 94.6 94.3 11.3 91.9 91.8 10.4 90.2 9.4 12.0 G23: <2.5% 84.9 85.5 85.1 9.3 83.3 8.3 2.3 7.1 2.2 2.0 2.0 2.1 G23: ~5% 6.4 Q1 22 Q2 22
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: Slowing growth in 2023, brightening prospects for 2024
MACROECONOMIC AND BUSINESS UPDATE: ECONOMIC FORECASTS * Slowing growth in 2023, brightening prospects for 2024 Real GDP growth Consumer price inflation Unemployment rate 2023 in % avg, in % avg, in % 2024 18.6 9.2 8.8 4.2 4.2 6.3 6.3 5.8 5.7 6.9 6.6 3.8 12.0 10.7 11.8 3.2 10.3 4.6 4.5 2.5 2.6 7.0 6.
Slide 10: Retail business benefits from growth spots outside lending
MACROECONOMIC AND BUSINESS UPDATE: RETAIL BUSINESS Retail business benefits from growth spots outside lending Economic slowdown, higher interest rates dent loan demand Housing and consumer loans − Housing loan demand strongly impacted higher interest rates in all relevant in EUR bn currencies; howev
Slide 11: Corporates and Markets businesses on track
MACROECONOMIC AND BUSINESS UPDATE: CORPORATE BUSINESS Corporates and Markets businesses on track Corporate volume growth decelerates in Q1 23 Net loan stock of Corporate segment − Corporate lending growth slowed down +16.2% − Commercial Real Estate pipeline dropped 72.7 74.1 in EUR bn 71.7 67.2 6.0
Slide 12: George now also serves corporate customers
MACROECONOMIC AND BUSINESS UPDATE: GEORGE George now also serves corporate customers George is a growth story # of George retail users − Almost 9 million users onboarded to George across 6 markets in m, eop +10.5% − Usage of digital channels further increases, resulting in an all-time-high of monthl
Slide 13: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 13
Slide 14: Net loan growth continues to slow
OPERATING TRENDS: NET LOAN STOCK AND GROWTH Net loan growth continues to slow Net loan stock Growth rates Economic slowdown, high interest rates dent loan demand − Retail loan growth has almost come to halt, with new business 185.3 0.3% volumes still under pressure in the housing loan segment, but G
Slide 15: Customer deposits jump qoq, yoy
OPERATING TRENDS: CUSTOMER DEPOSIT STOCK AND GROWTH Customer deposits jump qoq, yoy Customer deposits Growth rates Erste Group’s favourable deposit mix is a key competitive advantage – overweight retail, sight, EUR deposits 222.4 6.3% Group 224.0 7.1% 238.1 Key Q1 23 deposit drivers 46.4 -1.5% AT/EB
Slide 16: Strong NII momentum triggers guidance upgrade
OPERATING TRENDS: NET INTEREST INCOME (NII) AND NET INTEREST MARGIN (NIM) Strong NII momentum triggers guidance upgrade Net interest income Net interest margin NII grows 27.1% yoy driven by rate cycles in the euro zone, Hungary and Romania 1,392 2.14% Group 1,565 2.25% 2.50% 1,769 2023 NII growth gu
Slide 17: Robust fee performance confirms guidance of ~ +5% growth in 2023
OPERATING TRENDS: NET FEE AND COMMISSION INCOME Robust fee performance confirms guidance of ~ +5% growth in 2023 Net fee income by segment Net fee income by fee type in EUR m in EUR m +4.4% +3.3% 643 643 615 615 622 615 615 622 600 28 6 600 6 6 63 25 5 28 6 36 29 57 67 61 68 55 57 62 54 52 59 50 Oth
Slide 18: Underlying cost inflation in line, outlook adjusted
OPERATING TRENDS: OPERATING EXPENSES Underlying cost inflation in line, outlook adjusted Operating expenses by segment Operating expenses by type in EUR m in EUR m +0.6% +4.1% 1,235 1,242 1,235 1,242 1,194 1,194 59 16 49 68 82 68 19 Residual other admin 1,096 65 1,050 1,096 150 55 1,050 24 Other 113
Slide 19: Cost/income ratio target set to ~51% for 2023
OPERATING TRENDS: OPERATING RESULT AND COST/INCOME RATIO (CIR) Cost/income ratio target set to ~51% for 2023 Operating result Cost/income ratio in EUR m in % +56.9% 1,257 1,106 62 13 1,028 50 7 108 Other 1,060 10 10 140 RS 51 61 98 76 55 93 HR 801 103 131 92 10 135 HU 48 123 125 36 210 60.7 60.5 76
Slide 20: Net release of risk costs underpins guidance upgrade
OPERATING TRENDS: CREDIT RISK/RISK COSTS Net release of risk costs underpins guidance upgrade Risk costs by segment * Risk cost ratio * in EUR m in bps 184 78 141 Other RS G23: <25 bps 37 59 HR 28 HU SK 13 15 9 RO 2 CZ -4 -3 AT/OA -21 -18 AT/SB AT/EBOe Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 2018 2019 2020 20
Slide 21: Resilient portfolio translates into strong asset quality
OPERATING TRENDS: CREDIT RISK/ASSET QUALITY Resilient portfolio translates into strong asset quality NPL ratio NPL coverage ratio NPL ratio hovers at multi-decade lows − No significant increase in hard defaults due to geopolitical crisis and 2.3 in % 91.9 in % economic slowdown Group 2.0 94.6 − Marg
Slide 22: Real estate business is well-diversified, with a conservative focus
OPERATING TRENDS: CREDIT RISK/EXPOSURE HIGHLIGHT: REAL ESTATE (RE) Real estate business is well-diversified, with a conservative focus Real estate is a core business Share of total exposure Split by asset class − Exposure amounts to EUR 43.7bn in Q1 23 or 12% of total − Net customer loans equal EUR
Slide 23: Other result primarily impacted by regulatory items, valuations
OPERATING TRENDS: OTHER RESULT Other result primarily impacted by regulatory items, valuations Other result by segment Other result by accounting categories in EUR m in EUR m Other RS -16 HR 0 -71 -22 HU -123 SK 0 RO -138 -89 -54 -89 -96 CZ -40 -132 -96 AT/OA -157 -157 -132 AT/SB AT/EBOe -99 -274 -2
Slide 24: 2023 ROTE guidance confirmed at 13-15%
OPERATING TRENDS: NET RESULT, EARNINGS PER SHARE (EPS) & RETURN ON TANGIBLE EQUITY (ROTE) 2023 ROTE guidance confirmed at 13-15% Net result by segment EPS & ROTE in EUR m in EUR +32.3% 688 594 Other 17.1% 518 RS 510 14.6% 449 HR 13.6% 12.2% 12.2% HU SK RO 1.49 1.39 CZ 1.19 1.05 1.10 AT/OA AT/SB AT/E
Slide 25: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 25
Slide 26: 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 342.9 non-core institutional
Slide 27: Stable LT funding needs in 2023
WHOLESALE FUNDING AND CAPITAL: LONG TERM FUNDING Stable LT funding needs in 2023 Maturity profile of debt 5.9 5.6 4.7 4.4 3.6 2.6 2.8 1.5 0.9 0.9 0.7 0.2 0.1 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035+ Senior unsec. bonds Senior non-preferred bonds Covered bonds Capital exc Tie
Slide 28: 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 205 ~1,000 – 3,000 in EUR bn, in EUR m, as at Mar 2023 average pa 93 79 ~500-1,000 ~300-600 ~300-400 26 25 20 14 14 ~100-250 ~1
Slide 29: 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 143.9 146.2 138.2 140.8 135.5 7.0 6.3 5.5 5.8 6.3 14.8 14.9 14.5 14.6 14.3 25.6 25.2 26.2 26.4 24.3 3.8 3.6 3.5 3.6 3.5 2.2 2.2 2.2 2.2
Slide 30: 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 (pro-forma) Basel 3 capital ratios (final) in % in % 14.43 0.01 0.02 14.20 0.19 0.19 18.5 0.41 18.2 18.0 17.9 17.9 0.23 15.8 15.8
Slide 31: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 31
Slide 32: Upgrade of 2023 guidance
FINANCIAL OUTLOOK 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 slows in line with weaker economy NII ~ +10% ~ +15% Significant euro zone rates ris
Slide 33: Presentation topics
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 33
Slide 34: 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: 10,032 Employees: 3,574 Customers: 1.0m Branches: 391 Branches: 188 Employees: 3,335 Retail loan share: 25.3% Retail loan share
Slide 35: 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 36: 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 20.7% 23.6% 23.3% 27.1% AT 19.9% AT 23.9% AT 24.2% AT 24.1% 24.7% 27.1% 20.9% 14.6% CZ 25.3% CZ 26.1% CZ 22.5% CZ 13.1% 25.3% 25.8% 22.6% 16.1% 24.6% 28.
Slide 37: 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 1-3 22 1-3 23 YOY-Δ Q1 22 Q4 22 Q1 23 YOY-Δ QOQ-Δ Net interest income 1,392.1 1,769.0 27.1% 1,392.1 1,565.4 1,769.0 27.1% 13.0% Interest income 1,623.2 3,388.
Slide 38: 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 Mar 22 Jun 22 Sep 22 Dec 22 Mar 23 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 46,225 42,818 44,552 35,685 43,305 -6.3% 21.4% 21.4% Financial assets held for tradi
Slide 39: 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 Mar 22 Jun 22 Sep 22 Dec 22 Mar 23 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 2,917 3,005 3,175 3,264 3,139 7.6% -3.8% -3.8% Derivatives
Slide 40: 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 Q1 2023 YE 2023 2021 2022 Q1 2023 YE 2023 Pillar 1
Slide 41: 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 42: 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 % 35.45% resolution approach − In Q2 22, Erste Group Bank AG received its MREL requ
Slide 43: 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 206.1 206.7 in EUR bn 3.4 0.1 3.5 0.1 1% 1% 0% 1% 1% Other Other 3.3 3.0 1% 22% 1% 29% 29% 4.9 4.2 5.3 4.0
Slide 44: Residential real estate is predominantly an Austrian business
APPENDIX: CREDIT RISK/EXPOSURE HIGHLIGHT: REAL ESTATE/RESIDENTIAL REAL ESTATE (RRE) Residential real estate is predominantly an Austrian business Residential real estate – key facts RRE by asset class RRE by country of risk − Exposure amounts to EUR 23.2bn in Q1 23 or 53% of RE exposure − Focus on A
Slide 45: Commercial real estate is well-diversified
OPERATING TRENDS: CREDIT RISK/EXPOSURE HIGHLIGHT: REAL ESTATE/COMMERCIAL REAL ESTATE (CRE) Commercial real estate is well-diversified Commercial real estate – key facts CRE by asset class CRE by country of risk − Exposure amounts to EUR 15.8bn in Q1 23 or 36% of RE exposure − Retail focus is on well
Slide 46: 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 +6.1% 55.1 51.9 3% 2% 3% 48.9 11.5 14% 7% 10.9 18% 1% 9.2 1.2 0.9 1.0 6% 3.8 1.7 1.8 3
Slide 47: 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 48: 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 49: 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 50: 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), Q1 23 in EUR m 2020 54,491 Constr
Slide 51: Net-zero target setting to meet 1.5 degree climate scenarios
APPENDIX: ESG PROFILE (4)/ENVIRONMENT – NET-ZERO TARGET SETTING Net-zero target setting to meet 1.5 degree climate scenarios Portfolio decarbonization interim targets 2030 Portfolio selection Metric Baseline 2022 Target Reduction Volume covered (Q1 23)* Housing mortgages kgCO2e/m² 53.3 30.5 -43% EUR
Slide 52: 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 (5.8) (6.1) In 2022, Erste Group improved its assessment by Sustainalytics by 3.6 points, Low Risk Low Risk low risk category con
Slide 53: 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 5.54% 2.45% 4.78% 0.92% 0.92% 2.24% 11.89% Erste Foundation direct 2.24% Sparkassen Beteiligungs 17.88% Austria Gmbh & Co KG 33.19% 2.74% Foundations North America 4.08% Wiene
Slide 54: Erste Group Bank AG boasts strong issuer ratings
APPENDIX: CREDIT RATINGS Erste Group Bank AG boasts strong 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 Capital & Earn
Slide 55: 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 56: 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