Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q1 2024 Earnings Presentation
52 slides from Erste Group Bank's earnings presentation, Apr 30, 2024
Slide 1: Q1 2024 preliminary results presentation
Q1 2024 preliminary results presentation Vienna, 30 April 2024 Profit momentum continues 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: Robust top line and moderate costs drive net profit growth
EXECUTIVE SUMMARY: P&L PERFORMANCE Robust top line and moderate costs drive net profit growth QoQ net profit development YTD net profit development in EUR m in EUR m +13.8% +32.0% 52 40 152 71 62 62 783 148 783 95 115 20 289 89 688 594 Q4 23 Operating Operating Risk costs Other Taxes on Minorities Q
Slide 5: Fully on track to deliver 2024 guidance
EXECUTIVE SUMMARY: P&L DASHBOARD Fully on track to deliver 2024 guidance Net interest margin Cost/income ratio Risk cost ratio in % in % in bps 2.50 2.50 2.49 G24: ~50% G24: <25 bps 2.45 2.47 30 18 49.7 49.8 -4 -2 0 46.2 46.0 44.7 Q1 23 Q2 23 Q3 23 Q4 23 Q1 24 Q1 23 Q2 23 Q3 23 Q4 23 Q1 24 Q1 23
Slide 6: Moderate volume growth, as expected
EXECUTIVE SUMMARY: BALANCE SHEET PERFORMANCE Moderate volume growth, as expected YTD total asset development YTD equity & total liability development in EUR bn in EUR bn +1.6% 342.7 342.7 0.3 0.0 0.2 0.8 1.1 337.2 9.4 337.2 4.8 0.5 7.3 3.2 2.5 2.9 31/12/23 Cash Trading, Loans to Net loans Intangible
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 % 94.3 96.7 96.7 G24: ~5% 9.4 85.1 83.7 7.0 89.3 88.4 87.4 3.7 85.1 85.0 7.1 6.9 2.8 2.7 2.3 2.3 3.9 2.1 2.0 2.0 1.4 -1.2 Q1 23 Q2 23 Q3 23 Q4 23 Q1
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: Moderate economic recovery projected for 2024
MACROECONOMIC AND BUSINESS UPDATE: ECONOMIC FORECASTS * Moderate economic recovery projected for 2024 Real GDP growth Consumer price inflation Unemployment rate 2024 in % avg, in % avg, in % 2025 5.9 8.8 8.6 3.9 3.3 3.5 4.7 3.2 3.4 3.1 4.3 2.7 2.6 2.6 3.7 4.0 5.7 5.7 5.6 5.6 6.0 5.7 2.0 2.0 3.4 5.2
Slide 10: Retail business on a good track
MACROECONOMIC AND BUSINESS UPDATE: RETAIL BUSINESS Retail business on a good track Slightly growing loan book in FX-adjusted terms Housing and consumer loans − Housing loan volumes started to rebound in local currency (esp. in CZ and HU), first rate cuts support new sales; sustainable growth trend l
Slide 11: Operating income growing in Corporates and Markets division
MACROECONOMIC AND BUSINESS UPDATE: CORPORATES & MARKETS BUSINESS Operating income growing in Corporates and Markets division New loan generation covers repayments, pipeline builds up Net loan stock of Corporate segment − SME lending reflects weaker demand, FX development and minor resegmentation, wh
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: Flat qoq loan development on negative FX impact, muted demand
OPERATING TRENDS: NET LOAN STOCK AND GROWTH Flat qoq loan development on negative FX impact, muted demand Net loan stock Growth rates As expected, slow start to 2024 − Retail business flat qoq with RO and HR as positive outliers, up 3.5% 202.7 0.1% yoy driven by organic growth in HR and SK, inorgani
Slide 14: Customer deposits up 1.1% in Q1 24
OPERATING TRENDS: CUSTOMER DEPOSIT STOCK AND GROWTH Customer deposits up 1.1% in Q1 24 Customer deposits Growth rates Erste Group’s favourable deposit mix is a key competitive advantage – overweight retail, sight, EUR deposits 238.1 1.1% Group 232.8 -1.2% 235.3 Key Q1 24 deposit drivers 46.1 -0.9% A
Slide 15: NII consolidates near record levels
OPERATING TRENDS: NET INTEREST INCOME (NII) AND NET INTEREST MARGIN (NIM) NII consolidates near record levels Net interest income Net interest margin NII grows 4.7% yoy, up 2.6% qoq − Yoy increase driven by favourable interest rate backdrop 1,769 2.50% − Qoq increase due to strong CEE performance, m
Slide 16: Another quarter, another record fee print
OPERATING TRENDS: NET FEE AND COMMISSION INCOME Another quarter, another record fee print Net fee income by segment Net fee income by fee type in EUR m in EUR m +10.8% +1.5% 702 712 702 712 663 33 6 31 6 663 17 27 643 632 6 643 632 24 27 34 69 17 28 6 29 6 69 27 18 24 67 62 57 64 Other 23 25 54 65 5
Slide 17: Operating expenses benefit from lower deposit insurance contributions
OPERATING TRENDS: OPERATING EXPENSES Operating expenses benefit from lower deposit insurance contributions Operating expenses by segment Operating expenses by type in EUR m in EUR m -4.6% +3.3% 1,345 1,345 1,283 1,283 1,242 84 1,242 49 1,230 1,202 26 61 1,230 1,202 162 89 Residual other admin 19 79
Slide 18: 2024 starts with a record operating performance
OPERATING TRENDS: OPERATING RESULT AND COST/INCOME RATIO (CIR) 2024 starts with a record operating performance Operating result Cost/income ratio in EUR m in % +19.8% 1,489 1,505 1,432 73 14 78 14 1,354 72 18 Other 1,257 118 138 75 3 152 13 RS 107 129 62 111 105 HR 108 136 103 98 128 159 152 HU 131
Slide 19: Q1 24 risk costs come in at 18 bps, 2024 outlook confirmed
OPERATING TRENDS: CREDIT RISK/RISK COSTS Q1 24 risk costs come in at 18 bps, 2024 outlook confirmed Risk costs by segment * Risk cost ratio * in EUR m in bps 156 78 0 Other G24: <25 bps 95 RS HR 30 HU SK 15 18 9 6 RO 2 -2 0 CZ -4 AT/OA -21 -8 AT/SB AT/EBOe 2019 2020 2021 2022 2023 Q1 23 Q2 23 Q3 23
Slide 20: NPL and NPL coverage ratios at comfortable levels
OPERATING TRENDS: CREDIT RISK/ASSET QUALITY NPL and NPL coverage ratios at comfortable levels NPL ratio NPL coverage ratio NPL ratio edges up slightly in Q1 24 − Primarily driven by small, well collateralised residential real estate 2.1 in % 94.3 in % development projects at the mostly minority-owne
Slide 21: Other result improves yoy on lower resolution fund contribution
OPERATING TRENDS: OTHER RESULT Other result improves yoy on lower resolution fund contribution Other result by segment Other result by accounting categories in EUR m in EUR m Other 24 RS 0 0 -7 HR -22 -27 -27 -49 HU -7 -49 SK -36 -86 RO -138 -127 CZ -127 AT/OA AT/SB AT/EBOe -99 -274 -274 -279 -279 Q
Slide 22: Q1 24 ROTE at 17.2%, 2024 ROTE target confirmed at ~15%
OPERATING TRENDS: NET RESULT, EARNINGS PER SHARE (EPS) & RETURN ON TANGIBLE EQUITY (ROTE) Q1 24 ROTE at 17.2%, 2024 ROTE target confirmed at ~15% Net result by segment EPS & ROTE in EUR m in EUR +32.0% 896 820 Other 20.2% 783 19.1% 688 RS 17.2% 594 HR 14.6% 14.7% HU SK 1.98 1.90 1.87 RO 1.54 1.39 CZ
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: Start-of-year issuance activity drives debt securities
WHOLESALE FUNDING AND CAPITAL: ISSUED DEBT AND INTERBANK FUNDING Start-of-year issuance activity drives debt securities Liabilities and equity Debt securities Interbank deposits Comments in EUR bn in EUR bn in EUR bn Retail & SME deposits constitute core LT funding 337.2 342.7 source 28.5 29.3 43.8
Slide 25: 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 MREL issuance plan (by year-end 2024) 200 ~ 750–1,500 in EUR bn, in EUR m 92 as of Mar 2024 ~1,000-1,250 80 28 26 23 ~350-500 14 14 ~ 250-350
Slide 26: Majority of 2024 funding plan already executed
WHOLESALE FUNDING AND CAPITAL: LONG TERM FUNDING Majority of 2024 funding plan already executed Maturity profile of debt 8.6 in EUR bn 6.4 5.5 5.1 4.6 3.4 2.8 2.1 1.3 1.0 0.9 0.3 0.0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036+ Debt CEE Tier 2 Covered bonds Senior non-preferred
Slide 27: RWAs increase on business effects and operational risk
WHOLESALE FUNDING AND CAPITAL: CAPITAL AND RISK-WEIGHTED ASSETS (RWA) RWAs increase on business effects and operational risk Basel 3 capital Risk-weighted assets in EUR bn +2.5% in EUR bn 146.2 147.7 148.0 146.5 149.9 6.3 5.9 5.6 6.3 6.5 14.9 14.7 14.6 14.8 16.4 +9.0% 28.1 29.1 28.7 27.7 26.4 3.8 3.
Slide 28: Capital remains at strong level
WHOLESALE FUNDING AND CAPITAL: COMMON EQUITY TIER 1 (CET1), TIER 1 AND TOTAL CAPITAL RATIOS Capital remains at strong level CET 1 ratio development (final, pro forma) Basel 3 capital ratios (final) in % in % 19.9 15.66 19.0 19.2 0.23 15.47 18.7 0.35 0.51 0.11 0.03 0.01 0.02 18.0 17.3 16.4 16.7 16.1
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: Guidance for 2024 fully confirmed
FINANCIAL OUTLOOK Guidance for 2024 fully confirmed Variable 2024 guidance Key assumptions/additional comments Real GDP > 2% Moderately improving economic outlook Loans ~ +5% Loan growth on better economic outlook, declining interest rates, but back-end-loaded NII ~ -3% NII consolidation after 2 yea
Slide 31: Appendix: Erste Group basics, detailed financials & 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: 4.6m Customers: 2.0m Hungary Employees: 9,627 Employees: 3,509 Customers: 1.0m Branches: 360 Branches: 170 Employees: 3,345 Retail loan share: 26.7% 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 21.2% 24.1% 24.0% 24.4% AT 21.4% AT 24.2% AT 24.1% AT 23.2% 25.4% 25.7% 22.1% 15.6% CZ 26.7% CZ 24.9% CZ 22.7% CZ 13.1% 26.7% 24.6% 22.2% 14.5% 24.5% 27.
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 1-3 23 1-3 24 YOY-Δ Q1 23 Q4 23 Q1 24 YOY-Δ QOQ-Δ Net interest income 1,769.0 1,852.4 4.7% 1,769.0 1,805.6 1,852.4 4.7% 2.6% Interest income 3,388.2 3,966.0 1
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 Mar 23 Jun 23 Sep 23 Dec 23 Mar 24 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 43,305 32,810 31,922 36,685 29,425 -32.1% -19.8% -19.8% Financial assets held for tr
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 Mar 23 Jun 23 Sep 23 Dec 23 Mar 24 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 3,139 2,788 2,428 2,304 1,805 -42.5% -21.6% -21.6% Derivati
Slide 38: Capital requirements for 2024 slightly up on higher buffers
APPENDIX: REGULATORY CAPITAL POSITION/REQUIREMENT (SREP – SUPERVISORY REVIEW AND EVALUATION PROCESS) Capital requirements for 2024 slightly up on higher buffers Erste Group Consolidated Erste Group Unconsolidated Fully loaded Fully loaded 2022 2023 Q1 2024 YE 2024 2022 2023 Q1 2024 YE 2024 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 Ro
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 % 38.27% 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 211.9 212.2 in EUR bn 3.7 0.1 3.9 0.1 1% 1% 2% 1% Other Other 2.6 2.7 22% 1% 22% 1% 28% 28% 5.4 4.2 5.6 4.3
Slide 42: Real estate snapshot
APPENDIX: CREDIT RISK/EXPOSURE HIGHLIGHT: REAL ESTATE (RE) Real estate snapshot Sound lending standards − Income producing projects (>80%) − Ring-fenced, A-class buildings in prime locations with risk-mitigating structures − Highly collateralised business with conservative valuation approach (applic
Slide 43: 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 +4.3% 55.1 57.2 54.8 3% 3% 5% 11.5 11.9 12.2 15% 6% 15% 1% 1.2 2.1 2.6 7% 3.8 1.7 3.7
Slide 44: Erste Group's embedded ESG strategy as a key to success
APPENDIX: ESG PROFILE (1)/ESG STRATEGY OF ERSTE GROUP Erste Group’s embedded ESG strategy as a key to success GREEN TRANSITION SOCIAL INCLUSION • We aim to achieve a net zero status for our • We promote financial inclusion through our portfolio by 2050. social banking activities, thereby • We streng
Slide 45: Erste Group's ESG targets
APPENDIX: ESG PROFILE (2) Erste Group’s ESG targets Leading the Green Transition Promoting Social Inclusion Sustainable 25% of sustainable corporate financing in 2026 Social EUR 1bn Social Banking financing by 2030 Finance 15% of sustainable retail mortgages in 2027 Banking 200,000 jobs created or p
Slide 46: Environment
APPENDIX: ESG PROFILE (3)/ENVIRONMENT Environment Net zero operations Sustainable finance Operational emissions (in tonnes CO2e): New corporate financing of → pathway towards net zero 2030 environmental objectives Committed amount (total), Mar 2024 in EUR m 54,596 Construction and real estate 512 53
Slide 47: 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 scenarios1 Portfolio decarbonization interim targets 2030 Volume Baseline Targets as of Mar 24 Scenario/ Emissions Sector Metric Methodology pathway scope Year Value 2030 reduction in E
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) Erste Group’s assessment by Sustainalytics in the low risk category was confirmed. Low Risk Low Risk 15.3 / 100 16.4
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 4.13% 5.76% 2.15% 0.35% Sparkassen Beteiligungs 0.35% 1.17% GmbH & Co KG 1.17% 12.23% Foundations 17.94% Wiener Städtische Austria 33.70% 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