Erste Group Bank Ag · VIE:EBS
Erste Group Bank — H1 2014 Earnings Presentation
47 slides from Erste Group Bank's earnings presentation, Jul 31, 2014
Slide 1: Erste Group investor presentation H1 2014 results
Erste Group investor presentation H1 2014 results 31 July 2014 One-offs drive net loss as capital position and asset quality improves Andreas Treichl, CEO Erste Group Gernot Mittendorfer, CFO Erste Group Andreas Gottschling, CRO Erste Group Page
Slide 2: Disclaimer – 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 CORREC
Slide 3: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 3
Slide 4: Executive summary – Group income statement performance
Executive summary – Group income statement performance QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m) 302 103 30 61 64 12 40 68 911 1,024 361 136 20 49 1,033 930 Q1 14 Operating Operating Risk costs Other Taxes on Minorities Q2 14 1-6 13 Operating Operating Risk costs Ot
Slide 5: Executive summary – Q2 14 one-off summary
Executive summary – Group income statement performance: Q2 14 one-off summary One-offs with effect on regulatory capital One-offs with no effect on regulatory capital • Additional risk provisions of about EUR 80m in Romania • Write-down of remaining goodwill, value of customer • Bulk expected to occ
Slide 6: Executive summary – Key income statement data
Executive summary – Key income statement data Net interest income & margin Operating result & cost/income ratio Cost of risk 2.66% 2.62% in EUR m in EUR m in EUR m +0.2% 2,340 +1.5% 2,244 2.62% 2.61% 57.0% 1.35% 53.9% 1,523 1,525 784 796 1.14% 1,124 1,120 798 727 432 364 1-6 13 1-6 14 Q1 14 Q2 14 1-
Slide 7: Executive summary – Group balance sheet performance
Executive summary – Group balance sheet performance YTD total asset reconciliation (EUR m) YTD total liability reconciliation (EUR m) 1,503 2,166 200,118 200,118 678 61 2,091 2,034 172 705 198,398 1,061 1,003 1,019 198,398 66 31/12/13 Cash Trading, Loans to Net loans Intangibles Other 30/06/14 31/12
Slide 8: Executive summary – Key balance sheet data
Executive summary – 31/12/13 30/06/14 Key balance sheet data Loan/deposit & loan/TA ratio Net loans & credit RWA* NPL coverage ratio & NPL ratio G: ±2% in EUR bn +0.1% 98.0% 99.8% 63.1% 64.0% 119.9 120.0 59.9% 60.5% 84.9 84.9 9.6% 9.4% Loan/deposit ratio Loans/total assets Net loans Credit RWA NPL c
Slide 9: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 9
Slide 10: Business environment – Visible macroeconomic improvement across the CEE region
2013 Business environment – 2014 Visible macroeconomic improvement across the CEE region Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (ave, in %) 4.4 3.5 3.0 3.0 2.8 2.5 2.2 2.3 4.0 1.5 1.4 1.5 1.1 1.1 1.6 0.9 0.7 1.2 0.3 1.1 2.3 0.
Slide 11: Business environment – Historic low interest rate environment poses challenges
Business environment – 3M Interbank 10YR GOV Historic low interest rate environment poses challenges Austria Czech Republic Romania 5.53% 5.10% 5.36% 4.84% 1.82% 1.83% 1.98% 2.00% 2.27% 4.79% 2.60% 1.68% 1.86% 1.73% 2.66% 2.54% 0.21% 0.30% 0.30% 0.30% 0.48% 0.37% 0.37% 0.36% 1-6 13 1-6 14 Q1 14 Q2 1
Slide 12: Business environment – Limited currency volatility, despite CZK devaluation
Business environment – Limited currency volatility, despite CZK devaluation in November 2013 EUR/CZK EUR/RON +6.8% 0.0% +0.1% +1.7% -1.7% -2.0% 25.7 27.4 27.4 27.4 27.4 27.5 4.39 4.46 4.50 4.43 4.47 4.38 1-6 13 1-6 14 Q1 14 Q2 14 31/12/13 30/06/14 1-6 13 1-6 14 Q1 14 Q2 14 31/12/13 30/06/14 • YOY de
Slide 13: Business environment – Market shares: stability in AT, CZ and SK, challenges in RO, HU
30/06/13 Business environment – 31/03/14 Market shares: stability in AT*, CZ and SK, challenges in RO, HU 31/05/14 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 19.0% 16.8% 18.3% 21.1% AT 19.0% AT 17.4% AT 18.1% AT 19.6% 23.7% 19.3% 27.4% 11.2% CZ 23.6% CZ 19.2% CZ 26.6
Slide 14: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 14
Slide 15: Business performance: performing loan stock & growth
YoY 30/06/13 Business performance: performing loan stock & growth – QoQ 31/03/14 First rise in performing loan stock since Q3 11 30/06/14 Business line view (BL) Geographic view (geo) 117.2 26.8 -1.3% AT/EBOe 27.2 1.8% Group 115.2 0.4% 0.6% 115.7 27.3 11.8 -10.2% 43.9 -0.8% AT/OA 10.2 Retail 43.2 3.
Slide 16: Business performance: customer deposit stock & growth
YoY 30/06/13 Business performance: customer deposit stock & growth – QoQ 31/03/14 Deposit decline overstated by EUR 1.8bn CZ one-off 30/06/14 Business line view Geographic view 122.5 30.4 -2.5% Group 119.4 -1.8% AT/EBOe 28.7 0.7% 3.3% 120.2 29.7 4.9 64.3 AT/OA 4.9 8.8% Retail 62.6 -2.0% 7.8% 0.8% 5.
Slide 17: Business performance: NII and NIM
Business performance: NII and NIM – Q2 13 Q1 14 NII down yoy on lower volumes and CZK effect, stable qoq Q2 14 Business line view Geographic view 1.143 2.61% 135 1.38% Group 1.124 2.62% AT/EBOe 145 1.53% 1.120 2.61% 159 1.74% 555 4.52% 100 1.09% Retail 538 4.35% AT/OA 99 1.15% 545 4.49% 100 1.18% 17
Slide 18: Business performance: operating income
Q2 13 Business performance: operating income – Q1 14 Operating income stable yoy, up qoq on net trading & FV result Q2 14 Business line view Geographic view Highlights 1,735 1,735 • Increase in qoq group operating income Group 1,691 Group 1,691 despite lower NII on improved net trading & 1,731 1,731
Slide 19: Business performance: operating expenses
Q2 13 Business performance: operating expenses – Q1 14 Lower costs yoy and qoq, qoq due to lower other administrative costs Q2 14 Business line view Geographic view Highlights 970 970 • Group operating expenses declined due to Group 963 Group 963 lower average headcount (yoy) and lower 933 933 469 1
Slide 20: Business performance: operating result and CIR
Q2 13 Business performance: operating result and CIR – Q1 14 Improved yoy and qoq operating result Q2 14 Business line view Geographic view 765 55.9% 765 55.9% Group 727 57.0% Group 727 57.0% 798 53.9% 798 53.9% 374 55.6% 76 67.1% Retail 391 52.6% AT/EBOe 100 59.3% 380 54.1% 103 58.9% 165 30.4% 80 7
Slide 21: Business performance: risk costs (abs/rel)
Q2 13 Business performance: risk costs (abs/rel) – Q1 14 Higher risk costs on additional provisioning in Romania Q2 14 Business line view Geographic view 413 1.27% 43 0.60% Group 364 1.14% AT/EBOe 21 0.30% 432 1.35% 35 0.49% 68 2.05% 111 0.95% AT/OA 51 1.64% Retail 119 1.02% 70 61 0.52% 2.24% 41 0.8
Slide 22: Business performance: non-performing loans and NPL ratio
30/06/13 Business performance: non-performing loans and NPL ratio – 31/03/14 Declining NPL volume, declining NPL ratio 30/06/14 Business line view Geographic view 12,573 9.7% 1,050 3.8% Group 12,238 9.6% AT/EBOe 986 3.5% 11,996 9.4% 1,018 3.6% 1,334 10.2% 3,648 7.7% AT/OA 1,688 14.2% Retail 3,410 7.
Slide 23: Business performance: allowances for loans and NPL coverage
30/06/13 Business performance: allowances for loans and NPL coverage – 31/03/14 NPL coverage rises to multi-year high of 64.0% 30/06/14 Business line view Geographic view 7,757 61.7% 699 66.5% Group 7,660 62.6% AT/EBOe 673 68.2% 7,674 64.0% 697 68.4% 718 53.8% 2,477 67.9% AT/OA 847 50.2% Retail 2,36
Slide 24: Business performance: other result
Q2 13 Business performance: other result – Q1 14 Q2 14 impacted by intangible write-downs, Hungary FX provision Q2 14 Business line view Geographic view Highlights -284 -284 • QOQ rise in group other result due to one-off Group -124 Group -124 intangible write-downs of EUR 956.4m in Q2 -1.147 -1.147
Slide 25: Business performance: income tax and net result
Q2 13 Business performance: income tax and net result – Q1 14 Income tax hit by negative DTA change, net loss due to one-offs Q2 14 Net result by business line Net result by geography Highlights 126 126 • Group income tax charge impacted by Group 103 Group 103 negative change in deferred taxes: net
Slide 26: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 26
Slide 27: Assets and liabilities: YTD overview – Loan/deposit ratio balanced at 99.8%
Assets and liabilities: YTD overview – Loan/deposit ratio balanced at 99.8% Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 200.1 198.4 200.1 198.4 100% 6.5 3.2% 100% 9.3 7.3 4.6% 3.7% 7.2 3.6% 17.3 18.8 8.6% 9.5% 51.3 52.3 25.6% 26.4% 8.4 8.5 4.2% 4.3% 122.4
Slide 28: Assets and liabilities: customer loans by country of risk
Assets and liabilities: customer loans by country of risk – First qoq increase in performing loans since Q3 11 Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) 0.0% +0.2% -2.4% 122.0 119.9 120.0 117.2 115.4 115.7 2.7 2.7 12.6 12.3 6.4 2.7 2.8 6.0 2.8 2.9 5.1 0.8 0.
Slide 29: Assets and liabilities: allowances for customer loans
Assets and liabilities: allowances for customer loans – Slight decline in allowances despite higher decline in NPL volume Quarterly development (EUR m) Highlights • Higher qoq level of use driven by corporate segment due to higher overall qoq NPL sales (EUR 134.9m vs EUR 86.2m) -1.0% • Higher positi
Slide 30: Assets and liabilities: financial and trading assets
Assets and liabilities: financial and trading assets * – LCR at comfortable 110% (YE 13: 107%) By geography (EUR bn) By debtor type Liquidity buffer (EUR bn) +2.0% 47.5 44.9 45.8 100% 11.4% 12.3% 10.7% 8.4 7.8 8.2 21.5% 20.8% 2.1 13.1% 12.6% 11.9% 20.3% 2.7 2.1 2.2 3.1 3.4 17.8% 4.5 4.6 5.0 6.0 40.1
Slide 31: Assets and liabilities: intangibles
Assets and liabilities: intangibles – Significant reduction in intangibles to 13.8% of book value Quarterly development of intangibles (EUR bn) Highlights • Extraordinary intangible write-downs 2.8 amounted to EUR 956.4m in Q2 14 2.8 -41.1% • RO goodwill: EUR 319.1m • RO customer relationships: EUR
Slide 32: Assets and liabilities: customer deposit funding
Assets and liabilities: customer deposit funding – Decline in customer deposits driven by EUR 1.8bn Czech one-off By customer type By product type Highlights -1.8% • YTD decline driven mainly by: 122.5 122.5 122.4 • Final deconsolidation of Czech pension fund 122.4 120.2 120.2 0.5 6.3 1.4 0.9 (EUR 1
Slide 33: Assets and liabilities: debt vs interbank funding
Assets and liabilities: debt vs interbank funding – Decline in issued debt partly offset by increase in interbank funding Debt securities issued (EUR bn) Interbank deposits (EUR bn) -6.3% 33.7 33.1 31.0 22.0 +8.7% 3.3 3.6 Sub debt 1.2 4.0 Overnight deposits 0.4 1.2 0.4 Suppl. capital 18.8 1.2 6.6 17
Slide 34: Assets and liabilities: ST vs LT funding
Assets and liabilities: ST vs LT funding – Limited LT funding needs, solid ST funding collateral coverage Maturity profile of debt (EUR bn) Wholesale funding outflow (<1y) v collateral coverage 3.8 165.1% 3.6 156.6% 141.2% 139.1% 2.8 116.3% 2.4 2.4 2.5 2.0 37.0 37.3 31.6 33.9 1.6 1.6 27.9 26.8 1.3 2
Slide 35: Assets and liabilities: capital position
Assets and liabilities: capital position – CET 1-ratio (fully loaded) at 10.8%, as impairments do not impact capital ratios Basel 2.5/Basel 3 capital (EUR bn) Risk-weighted assets (EUR bn) Basel 2.5/Basel 3 capital ratios Basel 2.5 Basel 3 Basel 2.5 Basel 3 Basel 2.5 Basel 3 Phased-in Phased-in Phas
Slide 36: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 36
Slide 37: Conclusion – Outlook
Conclusion – Outlook • Erste Group confirms outlook provided on 3 July 2014 for 2014 and 2015 • For the geographic segment Romania: a full normalisation of risk costs at 100-150bps of average gross customer loans starting in 2015, accompanied by an accelerated NPL reduction (down about EUR 800 milli
Slide 38: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 38
Slide 39: Additional information: new segmentation – Business line and geographic view
Additional information: new segmentation – Business line and geographic view Erste Group – Business segments Group ALM & Savings Large Commercial Other Group Intragroup Corporate Retail SME Local CC Banks Corporates Real Estate Corporate Markets Elimination Center (ALM&LCC) (AT/SB) (LC) (CRE) (OC) (
Slide 40: Additional information: income statement – Year-to-date and quarterly view
Additional information: income statement – Year-to-date and quarterly view Year-to-date view Quarterly view in EUR million 1-6 13 1-6 14 YOY-Δ Q2 13 Q1 14 Q2 14 YOY-Δ QOQ-Δ Net interest income 2,339.9 2,243.6 -4.1% 1,143.3 1,123.9 1,119.7 -2.1% -0.4% Net fee and commission income 894.1 907.0 1.4% 44
Slide 41: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 10,578 11,852 9,301 10,373 7,267 -31.3% -21.9% -29.9% Financial assets - held for trading 15,258 14,219 12,283 13,610 12,954 -15.1% 5.
Slide 42: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities - held for trading 7,533 7,154 6,475 7,042 7,152 -5.1% 10.5% 1.6% Derivatives 7,044 6,706 6,087 6,341 6,347 -9.9% 4.3%
Slide 43: Additional information: gross customer loans
Additional information: gross customer loans – By risk category, by currency, by industry Gross cust. loans by risk category (EUR bn) Gross customer loans by currency (EUR bn) Gross customer loans by industry (EUR bn) 129.8 129.5 127.7 127.5 127.7 129.8 129.5 127.7 127.5 127.7 129.8 129.5 127.7 127.
Slide 44: Additional information: footprint
Additional information: footprint – Customer banking in Austria and the eastern part of the EU Erste Group footprint Highlights Czech Republic Slovakia • Leading retail and corporate bank Customers: 5.2m Customers: 2.4m in 7 geographically connected Employees : 10,474 Employees : 4,228 countries Bra
Slide 45: Additional information: strategy – A real customer need is the reason for all business
Additional information: strategy – A real customer need is the reason for all business Customer banking in Central and Eastern Europe Eastern part of EU Focus on CEE, limited exposure to other Europe Retail Corporate Capital Public Interbank banking banking markets sector business Focus on local cur
Slide 46: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region 2.4% 9.1% 13.1% 4.0% 4.1% 25.8% 7.1% 1.1% 42.7% 9.0% 9.5% 52.5% 19.6% Erste Stiftung, direct Institutional investors Austria UK & Ireland Other Erste Stiftung, indirect * UNIQA Versicherungsvere
Slide 47: Investor relations details
Investor relations details • Erste Group Bank AG, Milchgasse 1 (mezzanine floor), 1010 Vienna Fax : +43 (0)5 0100-13112 E-mail:investor.relations@erstegroup.com Internet: http://www.erstegroup.com/investorrelations http://twitter.com/ErsteGroupIR http://www.slideshare.net/Erste_Group Erste Group IR