Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q3 2016 Earnings Presentation
46 slides from Erste Group Bank's earnings presentation, Nov 4, 2016
Slide 1: Erste Group investor presentation Q3 2016 results
Erste Group investor presentation Q3 2016 results 4 November 2016 Continuing to deliver: on track for 12%+ ROTE and EUR 1 DPS in 2016 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) 567 1.179 44 42 29 11 214 68 764 154 337 455 1 131 49 111 Q2 16 Operating Operating Risk costs Other Taxes on Minorities Q3 16 1-9 15 Operating Operating Risk costs Othe
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 in EUR m in EUR m in EUR m 2.58% 2.50% 2.57% -10.8% 2.43% 57.6% 59.8% -87.8% 3,324 3,267 2,238 1,997 518 0.11% 1,102 1,073 716 660 -0.09% 37 63 -31 1-9 15 1-9 16 Q2 16 Q3 16 1
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) 22 206,811 206,811 299 2,354 1,722 3,088 203 386 6,077 1,522 2,393 199,743 1,016 199,743 404 31/12/15 Cash Trading, Loans to Net loans Intangibles Other 30/0
Slide 7: Executive summary – Key balance sheet data
Executive summary – 31/12/15 Key balance sheet data 30/09/16 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn +2.5% 98.4% 96.2% 67.7% 125.9 129.0 64.5% 63.0% 62.4% 84.7 83.0 7.1% 5.5% 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 – Solid CEE GDP growth expectations for 2016
2016 Business environment – 2017 Solid CEE GDP growth expectations for 2016 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (ave, in %) 5.7 5.0 2.0 4.5 1.6 1.7 0.9 1.2 1.0 3.3 3.1 3.2 1.4 1.2 0.8 0.6 0.7 0.4 2.8 2.9 2.6 2.6 2.1 2.2 2.0
Slide 10: Business environment – Interest rates remain at historically low levels in Q3 16
Business environment – 3M Interbank Interest rates remain at historically low levels in Q3 16 10YR GOV Austria Czech Republic Romania 3.47% 3.38% 3.54% 0.72% 3.01% 0.71% 0.34% 0.47% 0.42% 0.45% 0.13% 0.30% 0.00% 1.15% 0.56% 0.57% -0.21% -0.26% -0.30% 0.67% 0.32% 0.29% 0.29% 0.29% 1-9 15 1-9 16 Q2 16
Slide 11: Business environment – Limited currency volatility in CEE
Business environment – Limited currency volatility in CEE EUR/CZK EUR/RON -1.2% 0.0% 0.0% +0.8% -0.8% -1.7% 27.4 27.0 27.0 27.0 27.0 27.0 4.44 4.48 4.50 4.46 4.52 4.44 1-9 15 1-9 16 Q2 16 Q3 16 31/12/15 30/09/16 1-9 15 1-9 16 Q2 16 Q3 16 31/12/15 30/09/16 • Czech National Bank maintains exchange rat
Slide 12: Business environment – Market shares: mostly stable, RO impacted by NPL sales
30/09/15 Business environment – 30/06/16 Market shares: mostly stable, RO impacted by NPL sales, write-offs 30/09/16 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 19.4% 18.6% 18.5% 18.8% AT 19.5% AT 19.2% AT 18.7% AT 19.2% 22.8% 18.8% 25.4% 12.3% CZ 22.9% CZ 19.1% CZ 25
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 30/09/15 Business performance: performing loan stock & growth – QoQ 30/06/16 Performing loan volume increases by 3.3% ytd 30/09/16 121.5 4.2% • Rising performing loan volume trend continues in Q3 16 Group 124.7 126.6 1.5% across most geographies, most pronounced in AT and CZ; 29.0 yoy growth dri
Slide 15: Business performance: customer deposit stock & growth
YoY 30/09/15 Business performance: customer deposit stock & growth – QoQ 30/06/16 Deposits grow by 4.7% ytd 30/09/16 125.4 6.8% • Continued inflow in customer deposits, mainly driven by CZ, Group 130.4 134.0 2.8% RO, AT/SB and AT/EBOe 30.0 4.5% • Yoy growth predominantly in Retail but increasingly s
Slide 16: Business performance: NII and NIM
Business performance: NII and NIM – Q3 15 Q2 16 NII, NIM down on lower reinvestment yields, lower unwinding contribution Q3 16 1,112 2.57% Group 1,102 2.57% 1,073 2.43% • Yoy decline driven primarily by lower trading-related NII and lower interest income from financial assets as well as lower 160 1.
Slide 17: Business performance: operating income
YoY Q3 15 Business performance: operating income – QoQ Q2 16 Operating income down on weaker net interest income in Q3 16 Q3 16 1,692 -2.9% • Yoy down primarily due to lower net interest income, lower Group 1,687 -2.6% fees and lower dividend income, partly offset by higher 1,643 trading contributio
Slide 18: Business performance: operating expenses
YoY Q3 15 Business performance: operating expenses – QoQ Q2 16 Increase driven by IT and regulatory projects Q3 16 956 2.8% • Yoy cost increase driven by higher IT expenses and higher Group 972 1.1% personnel costs, partly offset by lower deposit insurance 983 contributions resulting from different
Slide 19: Business performance: operating result and CIR
YoY Q3 15 Business performance: operating result and CIR – QoQ Q2 16 Operating result declines in Q3 16, down yoy and qoq Q3 16 Operating result YoY & QoQ change Cost/income ratio 736 56.5% Group -10.3% 57.6% 716 -7.7% 660 59.8% 104 60.8% AT/EBOe 106 -7.0% 59.4% 96 -8.9% 61.8% 104 69.7% AT/SB 114 16
Slide 20: Business performance: risk costs
Q3 15 Business performance: risk costs (abs/rel*) – Q2 16 Risk costs remain at historically low levels in Q3 16 Q3 16 144 0.44% • Yoy improvement driven by significantly reduced new Group -31 -0.09% 37 0.11% allocations, lower direct write-offs and higher recoveries 15 0.20% • Qoq development mainly
Slide 21: Business performance: non-performing loans and NPL ratio
30/09/15 Business performance: non-performing loans and NPL ratio – 30/06/16 NPL ratio improves for 11th consecutive quarter to 5.5% 30/09/16 9,717 7.4% • Continued decline of group NPL volume in Q3 16 mainly due Group 7,746 5.8% 7,308 5.5% to low NPL inflows, continued portfolio upgrades and net 89
Slide 22: Business performance: allowances for loans and NPL coverage
30/09/15 Business performance: allowances for loans and NPL coverage – 30/06/16 NPL provision coverage at comfortable 67.7% 30/09/16 6,721 69.2% • NPL coverage at 67.7%, qoq improvement resulting from Group 5,083 65.6% 4,948 67.7% reduced NPL stock in Q3 16 561 62.7% AT/EBOe 502 60.6% 492 61.5% • HU
Slide 23: Business performance: other result
Q3 15 Business performance: other result – Q2 16 Other result without any significant one-offs in Q3 16 Q3 16 -154 • Yoy improvement mainly due to one-off provision for FX Group 93 -61 conversion in Croatia in Q3 15 17 • Qoq deterioration driven by one-off gain from sale of AT/EBOe 26 participation
Slide 24: Business performance: net result
Q3 15 Business performance: net result – Q2 16 Q3 16 net result puts Erste Group on track for 12%+ ROTE in 2016 Q3 16 277 • Yoy profitability driven by lower risk provisions across the Group 567 337 board and improved other result in HR 76 • Qoq development mainly due to VISA sale one-off and AT/EBO
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 down to 96.2% in Sept 16 (Dec 15: 98.4%) Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 206.8 206.8 199.7 100% 199.7 100% 14.7 6.2% 7.1% 6.3 2.9% 12.4 5.9 15.2 7.1% 7.4% 3.0% 14.2 49.1 23.8% 23.7% 47.5
Slide 27: Assets and liabilities: customer loans by country of risk
Assets and liabilities: customer loans by country of risk – Net customer loans up 3.6% yoy, NPLs down 24.8% Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +3.6% +4.2% -24.8% 127.4 129.0 124.7 126.6 9.7 124.5 3.3 121.5 3.3 3.3 3.3 0.5 3.2 6.2 6.3 3.2 5.9 6.0 5.9 0
Slide 28: Assets and liabilities: allowances for customer loans
Assets and liabilities: allowances for customer loans – As asset quality improves lower interest income from NPLs weighs on NII Quarterly development (EUR m) Highlights • Development of interest income from NPLs: • 2013: EUR 270m 12 • 2014: EUR 202m • 2015: EUR 162m 818 908 • 2016e: EUR 90-100m 6,72
Slide 29: Assets and liabilities: financial and trading assets
Assets and liabilities: financial and trading assets * – LCR at 154.9% By geography By debtor type Liquidity buffer +2.1% in EUR bn in EUR bn 42.2 43.4 43.1 100% 26.4% 10.1% 9.4% 9.3% 24.8% 24.9% 8.7 10.0 9.8 7.8% 7.5% 9.5% 21.5% 1.3 1.2 1.1 1.5 1.9 2.3 50.3 4.5 4.4 4.5 45.4 46.1 39.8 6.3 5.8 5.8 80
Slide 30: Assets and liabilities: customer deposit funding
Assets and liabilities: customer deposit funding – Customer deposits grow by 2.8% qoq, up 6.8% yoy By customer type By product type Highlights in EUR bn in EUR bn • Continued deposit inflows driven by Retail +6.8% segment with highest demand for overnight deposits amid low interest rate environment
Slide 31: Assets and liabilities: debt vs interbank funding
Assets and liabilities: debt vs interbank funding – Stable wholesale funding base Debt securities issued Interbank deposits in EUR bn in EUR bn -10.8% -12.6% 30.6 17.4 Sub debt 16.4 28.0 27.3 Overnight deposits 5.4 Suppl. capital 3.1 15.2 Term deposits 0.4 0.4 5.8 5.9 Hybrid issues 5.3 4.6 Repurchas
Slide 32: Assets and liabilities: LT funding
Assets and liabilities: LT funding – Limited LT funding needs Maturity profile of debt in EUR bn 3.0 2.9 2.8 2.7 2.7 1.9 1.9 1.1 0.8 0.9 0.5 0.6 0.3 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028+ Debt CEE Capital exc Tier 1 Covered bonds Senior unsec. bonds • In January 2016 Erste
Slide 33: Assets and liabilities: capital position
Assets and liabilities: capital position – Clean B3FL CET1 ratio increases to 13.0%, ADIs at EUR 1.6bn Basel 3 capital (phased-in) Risk-weighted assets (phased-in) Basel 3 capital ratios (phased-in) in EUR bn in EUR bn 18.7% 18.4% 17.9% 17.6% 16.8% 18.9 18.5 100.4 100.5 101.0 100.7 17.7 98.3 17.6 16
Slide 34: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 34
Slide 35: Conclusion – Outlook 2016 & 2017
Conclusion – Outlook 2016 & 2017 • Real GDP growth of between 1.3-4.5% expected in 2016 in CEE markets and Austria • Growth in the range of 2-3% in 2017 in CEE, about 1.5% in Austria Macro outlook • Real GDP growth to be driven by solid domestic demand, as real wage growth and declining unemployment
Slide 36: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 36
Slide 37: 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 38: Additional information: income statement
Additional information: income statement – Year-to-date and quarterly view Year-to-date view Quarterly view in EUR million 1-9 15 1-9 16 YOY-Δ Q3 15 Q2 16 Q3 16 YOY-Δ QOQ-Δ Net interest income 3,324.3 3,267.5 -1.7% 1,112.3 1,101.9 1,073.4 -3.5% -2.6% Net fee and commission income 1,372.6 1,319.8 -3.
Slide 39: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 11,097 12,350 14,641 12,982 14,743 32.9% 19.4% 13.6% Financial assets - held for trading 8,805 8,719 9,960 10,373 9,731 10.5% 11.6% -6
Slide 40: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities - held for trading 6,364 5,867 6,612 6,146 6,272 -1.5% 6.9% 2.0% Derivatives 5,654 5,434 5,782 5,341 4,933 -12.8% -9.2%
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) 131.2 131.9 132.6 132.5 133.9 131.2 131.9 132.6 132.5 133.9 131.9 132.6 132.5 133.
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: 4.7m Customers: 2.3m in 7 geographically connected Employees: 10,384 Employees: 4,236 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 - (Individual Rating ) + bbb+ bbb+ Financial Profile ▲ Asset Risk ba1 Anchor bbb Capital baa2 Business Position Strong +1 SRF - Support R
Slide 45: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Erste Stiftung direct Unidentified Unidentified 9.9% 14.0% 14.0% Erste Stiftung indirect * Austria Harbor International Rest of world Fund 9.6% 28.4% 4.0% 2.9% 9.9% Caixa 24.3% 0.9% Continental
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