Erste Group Bank Ag · VIE:EBS
Erste Group Bank — FY2018 Earnings Presentation
46 slides from Erste Group Bank's earnings presentation, Feb 28, 2019
Slide 1: Erste Group investor presentation FY 2018 preliminary results
Erste Group investor presentation FY 2018 preliminary results 28 February 2019 Erste Group targets ROTE > 11% for 2019; in 2018 operating profit growth and risk releases drove record net profit Andreas Treichl, CEO Erste Group Gernot Mittendorfer, CFO Erste Group Willibald Cernko, CRO Erste Group Pa
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) +36.3% 1,793 +24.5% 78 18 191 2 565 23 37 -53 247 454 97 -72 1,316 143 -41 Q3 18 Operating Operating Risk costs Other Taxes on Minorities Q4 18 2017 Operating Operating
Slide 5: Executive summary – Key income statement data
Executive summary – Key income statement data Net interest income & margin Operating result & cost/income ratio Cost of risk 2.40% in EUR m in EUR m in EUR m 2.30% 2.33% +8.9% 2.27% 0.11% 4,582 2,735 -0.02% 4,353 59.6% 59.3% 132 2,511 696 741 43 1,158 1,210 -29 -59 Q3 18 Q4 18 2017 2018 Q3 18 Q4 18
Slide 6: Executive summary – Group balance sheet performance
Executive summary – Group balance sheet performance YTD total asset reconciliation (EUR m) YTD equity & total liability reconciliation (EUR m) +7.3% +7.3% 236,792 236,792 16 548 580 4,643 1,154 9,789 11,669 220,659 9,977 1,178 220,659 1,308 4,247 915 31/12/17 Cash Trading, Loans to Net loans Intangi
Slide 7: Executive summary – Key balance sheet data
Executive summary – 31/12/17 Key balance sheet data 31/12/18 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn 92.4% 91.8% +7.0% 73.0% 63.2% 63.1% 139.5 149.3 68.8% 89.2 95.8 4.0% 3.2% Loan/deposit ratio Loans/total assets Net loans Credit RWA NPL coverage
Slide 8: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 8
Slide 9: Business environment – Strong economic outlook for 2019
2018 Business environment – 2019 Strong economic outlook for 2019 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (ave, in %) 5.8 4.8 4.7 4.7 4.6 4.1 4.1 3.8 4.0 3.9 3.4 3.6 3.4 3.4 3.0 3.1 3.0 2.5 3.2 2.7 2.8 2.6 2.6 0.7 0.4 0.8 2.5 2
Slide 10: Business environment – CZ further increases key policy rate to 175bps in November 2018
Business environment – 3M Interbank 10YR GOV CZ further increases key policy rate to 175bps in November 2018 Austria Czech Republic Romania 1.98% 2.13% 2.04% 4.77% 4.90% 4.97% 0.58% 0.66% 0.60% 1.02% 3.92% 0.58% 2.61% 1.27% 1.91% 0.95% -0.33% -0.32% -0.32% -0.32% 1.39% 3.12% 3.01% 0.41% 2017 2018 Q3
Slide 11: Business environment – Emerging market volatility has minor impact on CEE currencies
Business environment – Emerging market volatility has minor impact on CEE currencies EUR/CZK EUR/RON -2.6% +0.6% +0.9% +1.9% +0.3% -0.3% 26.3 25.6 25.7 25.9 25.5 25.7 4.57 4.65 4.65 4.66 4.67 4.65 2017 2018 Q3 18 Q4 18 31/12/17 31/12/18 2017 2018 Q3 18 Q4 18 31/12/17 31/12/18 • Czech National Bank e
Slide 12: Business environment – Market shares: mostly stable or increasing shares across the region
31/12/17 Business environment – 30/09/18 Market shares: mostly stable or increasing shares across the region 31/12/18 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 20.2% 21.0% 19.5% 20.2% AT 20.3% AT 21.2% AT 19.8% AT 21.4% 23.2% 20.6% 25.3% 12.0% CZ 23.4% CZ 20.8% CZ 2
Slide 13: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 13
Slide 14: Business performance: performing loan stock & growth
YoY 31/12/17 Business performance: performing loan stock & growth – QoQ 30/09/18 Performing loans continue to grow in Q4 18 31/12/18 137.7 7.4% • Rising performing loan volume trend continued in Q4 18 Group 146.7 148.0 0.8% across all geographies (except CZ); yoy loan growth 31.2 exceptionally stron
Slide 15: Business performance: customer deposit stock & growth
YoY 31/12/17 Business performance: customer deposit stock & growth – QoQ 30/09/18 Deposit build-up continues apace in Q4 18 31/12/18 151.0 7.7% • Continuation of exceptional deposit growth across all Group 159.8 162.6 1.8% geographies despite zero/low interest rate environment as 33.7 retail and cor
Slide 16: Business performance: NII and NIM
Business performance: NII and NIM – Q4 17 Q3 18 NII advances further qoq and yoy Q4 18 1,124 2.41% • Yoy NII increase mainly driven by CZ due to higher business Group 1,158 2.27% 1,210 2.33% volumes and rising interest rates; also strong contribution 150 1.50% from AT and RO; NIM decline due to chan
Slide 17: Business performance: operating income
YoY Q4 17 Business performance: operating income – QoQ Q3 18 Operating income up yoy, mainly on strong NII Q4 18 1,732 5.0% • Yoy up on strong rise in NII and improved net trading result Group 1,722 1,819 5.7% and FV result, while fees declined slightly 269 6.8% • Qoq up on rising NII, fees and net
Slide 18: Business performance: operating expenses
YoY Q4 17 Business performance: operating expenses – QoQ Q3 18 Moderate cost development despite wage pressure in CEE Q4 18 1,145 -5.8% • Yoy cost decline driven by lower other administrative Group 1,026 1,079 5.2% expenses due to lower IT and consulting costs 183 -3.4% • Qoq up on seasonally higher
Slide 19: Business performance: operating result and CIR
YoY Q4 17 Business performance: operating result and CIR – QoQ Q3 18 Operating result up 26.1% yoy, up 6.4% qoq on better NII Q4 18 Operating result YoY & QoQ change Cost/income ratio 587 66.1% Group 696 26.1% 6.4% 59.6% 741 59.3% 86 68.0% AT/EBOe 95 28.4% 16.1% 63.4% 111 61.5% 96 75.0% AT/SB 130 -5
Slide 20: Business performance: risk costs
Q4 17 Business performance: risk costs (abs/rel*) – Q3 18 Minor risk provisions in Q4 18, after 3 quarters of releases Q4 18 61 0.17% • Yoy and qoq development characterised by continuation of Group -29 -0.02% 43 0.11% healthy asset quality, resulting in net releases in most -6 -0.07% geographies AT
Slide 21: Business performance: non-performing loans and NPL ratio
31/12/17 Business performance: non-performing loans and NPL ratio – 30/09/18 NPL ratio improves further to 3.2%, best level since 1999 31/12/18 5,776 4.0% • NPL volume falls by almost EUR 0.5bn to EUR 4.9bn in Group 5,337 3.5% 4,881 3.2% Q4 18, despite continued loan growth, supported by: 631 2.0% •
Slide 22: Business performance: allowances for loans and NPL coverage
31/12/17 Business performance: allowances for loans and NPL coverage* – 30/09/18 NPL provision coverage rises to 73.0% 31/12/18 3,977 68.8% • NPL provision coverage rises qoq and yoy, exceptionally Group 3,774 70.7% 3,563 73.0% strong in Central & Eastern Europe 360 57.1% • Stock of provisions conti
Slide 23: Business performance: other result
Q4 17 Business performance: other result – Q3 18 Other result improves yoy Q4 18 -75 • Yoy: slight improvement despite sale of participation in Q4 17 Group -31 -72 • Qoq other operating result deteriorated due to allocation of 3 additional litigation provisions, primarily in Austria AT/EBOe 5 -24 6
Slide 24: Business performance: net result
Q4 17 Business performance: net result – Q3 18 Net profit rises significantly yoy and qoq Q4 18 329 • Yoy profitability rises on better operating performance and Group 454 565 positive tax effect (primarily booking of deferred tax assets, 57 and generally lower tax rate than accrued for) AT/EBOe 76
Slide 25: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 25
Slide 26: Assets and liabilities: YTD overview
Assets and liabilities: YTD overview – Loan/deposit ratio stable at 91.8% at Dec 18 (Dec 17: 92.4 %) Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 236.8 236.8 220.7 17.5 7.4% 100% 220.7 2.5 1.6% 100% 9.9% 17.7 7.4% 7.5% 1.1% 3.4 21.8 16.3 43.9 18.6% 19.4% 42
Slide 27: Assets and liabilities: customer loans by country of risk
Assets and liabilities: customer loans by country of risk – Net customer loans up 7.0%, NPLs down 15.5% in 2018 Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +7.0% +7.4% 148.2 149.3 146.7 148.0 139.5 4.4 4.6 137.7 4.5 4.6 -15.5% 3.5 7.4 7.5 3.6 7.2 7.4 1.3 1.5 1
Slide 28: Assets and liabilities: financial and trading assets
Assets and liabilities: financial and trading assets * – LCR at excellent 150.3% By geography By debtor type Liquidity buffer +6.1% in EUR bn in EUR bn 41.0 41.8 39.4 100% 26.7% 27.4% 26.9% 9.2% 9.3% 9.4% 9.3 9.5 7.8% 8.6% 9.0% 8.6 21.9% 58.7 0.7 55.5 0.8 0.7 51.2 3.7 3.5 3.3 47.3 5.0 4.9 5.0 4.8 5.
Slide 29: Assets and liabilities: customer deposit funding
Assets and liabilities: customer deposit funding – Customer deposits grow by 7.7% in 2018, driven by households By customer type By product type Highlights in EUR bn in EUR bn • Continued deposit inflows driven by Retail +7.7% segment with highest demand for overnight deposits amid low interest rate
Slide 30: Assets and liabilities: debt vs interbank funding
Assets and liabilities: debt vs interbank funding – Taking advantage of favourable market conditions Debt securities issued Interbank deposits in EUR bn in EUR bn +18.5% +8.0% 29.7 19.1 28.2 Sub debt 17.7 Overnight deposits 25.1 5.8 Senior unsec. bonds 16.3 5.9 6.0 Term deposits Certificates of depo
Slide 31: Assets and liabilities: LT funding
Assets and liabilities: LT funding – Limited LT funding needs in 2019 Maturity profile of debt in EUR bn 3.1 3.2 2.7 2.5 2.0 1.8 1.6 1.4 1.4 1.4 0.4 0.1 0.2 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031+ Senior unsec. bonds Covered bonds Capital exc Tier 1 Debt CEE • One single be
Slide 32: Assets and liabilities: capital position
Assets and liabilities: capital position – Internal B3FL CET1-target for 2020 of 13.5% met early* Basel 3 capital (phased-in) Risk-weighted assets (phased-in) Basel 3 capital ratios (phased-in) in EUR bn in EUR bn 18.5% 18.2% 17.6% 17.4% 17.2% 20.9 114.0 116.3 117.0 114.6 20.3 20.1 20.3 20.1 110.0 3
Slide 33: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 33
Slide 34: Conclusion – Outlook 2019
Conclusion – Outlook 2019 • Real GDP growth of approx. 3% expected in 2019 in CEE and above 2% in Austria Macro outlook • Real GDP growth to be driven by solid domestic demand, as real wage growth and 2019 low unemployment support economic activity in CEE • Solid public finances across CEE • ROTE fo
Slide 35: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 35
Slide 36: Additional information: new segmentation
Additional information: new segmentation – Business line and geographic view Erste Group – Business segments ALM & Group Group Savings Intragroup Retail Corporates Local CC Corporate Markets Banks Elimination (ALM&LCC) Center • SME • Other Subsidiaries • Local Large Corporate • Asset/Liability Manag
Slide 37: Additional information: income statement
Additional information: income statement – Year-to-date and quarterly view Year-to-date view Quarterly view in EUR million 2017 2018 YOY-Δ Q4 17 Q3 18 Q4 18 YOY-Δ QOQ-Δ Net interest income 4,353.2 4,582.0 5.3% 1,123.9 1,158.2 1,210.0 7.7% 4.5% Interest income 5,624.4 5,174.3 -8.0% 1,400.3 1,314.0 1,
Slide 38: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 21,796 25,246 16,888 15,237 17,549 -19.5% -19.5% 15.2% Financial assets held for trading 6,349 6,603 6,888 6,034 5,584 -12.0% -12.0% -
Slide 39: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 3,423 2,940 3,070 2,865 2,508 -26.7% -26.7% -12.5% Derivatives 2,934 2,384 2,529 2,153 2,000 -31.8% -3
Slide 40: Additional information: regulatory capital position/requirement (SREP)
Additional information: regulatory capital position/requirement (SREP) – Internal CET1-target for 2020 of 13.5% already met in 2018* • Combined impact of countercyclical buffers amounts to 44bps in 2019 • Management buffer targeted in 100-150bps range from 2019 Erste Group Consolidated Erste Group U
Slide 41: 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) 148.5 152.0 152.8 148.5 152.0 152.8 152.0 152.8 143.5 146.0 143.5 146.0 148.5 5.8
Slide 42: 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: 4.6m Customers: 2.2m in 7 geographically connected Employees: 10,115 Employees: 4,105 countries CZ Br
Slide 43: Additional information: strategy
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 44: Additional information: Ratings
Additional information: Ratings – Composition of Erste Group Bank AG’s 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 Ca
Slide 45: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Unidentified * Erste Foundation 1 Unidentified * Identified Trading ** 8.42% Identified Trading ** 8.42% 11.28% Savings Banks & BlackRock Inc. 2.29% Savings Banks Rest of world 2.29% Foundations
Slide 46: Investor relations details
Investor relations details • Erste Group Bank AG, Am Belvedere 1, 1100 Vienna 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 App for iPad, iPhone and Android http://w