Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q2 2016 Earnings Presentation
45 slides from Erste Group Bank's earnings presentation, Aug 5, 2016
Slide 1: Erste Group investor presentation Q2 2016 results
Erste Group investor presentation Q2 2016 results 5 August 2016 Erste Group powers ahead: capital generation at historic high, asset quality improvement continues 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) 842 70 57 5 51 567 121 230 87 487 348 37 83 275 58 84 Q1 16 Operating Operating Risk costs Other Taxes on Minorities Q2 16 1-6 15 Operating Operating Risk costs Other Ta
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% 2.54% -11.1% 2.51% 2.57% 61.9% 57.6% -93.1% 2,212 2,194 1,503 1,336 374 0.17% 1,092 1,102 716 620 -0.09% 56 26 -31 1-6 15 1-6 16 Q1 16 Q2 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) 204,505 204,505 28 84 1,511 1,640 1,169 2,471 327 821 1,910 2,155 199,743 632 199,743 279 31/12/15 Cash Trading, Loans to Net loans Intangibles Other 30/06/1
Slide 7: Executive summary – Key balance sheet data
Executive summary – 31/12/15 Key balance sheet data 30/06/16 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn +1.2% 98.4% 97.7% 65.6% 64.5% 125.9 127.4 63.0% 62.3% 84.7 83.4 7.1% 5.8% 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 1.7 2.0 4.1 1.3 1.2 1.4 3.6 1.1 1.0 3.1 3.1 0.6 0.6 2.8 2.7 2.9 2.2 2.5 2.1 2.4 0.1 0.3 0.5
Slide 10: Business environment – Interest rates remain at historically low levels in Q2 16
Business environment – 3M Interbank 10YR GOV Interest rates remain at historically low levels in Q2 16 Austria Czech Republic Romania 3.30% 3.51% 3.42% 3.54% 0.56% 0.58% 0.57% 0.64% 0.34% 0.47% 0.45% 0.45% 0.02% 1.17% 0.62% 0.56% -0.18% -0.19% -0.26% 0.71% 0.32% 0.29% 0.29% 0.29% Q1 16 Q2 16 1-6 15
Slide 11: Business environment – Limited currency volatility in CEE
Business environment – Limited currency volatility in CEE EUR/CZK EUR/RON -1.7% 0.0% +0.1% +0.8% +0.1% 0.0% 27.5 27.0 27.0 27.0 27.0 27.1 4.45 4.48 4.49 4.50 4.52 4.52 1-6 15 1-6 16 Q1 16 Q2 16 31/12/15 30/06/16 1-6 15 1-6 16 Q1 16 Q2 16 31/12/15 30/06/16 • Czech National Bank maintains exchange rat
Slide 12: Business environment – Market shares: mostly stable, RO impacted by NPL sales
30/06/15 Business environment – 31/03/16 Market shares: mostly stable, RO impacted by NPL sales, write-offs 30/06/16 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 19.4% 18.6% 18.4% 19.3% AT 19.5% AT 19.1% AT 18.5% AT 18.9% 22.8% 18.6% 25.5% 11.8% CZ 22.8% CZ 19.2% 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 30/06/15 Business performance: performing loan stock & growth – QoQ 31/03/16 Performing loan volume increases by 1.8% ytd 30/06/16 120.3 3.7% • Rising performing loan volume trend continues in Q2 16 Group 123.8 124.7 0.8% across most geographies, most pronounced in AT and CZ; 28.6 yoy growth dri
Slide 15: Business performance: customer deposit stock & growth
YoY 30/06/15 Business performance: customer deposit stock & growth – QoQ 31/03/16 Deposits grow by 1.9% ytd 30/06/16 124.5 4.7% • Continued inflow in customer deposits, mainly driven by CZ, Group 128.6 130.4 1.4% RO and EBOe 29.9 3.0% • Yoy growth predominantly due to Retail business line AT/EBOe 30
Slide 16: Business performance: NII and NIM
Business performance: NII and NIM – Q2 15 Q1 16 Low interest rate environment results in NIM pressure, improved qoq Q2 16 1,113 2.59% • Yoy relatively stable as increase in Other segment (due to Group 1,092 2.51% 1,102 2.57% higher benefit from free capital) and AT/SB (driven by higher 160 1.87% loa
Slide 17: Business performance: operating income
YoY Q2 15 Business performance: operating income – QoQ Q1 16 Operating income up qoq due to better trading and dividend income Q2 16 1,710 -1.3% • Yoy down in HU, RO and AT/OA primarily on NII and fees Group 1,629 3.6% 1,687 • Qoq increase driven by dividend income as well as net 258 0.8% trading an
Slide 18: Business performance: operating expenses
YoY Q2 15 Business performance: operating expenses – QoQ Q1 16 Qoq decline due to upfront booking of deposit insurance fees Q2 16 949 • Yoy costs increase primarily driven by regular adjustment of 2.4% Group 1,009 -3.7% salaries at constant FTE level and parallel operation of buildings 972 after mov
Slide 19: Business performance: operating result and CIR
YoY Q2 15 Business performance: operating result and CIR – QoQ Q1 16 Operating result recovers in Q2 16, still down yoy Q2 16 Operating result YoY & QoQ change Cost/income ratio 762 55.5% Group -6.0% 61.9% 620 15.4% 716 57.6% 107 58.7% AT/EBOe 73 -0.8% 70.3% 106 44.9% 59.4% 126 65.7% AT/SB 87 -9.2%
Slide 20: Business performance: risk costs (abs/rel)
Q2 15 Business performance: risk costs (abs/rel*) – Q1 16 Releases in HU and AT drive risk costs Q2 16 191 0.58% • Continued strong risk performance in Q2 16 across the board Group 56 0.17% -31 -0.09% and further improvements in Retail -8 -0.11% AT/EBOe 9 0.12% -6 -0.08% • Year-on-year segment trend
Slide 21: Business performance: non-performing loans and NPL ratio
30/06/15 Business performance: non-performing loans and NPL ratio – 31/03/16 NPL ratio improves to 5.8%, lowest since June 2009 30/06/16 10,102 7.7% • Continued decline of group NPL volume in Q2 16 mainly due Group 8,856 6.7% 7,746 5.8% to low NPL inflows and continued NPL sales 942 3.2% AT/EBOe 836
Slide 22: Business performance: allowances for loans and NPL coverage
30/06/15 Business performance: allowances for loans and NPL coverage – 31/03/16 NPL coverage at comfortable 65.6% 30/06/16 6,887 68.2% • NPL coverage at 65.6%, slight decline due to NPL sales and Group 5,891 66.5% 5,083 65.6% higher collateralisation 583 61.9% AT/EBOe 531 63.5% 502 60.6% • HU: cover
Slide 23: Business performance: other result
Q2 15 Business performance: other result – Q1 16 Other result improves yoy and qoq on VISA gain in Q2 16 Q2 16 -22 • Yoy development due to sale of VISA Europe shares totalling Group -137 93 EUR 138.7m -15 • Qoq improvement also driven by non-recurrence of regulatory AT/EBOe -6 costs (HU banking tax
Slide 24: Business performance: net result
Q2 15 Business performance: net result – Q1 16 Q2 16 net result up yoy and qoq on risk costs, VISA sale and other result Q2 16 261 • Yoy and qoq rise in profitability driven by net releases of risk Group 275 567 provisions, significantly improved other result (VISA sale one- 75 off) and also qoq bet
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 97.7% (Dec 15: 98.4%) Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 199.7 204.5 199.7 204.5 100% 6.1 3.0% 100% 12.4 13.0 6.2% 6.3% 5.9 2.9% 14.2 16.4 7.1% 8.0% 47.5 49.5 23.8% 24.2% 4.8 5.6
Slide 27: Assets and liabilities: customer loans by country of risk
Assets and liabilities: customer loans by country of risk – Performing loans up 3.7% yoy, NPLs down 23.3% Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +3.2% +3.7% -23.3% 123.5 126.7 127.4 123.8 124.7 10.1 3.3 120.3 3.3 3.3 3.3 3.3 0.5 6.1 6.2 3.3 5.8 5.9 6.0 0.
Slide 28: Assets and liabilities: allowances for customer loans
Assets and liabilities: allowances for customer loans – Decrease in allowances mainly due to continued NPL reduction in Q2 16 Quarterly development (EUR m) Highlights • Substantially increased use of allowances because of higher sales and write-offs 23 • Higher releases partly due to NPL sales 305 5
Slide 29: Assets and liabilities: financial and trading assets
Assets and liabilities: financial and trading assets * – LCR at comfortable 115.4% By geography By debtor type Liquidity buffer +0.1% in EUR bn in EUR bn 43.4 42.7 43.4 100% 24.8% 24.9% 25.3% 11.1% 9.8% 9.4% 9.1 9.3 10.0 9.0% 7.8% 7.8% 21.5% 1.3 1.3 1.2 1.4 2.0 1.9 4.8 46.1 47.7 4.8 4.4 45.4 6.3 39.
Slide 30: Assets and liabilities: customer deposit funding
Assets and liabilities: customer deposit funding – Customer deposits grow by 1.4% qoq, up 4.7% yoy By customer type By product type Highlights in EUR bn in EUR bn • Continued deposit inflows driven by Retail +4.7% 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 -6.4% +4.2% 29.9 30.1 17.3 28.0 Sub debt 16.4 15.7 Overnight deposits 4.8 5.7 Suppl. capital 5.8 5.3 Term deposits 1.0 0.4 0.4 Hybrid issues 3.9 5.3 0.4 0.4
Slide 32: Assets and liabilities: LT funding
Assets and liabilities: LT funding – Limited LT funding needs Maturity profile of debt in EUR bn 2.7 2.7 2.8 2.8 2.6 1.9 1.9 1.3 1.1 0.9 0.8 0.5 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 – B3FL CET1 ratio increases to 12.7%, ADIs triple to EUR 1.7bn Basel 3 capital (phased-in) Risk-weighted assets (phased-in) Basel 3 capital ratios (phased-in) in EUR bn in EUR bn 18.7% 17.9% 17.6% 16.8% 16.8% 18.9 100.3 100.4 100.5101.0 17.7 98.3 17.6 16.8 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
Conclusion – Outlook 2016 • CEE economic environment anticipated to be conducive to credit expansion • Real GDP growth of between 1.4-4.1% expected in 2016 in all major CEE markets, including Austria • Real GDP growth to be driven by solid domestic demand • Return on tangible equity (ROTE) expected
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 1-6 15 1-6 16 YOY-Δ Q2 15 Q1 16 Q2 16 YOY-Δ QOQ-Δ Net interest income 2,211.9 2,194.1 -0.8% 1,113.4 1,092.2 1,101.9 -1.0% 0.9% Net fee and commission income 917.4 884.9 -3.5% 45
Slide 39: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 7,011 11,097 12,350 14,641 12,982 85.2% 5.1% -11.3% Financial assets - held for trading 9,022 8,805 8,719 9,960 10,373 15.0% 19.0% 4.1
Slide 40: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities - held for trading 6,632 6,364 5,867 6,612 6,146 -7.3% 4.8% -7.0% Derivatives 5,875 5,654 5,434 5,782 5,341 -9.1% -1.7%
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) 130.4 131.2 131.9 132.6 132.5 130.4 131.2 131.9 132.6 132.5 130.4 131.2 131.9 132.
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: 10,429 Employees: 4,260 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: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Erste Stiftung direct Unidentified Unidentified 9.9% 15.0% 15.0% Erste Stiftung indirect * Austria 9.6% Other 28.4% Harbor International Fund 2.6% 4.6% 9.9% Caixa 0.9% 24.0% Employees Continenta
Slide 45: 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