Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q3 2024 Earnings Presentation
53 slides from Erste Group Bank's earnings presentation, Oct 31, 2024
Slide 1: Q3 2024 results presentation
Q3 2024 results presentation Vienna, 31 October 2024 Strong operating performance drives further guidance upgrade Peter Bosek, 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: On track to beat 2023 record net profit
EXECUTIVE SUMMARY: P&L PERFORMANCE On track to beat 2023 record net profit QoQ net profit development YTD net profit development in EUR m in EUR m +8.9% 135 84 467 18 2,516 148 88 2,310 +4.8% 11 4 35 886 55 73 64 846 Q2 24 Operating Operating Risk costs Other Taxes on Minorities Q3 24 1-9 23 Operati
Slide 5: Strong performance triggers another 2024 guidance upgrade
EXECUTIVE SUMMARY: P&L DASHBOARD Strong performance triggers another 2024 guidance upgrade Net interest margin Cost/income ratio Risk cost ratio in % in % in bps 2.50 2.49 G24: ≤48% G24: <20 bps 2.47 2.45 2.43 30 18 16 49.8 6 0 46.0 46.3 44.7 45.1 Q3 23 Q4 23 Q1 24 Q2 24 Q3 24 Q3 23 Q4 23 Q1 24
Slide 6: Moderate volume growth trends
EXECUTIVE SUMMARY: BALANCE SHEET PERFORMANCE Moderate volume growth trends YTD total asset development YTD equity & total liability development in EUR bn in EUR bn +2.8% 346.5 346.5 0.0 0.0 1.6 5.6 0.1 337.2 7.5 11.8 337.2 0.5 12.7 6.9 6.0 4.8 31/12/23 Cash Trading, Loans to Net loans Intangibles Mi
Slide 7: Exemplary balance sheet metrics
EXECUTIVE SUMMARY: BALANCE SHEET DASHBOARD Exemplary balance sheet metrics Loan/deposit ratio Loan & deposit growth Asset quality in % yoy, in % in % 96.7 G24: ~5% 85.1 83.7 80.6 78.7 89.3 88.4 89.0 87.4 87.9 3.7 3.1 3.5 2.8 2.7 2.3 2.3 2.4 2.4 3.9 2.0 1.4 1.7 -0.4 -1.2 Q3 23 Q4 23 Q1 24 Q2 24 Q3 24
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 in 2024
MACROECONOMIC AND BUSINESS UPDATE: ECONOMIC FORECASTS * Moderate economic recovery in 2024 Real GDP growth Consumer price inflation Unemployment rate 2024 in % avg, in % avg, in % 2025 5.5 8.5 8.2 4.0 4.5 4.6 4.6 3.2 3.5 2.7 2.2 2.0 1.9 2.8 2.9 3.7 3.7 4.1 3.6 5.2 5.0 5.5 5.5 5.3 5.3 5.2 5.1 3.0 2.9
Slide 10: Retail growth increasingly robust
MACROECONOMIC AND BUSINESS UPDATE: RETAIL BUSINESS Retail growth increasingly robust Moderately improving loan demand Housing and consumer loans − Housing loan volumes improving across the group driven by increased demand; in EUR bn higher growth contingent on better economic backdrop in Austria − C
Slide 11: Corporate loan demand still muted
MACROECONOMIC AND BUSINESS UPDATE: CORPORATES & MARKETS BUSINESS Corporate loan demand still muted Weaker corporate loan demand in Q3 24 Net loan stock of Corporate segment − SME lending demand continues to be sluggish, yoy loan growth primarily driven by Large Corporates and Real Estate +2.7% − Low
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: Measured acceleration in loan demand
OPERATING TRENDS: NET LOAN STOCK AND GROWTH Measured acceleration in loan demand Net loan stock Growth rates Measured acceleration in loan demand in Q3 24 − Growth more pronounced in Retail than in Corporate business, up 206.2 1.0% 1.7% vs 0.7% qoq, mostly visible in CZ, yoy also strong in HR, RO Gr
Slide 14: Healthy customer deposit volume trends
OPERATING TRENDS: CUSTOMER DEPOSIT STOCK AND GROWTH Healthy customer deposit volume trends Customer deposits Growth rates Erste Group’s favourable deposit mix is a key competitive advantage – overweight retail, sight, EUR deposits 235.8 -0.2% Group 240.2 1.7% 239.7 Key Q3 24 deposit drivers 44.9 -1.
Slide 15: NII projection for 2024 revised upwards
OPERATING TRENDS: NET INTEREST INCOME (NII) AND NET INTEREST MARGIN (NIM) NII projection for 2024 revised upwards Net interest income Net interest margin Q3 24 NII tops EUR 1.9bn, sets new record − Positive effects from client business: swift deposit repricing, 1,861 2.50% tailwinds from fixed rate
Slide 16: Fees remain on growth path, 2024 guidance confirmed
OPERATING TRENDS: NET FEE AND COMMISSION INCOME Fees remain on growth path, 2024 guidance confirmed Net fee income by segment Net fee income by fee type in EUR m in EUR m +10.9% +3.4% 735 735 702 712 711 702 712 711 35 7 26 663 33 6 31 6 33 7 663 24 17 27 27 21 16 23 6 78 17 67 34 69 69 73 24 67 59
Slide 17: Operating expenses unchanged qoq, 2024 guidance confirmed
OPERATING TRENDS: OPERATING EXPENSES Operating expenses unchanged qoq, 2024 guidance confirmed Operating expenses by segment Operating expenses by type in EUR m in EUR m +4.9% -0.3% 1,345 1,345 1,283 1,265 1,262 1,283 1,265 1,262 84 Residual other admin 1,202 26 61 53 1,202 162 89 71 20 74 22 23 107
Slide 18: 2024 CIR guidance upgraded to ≤48%
OPERATING TRENDS: OPERATING RESULT AND COST/INCOME RATIO (CIR) 2024 CIR guidance upgraded to ≤48% Operating result Cost/income ratio in EUR m in % +3.2% 1,489 1,536 1,505 1,468 78 14 1,354 18 18 80 18 Other 72 75 138 75 3 152 133 143 RS 107 129 122 105 115 HR 136 103 168 159 164 HU 152 234 SK 273 27
Slide 19: 2024 risk cost outlook confirmed at <20 bps
OPERATING TRENDS: CREDIT RISK/RISK COSTS 2024 risk cost outlook confirmed at <20 bps Risk costs by segment * Risk cost ratio * in EUR m in bps 156 78 86 0 Other G24: <20 bps 95 31 RS HR HU SK 15 30 9 6 RO 2 18 16 CZ AT/OA 6 0 AT/SB AT/EBOe 2019 2020 2021 2022 2023 Q3 23 Q4 23 Q1 24 Q2 24 Q3 24 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 Excellent NPL performance in CEE − New defaults mainly in Austrian segments, related to corporate/real 2.0 in % 96.7 in % estate business Group 2.4 80.6 2.4 78.7 − NPL coverage
Slide 21: Other result normalises qoq
OPERATING TRENDS: OTHER RESULT Other result normalises qoq Other result by segment Other result by accounting categories in EUR m in EUR m Other 0 0 0 RS HR -27 -59 -27 -49 HU -49 -57 SK -36 -86 -57 RO -1 -127 CZ -48 -129 -127 AT/OA -129 AT/SB AT/EBOe -279 -279 Q3 23 Q4 23 Q1 24 Q2 24 Q3 24 Q3 23 Q4
Slide 22: 2024 ROTE target upgraded to >16%
OPERATING TRENDS: NET RESULT, EARNINGS PER SHARE (EPS) & RETURN ON TANGIBLE EQUITY (ROTE) 2024 ROTE target upgraded to >16% Net result by segment EPS & ROTE in EUR m in EUR +8.1% 886 19.1% 19.5% 820 846 17.2% 17.2% 783 Other 688 14.7% RS HR HU 2.14 SK 1.90 1.87 1.87 RO 1.54 CZ AT/OA AT/SB AT/EBOe Q3
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: Vast retail deposit base provides competitive funding advantage
WHOLESALE FUNDING AND CAPITAL: ISSUED DEBT AND INTERBANK FUNDING Vast retail deposit base provides competitive funding advantage Liabilities and equity Debt securities Interbank deposits Comments in EUR bn in EUR bn in EUR bn Highly granular and well- diversified Retail & SME 337.2 346.5 deposit bas
Slide 25: 2024 funding plan already fully executed
WHOLESALE FUNDING AND CAPITAL: LONG TERM FUNDING 2024 funding plan already fully executed Maturity profile of debt 8.8 in EUR bn 7.4 5.6 5.1 4.7 3.3 2.8 1.2 1.3 1.0 1.0 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 bonds
Slide 26: RWAs increase on business effects and operational risk ytd
WHOLESALE FUNDING AND CAPITAL: CAPITAL AND RISK-WEIGHTED ASSETS (RWA) RWAs increase on business effects and operational risk ytd Basel 3 capital Risk-weighted assets in EUR bn +5.3% in EUR bn 153.2 155.9 148.0 146.5 149.9 6.8 7.4 5.6 6.3 6.5 16.2 16.3 14.6 16.4 +8.1% 14.8 29.1 30.1 29.9 27.7 28.7 3.
Slide 27: CET 1 ratio remains at strong level
WHOLESALE FUNDING AND CAPITAL: COMMON EQUITY TIER 1 (CET1), TIER 1 AND TOTAL CAPITAL RATIOS CET 1 ratio remains at strong level CET 1 ratio development (final, pro-forma) Basel 3 capital ratios (final) in % in % 19.9 19.6 19.2 19.2 0.70 18.7 15.66 15.61 0.07 0.26 0.23 1.69 17.3 17.2 0.99 16.7 16.9 1
Slide 28: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 28
Slide 29: 2024 guidance upped again – initial 2025 ROTE forecast: ~15%
FINANCIAL OUTLOOK 2024 guidance upped again – initial 2025 ROTE forecast: ~15% 2024 old 2024 new Variable Key assumptions/additional comments guidance guidance Real GDP > 2% ~ 0-4% Diverging economic performance with HR and RS performing better than expected Loans ~ +5% ~ +5% Loan growth supported b
Slide 30: 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 30
Slide 31: 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: 1.9m Hungary Employees: 9,583 Employees: 3,507 Customers: 1.0m Branches: 346 Branches: 163 Employees: 3,374 Retail loan share: 26.9% Retail loan share:
Slide 32: 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 33: Strategy: continuity & progress
APPENDIX: ERSTE GROUP STRATEGY Strategy: continuity & progress Strategic continuity… … and strategic progress Full commitment to growth Elevating George to the next level − Organic growth: fully capturing existing and emerging growth − Rolling out digital client advice in a structured way, thereby o
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 21.3% 24.2% 23.8% 23.5% AT 21.4% AT 24.4% AT 24.4% AT 22.4% 26.4% 25.2% 22.7% 14.2% CZ 26.8% CZ 24.3% CZ 22.6% CZ 14.8% 26.9% 24.3% 22.8% 14.3% 24.7% 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 1-9 23 1-9 24 YOY-Δ Q3 23 Q2 24 Q3 24 YOY-Δ QOQ-Δ Net interest income 5,422.3 5,590.7 3.1% 1,861.2 1,835.0 1,903.2 2.3% 3.7% Interest income 11,125.4 11,669.9
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 Sep 23 Dec 23 Mar 24 Jun 24 Sep 24 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 31,922 36,685 29,425 26,231 23,972 -24.9% -34.7% -8.6% Financial assets held for tra
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 Sep 23 Dec 23 Mar 24 Jun 24 Sep 24 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 2,428 2,304 1,805 2,003 1,770 -27.1% -23.2% -11.7% 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 Q3 2024 YE 2024 2022 2023 Q3 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
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 % 39.18% resolution approach − In Q2 24, Erste Group Bank AG received its MREL requ
Slide 41: MREL issuance progresses to plan
APPENDIX: MULTIPLE POINT OF ENTRY (MPE) RESOLUTION STRATEGY MREL issuance progresses to plan MPE resolution groups MREL issuance plan (by year-end 2024) 201 ~ 750–1,500 in EUR bn, in EUR m 93 as of Sep 2024 ~1,000-1,250 82 30 26 24 ~350-500 15 ~ 250-350 ~250-350 11 11 12 ~150-250 7 7 AT CZ SK RO HR
Slide 42: 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 217.6 in EUR bn 211.9 0.1 3.9 0.1 1% 1% 2% 1% 3.7 2.6 Other Other 2.8 22% 1% 22% 1% 28% 28% 4.2 5.7 4.3 CHF
Slide 43: 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 44: 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 +5.2% 56.4 57.7 54.8 3% 5% 5% 11.8 13.1 5% 11.9 16% 16% 2.1 2.7 7% 1% 2.1 4.0 1.0 1.2
Slide 45: 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 46: 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 47: 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), Sep 2024 in EUR m 54,596 Construction and real estate 1,930
Slide 48: 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 Volume Portfolio decarbonization interim targets 2030 Baseline Targets as of Sep 24 Scenario/ Emissions Sector Metric Methodology pathway scope Year Value 2030 reduction in E
Slide 49: Erste Group has strong ESG ratings
APPENDIX: ESG PROFILE (5)/ESG RATINGS AND INDICES Erste Group has strong ESG ratings 2023 2024 Erste Group maintains rating of AA in the MSCI ESG Ratings assessment. AA AA (5.5) (5.6) Erste Group’s assessment by Sustainalytics in the low risk category was confirmed. Low Risk Low Risk 16.4 / 100 17.5
Slide 50: 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 4.49% 5.79% 2.21% Sparkassen Beteiligungs 0.35% 0.35% GmbH & Co KG 1.79% 1.79% 12.23% Foundations 17.19% Wiener Städtische Austria 33.80% Versicherungs
Slide 51: Erste Group Bank AG boasts strong issuer ratings
APPENDIX: CREDIT RATINGS Erste Group Bank AG boasts strong issuer ratings Financial Profile SACP - Stand-Alone Credit Profile VR - Viability Rating Asset Risk baa1 a (Individual Rating ) Capital baa1 ▲ a Profitability baa3 Anchor bbb+ Funding Structure a2 Business position Strong +1 SRF - Support Ra
Slide 52: 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 53: 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