Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Erste Bank — H1 2006 Earnings Presentation
53 slides from Erste Group Bank's earnings presentation, Jul 31, 2006
Slide 1: Erste Bank: H1 2006 Results Teleconference
> Erste Bank: - strong operating performance drives net profit growth > H1 2006 Results > Teleconference Vienna, 31 July 2006 > Andreas Treichl, CEO Reinhard Ortner, CFO Gabriele Werzer, IR
Slide 2: Presentation topics
> Presentation topics 1. Ukraine – expanding the home market 2. H1 2006 highlights 3. Financial statements 4. Divisional information 5. Asset quality 6. Outlook and targets 7. Appendix NB Figures of prior years (2005 and 2004) have been adapted pursuant to the requirements of IAS 32 and IAS 39. Deta
Slide 3: EB grows home market to 120 million people
> EB grows home market to 120 million people The Ukraine further strengthens EB’s long-term growth prospects Clients: 2.5m; #1 Retail deposits: 32% Clients: 5.3m; #1 Branches: 300 Retail deposits: 33% Branches: 637 Clients: 0.9m; #2 Retail deposits: 6% Clients: 0.6m; # 2 Branches: 171 Retail deposit
Slide 4: Acquisition of Bank Prestige
> Acquisition of Bank Prestige Semi-greenfield operation representing best risk/return profile » Bank Prestige: » Founded in Kiev in December 2005 by the former owners of Bank Aval » Shareholders’ equity: UAH 299.1m/EUR 46.5m » Total assets (H1 2006): UAH 637.4m/EUR 99.1m » Close to 100 employees »
Slide 5: The Ukraine – a market with great future potential
> The Ukraine – a market with great future potential Major market parameters The Ukrainian banking market – Assets/GDP * » 47m inhabitants 35.8 50.4% » GDP/capita (2005): EUR 1,400 37.5% 38.9% » Loan/GDP (2005): 34% 30.0% 18.6 23.3% 24.7% 15.0 Improving macro indicators 10.8 12.2 in EUR bn 7.8 » Sta
Slide 6: Presentation topics
> Presentation topics 1. Ukraine – expanding the home market 2. H1 2006 highlights 3. Financial statements 4. Divisional information 5. Asset quality 6. Outlook and targets 7. Appendix H1 2006 Results 31 July 2006 6
Slide 7: H1 2006 financial highlights
> H1 2006 financial highlights EPS (in EUR)1) 1.52 » Net profit: + 33.7% to EUR 448.7m yoy 1.40 » Total assets: + 5.0% to EUR 160.2bn ytd 1.00 » Tier 1 ratio: 9.8% 0.86 » Tier 1 capital increased by EUR 2.7bn in Jan 06 0.71 0.63 0.57 » Cost/income ratio: 60.3% » Return on equity: 13.9% H1 00 H1 01 H
Slide 8: Operating results per segment
> Operating results per segment Sound operating performance in Austria and CEE EUR m H1 2006 H1 2005 % Change Austria 467.2 433.2 7.9 Savings banks 178.8 171.9 4.0 Retail & Mortgage 130.3 125.2 4.1 thereof - Retail Branches 53.0 49.0 8.4 - SME 12.9 12.5 3.4 - Own savings banks 28.2 23.4 20.6 - Mortg
Slide 9: Key figures of EB subsidiaries in CEE
> Key figures of EB subsidiaries in CEE Results (IFRS) as reported by local entities 1) 1) 2) 97.99% 100.00% 99.92% 64.68% 80.49% H1 06 H1 05 +/- H1 06 H1 05 +/- H1 06 H1 05 +/- H1 06 H1 05 +/- H1 06 H1 05 +/- Net profit (EUR m) 171.0 169.8 0.7% 46.9 48.9 -4.1% 40.9 32.5 25.8% 22.9 23.1 -0.9% (10.1)
Slide 10: Update on BCR
> Update on BCR Preparations for closing well advanced » BCR Integration and Development Programme consisting of 32 projects defined » Comprising all business lines and important internal functions » Respective teams consisting of Erste Bank and BCR staff have been defined and approved » Programme i
Slide 11: Update on BCR (cont)
> Update on BCR (cont) Completion of BCR acquisition expected in September 2006 Roadmap to completion Status Remarks Approvals by Romanian regulators National Bank of Romania Insurance Supervising Commission National Securities Commission Romanian Competition Council Approval by Austrian Financial M
Slide 12: New Group Architecture (NGA) - Update
> New Group Architecture (NGA) - Update Positive contribution to pre-tax profit according to NGA budgets » Group Large Corporates performance above expectations but based on a different structure » New and improved targets for this project to be announced at Erste Bank’s Capital Markets Day in Octob
Slide 13: Presentation topics
> Presentation topics 1. Ukraine – expanding the home market 2. H1 2006 highlights 3. Financial statements 4. Divisional information 5. Asset quality 6. Outlook and targets 7. Appendix H1 2006 Results 31 July 2006 13
Slide 14: Group income statement (IFRS)
> Group income statement (IFRS) Strong operating performance drives net profit growth EUR m H1 2006 H1 2005 % Change Net interest income 1,481.8 1,369.5 8.2 Risk provisions for loans and advances (218.3) (209.9) 4.0 Net commission income 697.7 617.0 13.1 Net trading result 136.2 105.2 29.5 General a
Slide 15: Group balance sheet (IFRS) – Assets
> Group balance sheet (IFRS) Assets – Retail loans continue to grow in CEE EUR m H1 06 YE 05 % Change Cash and balances with central banks 2,658 2,728 (2.6) Loans and advances to credit institutions 19,890 16,858 18.0 Loans and advances to customers 84,474 80,419 5.0 Risk provisions for loans and ad
Slide 16: Group balance sheet (IFRS) – Liabilities
> Group balance sheet (IFRS) Liabilities – Customer deposits grow in Austria and Czech Republic EUR m H1 06 YE 05 % Change Amounts owed to credit institutions 35,897 33,911 5.9 Amounts owed to customers 77,836 72,793 6.9 Debts evidenced by certificates 18,983 21,291 (10.8) Provisions 8,830 8,635 2.3
Slide 17: Presentation topics
> Presentation topics 1. Ukraine – expanding the home market 2. H1 2006 highlights 3. Financial statements 4. Divisional information 5. Asset quality 6. Outlook and targets 7. Appendix H1 2006 Results 31 July 2006 17
Slide 18: Divisional figures – Core segments
> Divisional figures – Core segments Net profit growth in all core divisions Austria CEE Subsidiaries Int. Business Corp. Center TOTAL EB GROUP In EUR m H1 06 H1 05 H1 06 H1 05 H1 06 H1 05 H1 06 H1 05 H1 06 H1 05 Net interest income 753.5 772.6 624.8 532.8 70.4 75.1 33.1 (10.9) 1,481.8 1,369.5 Risk
Slide 19: Core Segment Austria
> Core Segment Austria Austria – Strong performance in all business segments Savings banks Retail & Mortgage Large Corp. Trading & Inv.B. TOTAL AUSTRIA In EUR m H1 06 H1 05 H1 06 H1 05 H1 06 H1 05 H1 06 H1 05 H1 06 H1 05 Net interest income 395.8 409.1 257.3 257.3 72.6 73.0 27.8 33.2 753.5 772.6 Ris
Slide 20: Savings Banks
> Savings Banks H1 2006 highlights » Operating result increases by 4% yoy supported Segment Savings Banks H1 06 H1 05 % chg mainly by strong commission income Operating income (EUR m) 594.6 584.5 1.7 Operating expenses (EUR m) (415.8) (412.6) 0.8 » NII down 3.2% yoy » Persisting pressure on deposit
Slide 21: Retail and Mortgage
> Retail and Mortgage H1 2006 highlights » Retail Austria – strong commission income line Segment Retail & M'ge H1 06 H1 05 % chg supports net profit growth (+12.8%) yoy Operating income (EUR m) 448.0 439.8 1.9 » Compensating competitive pressure on margins Operating expenses (EUR m) (317.7) (314.6)
Slide 22: Retail and Mortgage - details
> Retail and Mortgage - details R & M Austria – positive trend continues Operating profit (EUR m) Net profit (EUR m) 53.0 H1 2005 H1 2006 H1 2005 H1 2006 49.0 28.2 26.1 23.4 24.6 22.1 20.8 14.3 14.1 13.4 12.5 12.9 11.7 9.5 10.1 5.2 3.7 1.9 0.0 Branches SME Own SBs Mortgage Subsidiaries Branches SME
Slide 23: Large Corporates
> Large Corporates H1 2006 highlights » Net profit substantially up by 88.4% Segment Large Corp H1 06 H1 05 % chg » Supported by strong commission income, lower risk costs Operating income (EUR m) 119.5 109.1 9.6 and improvement of OOR Operating expenses (EUR m) (47.4) (42.6) 11.3 » NII slightly dow
Slide 24: Trading & Investment Banking
> Trading & Investment Banking H1 2006 highlights » Net profit contribution rises by 38.1% Segment Trading & IB H1 06 H1 05 % chg » Supported by very strong trading line in Q1 06 and further Operating income (EUR m) 137.4 114.9 19.6 improvement of commission income Operating expenses (EUR m) (51.5)
Slide 25: Core segment Central Europe
> Core segment Central Europe CEE subsidiaries – continuing strong increase in net profit contribution Czech Republic Slovakia Hungary Croatia Serbia TOTAL CEE In EUR m H1 06 H1 05 H1 06 H1 05 H1 06 H1 05 H1 06 H1 05 H1 06 H1 05 H1 06 H1 05 Net interest income 352.8 285.3 107.0 92.8 109.8 97.6 53.7
Slide 26: Ceska sporitelna
> 7eská spo9itelna H1 2006 highlights » Net profit contribution up 14.1% yoy (7.7%)* Segment contribution H1 06 H1 05 % chg » Supported by strong operating result +33.6% (26.2%) Operating income (EUR m) 545.6 455.3 19.8 » NII increases by 23.7% yoy (16.8%) Operating expenses (EUR m) (294.4) (267.3)
Slide 27: Slovenská sporitelna
> Slovenská sporitel’;a H1 2006 highlights » Net profit contribution up 10.9% (8.1%)* yoy Segment contribution H1 06 H1 05 % chg supported by higher interest rates Operating income (EUR m) 154.3 141.4 9.2 » NII up 15.3% yoy (12.4%) Operating expenses (EUR m) (89.1) (83.9) 6.1 » Strong loan demand (r
Slide 28: Erste Bank Hungary
> Erste Bank Hungary H1 2006 highlights » Net profit contribution up 8% (14.3%)* yoy Segment contribution H1 06 H1 05 % chg » Operating result improved by 13.4% (20%) Operating income (EUR m) 159.2 144.7 10.0 » NII up 12.5% yoy (19%) Operating expenses (EUR m) (93.4) (86.7) 7.7 » Supported by strong
Slide 29: Erste Bank Croatia
> Erste Bank Croatia H1 2006 highlights » Net profit contribution slightly up by 0.3% (-1.5%)* Segment contribution H1 06 H1 05 % chg - Operating result up by 1.5% (-0.3%) Operating income (EUR m) 74.1 66.4 11.5 » Impact of regulatory actions taken by local National Bank Operating expenses (EUR m) (
Slide 30: Erste Bank Serbia
> Erste Bank Serbia H1 2006 highlights » Net loss of EUR 11.3m resulting from Segment contribution H1 06 H1 05 % chg restructuring expenses and investments Operating income (EUR m) 3.8 - - » Significant change of regulatory environment Operating expenses (EUR m) (14.2) - - » Measures implemented by
Slide 31: Core segments – International Business and Corporate Center
> Core segments – INT. BUSINESS and CORP. CENTER Int’l Business – H1 06 highlights Corporate Center – H1 06 highlights » Net profit up by 7.0% yoy supported by declining » NII - EUR 36m of additional interest income from risk costs and lower costs capital increase included » NII down -6.2% yoy » Ref
Slide 32: Presentation topics
> Presentation topics 1. Ukraine – expanding the home market 2. H1 2006 highlights 3. Financial statements 4. Divisional information 5. Asset quality 6. Outlook and targets 7. Appendix H1 2006 Results 31 July 2006 32
Slide 33: Asset quality
> Asset quality NPL cover ratio at Erste Bank Group continues to improve Low Risk Mgmt. Att'n Substandard NPL Total¹ Risk Provisions NPL Coverage2 H1 06 YE 05 H1 06 YE 05 H1 06 YE 05 H1 06 YE 05 H1 06 YE 05 H1 06 YE 05 H1 06 YE 05 Austria Total 79,771 75,544 11,206 12,267 2,143 2,431 3,184 3,275 96,
Slide 34: Presentation topics
> Presentation topics 1. Ukraine – expanding the home market 2. H1 2006 highlights 3. Financial statements 4. Divisional information 5. Asset quality 6. Outlook and targets 7. Appendix H1 2006 Results 31 July 2006 34
Slide 35: Erste Bank Group targets
> Erste Bank Group targets Outlook 2006 Net profit(1) growth Above 20% in 2006 Mid term targets Net profit(1) growth More than 20% p.a. average until 2009 Cost/income ratio Below 55% in 2009 Return on equity(2) 18-20% in 2009 (1) Net profit after tax and minorities (2) Based on a Tier 1 ratio of at
Slide 36: Presentation topics
> Presentation topics 1. Ukraine – expanding the home market 2. H1 2006 highlights 3. Financial statements 4. Divisional information 5. Asset quality 6. Outlook and targets 7. Appendix H1 2006 Results 31 July 2006 36
Slide 37: Macro overview
> Macro overview Real GDP growth Inflation (average) 8.0% 20.0% 7.0% 16.0% 6.0% 5.0% 12.0% 4.0% 3.0% 8.0% 2.0% 4.0% 1.0% 0.0% 0.0% 2002 2003 2004 2005e 2006e 2007e 2008e 2002 2003 2004 2005e 2006e 2007e 2008e Austria Czech Republic Slovakia Hungary Croatia Serbia Austria Czech Republic Slovakia Hung
Slide 38: Overview of international exposures
> Overview of international exposures Credit Risk1 by regions at EB Group Low Risk Management Substandard Non performing Total outstanding attention in EUR m H1 06 YE 05 H1 06 YE 05 H1 06 YE 05 H1 06 YE 05 H1 06 YE 05 % of total % of total Core Markets 96,401 89,322 12,288 12,890 2,564 2,826 3,494 3
Slide 39: Overview of international exposures (cont)
> Overview of international exposures (cont) Credit Risk1 by industry sectors at EB Group Low Risk Management Substandard Non performing Total outstanding attention in EUR m H1 06 YE 05 H1 06 YE 05 H1 06 YE 05 H1 06 YE 05 H1 06 YE 05 % of total % of total Banking & insurance 52,024 47,514 1,447 799
Slide 40: Financials (IFRS) of CE subsidiaries
> Financials (IFRS) of CE subsidiaries Leská spoNitelna EUR m H1 2006 H1 2005 % Change Net interest income 364.5 316.8 15.1 Risk provisions for loans and advances (22.1) (3.3) >100.0 Net commission income 161.8 153.2 5.6 Net trading result 26.5 22.8 16.2 General administrative expenses (294.4) (283.
Slide 41: Financials (IFRS) of CE subsidiaries (cont)
> Financials (IFRS) of CE subsidiaries (cont) Slovenská sporiteOPa EUR m H1 2006 H1 2005 % Change Net interest income 107.7 101.8 5.8 Risk provisions for loans and advances (7.6) (5.2) 46.2 Net commission income 40.4 42.1 (4.0) Net trading result 6.9 7.7 (10.4) General administrative expenses (89.1)
Slide 42: Financials (IFRS) of CE subsidiaries (cont)
> Financials (IFRS) of CE subsidiaries (cont) Erste Bank Hungary EUR m H1 2006 H1 2005 % Change Net interest income 119.2 101.9 17.0 Risk provisions for loans and advances (14.1) (12.9) 9.3 Net commission income 31.9 28.1 13.5 Net trading result 17.5 16.5 6.1 General administrative expenses (93.4) (
Slide 43: Financials (IFRS) of CE subsidiaries (cont)
> Financials (IFRS) of CE subsidiaries (cont) Erste Bank Croatia EUR m H1 2006 H1 2005 % Change Net interest income 57.6 60.4 (4.6) Risk provisions for loans and advances (7.3) (4.4) 65.9 Net commission income 13.1 10.2 28.4 Net trading result 7.3 (0.6) >100.0 General administrative expenses (41.4)
Slide 44: Financials (IFRS) of CE subsidiaries (cont)
> Financials (IFRS) of CE subsidiaries (cont) Erste Bank Serbia 1) EUR m H1 2006 H1 2005 % Change Net interest income 3.2 4.7 (31.9) Risk provisions for loans and advance (1.1) (5.1) (78.4) Net commission income 2.3 1.9 21.1 Net trading result 0.0 3.9 (100.0) General administrative expenses (14.2) (
Slide 45: EB Group quarterly results (IFRS)
> EB Group quarterly results (IFRS) Profit & loss statement - details EUR m Q2'04 Q3'04 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Net interest income 652 666 693 673 697 694 731 724 758 Net commission income 283 285 287 311 306 305 335 342 356 Net trading result 46 48 60 57 48 66 70 91 45 Income fro
Slide 46: EB Group quarterly balance sheet (IFRS)
> EB Group quarterly balance sheet (IFRS) Balance sheet - details EUR m Q2'04 Q3'04 Q4´04 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Total assets 137,517 142,221 139,812 148,202 152,660 156,931 152,660 158,815 160,229 Loans & advances credit inst. 17,846 19,304 15,684 19,545 19,840 20,058 16,858 18,604 19,
Slide 47: EB Group quarterly by divisions
> EB Group quarterly by divisions Core segments In EUR m Total Austria Total CEE Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Net interest income 388.4 383.4 394.2 376.5 377.0 273.0 273.6 290.3 303.2 321.5 Risk provisions (88.2) (99.1) (83.9) (80.4) (78.5) (18.0) (20.0) (28.2) (24.1)
Slide 48: EB Group quarterly by divisions – Austria details
> EB Group quarterly by divisions Austria - details In EUR m Savings Banks Retail & Mortgage Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Net interest income 204.9 209.2 215.7 199.4 196.5 128.9 126.6 127.2 129.6 127.7 Risk provisions (46.3) (58.2) (70.7) (44.1) (43.1) (26.1) (27.2) (2
Slide 49: EB Group quarterly by divisions – Central Europe details
> EB Group quarterly by divisions Central Europe - details In EUR m Czech Republic Slovakia Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Net interest income 145.6 149.5 160.2 172.1 180.7 47.2 47.0 55.1 50.7 56.3 Risk provisions (6.4) (6.5) (13.8) (10.8) (11.3) (5.0) (3.9) (2.2) (2.8)
Slide 50: EB Group quarterly by divisions – Central Europe details
> EB Group quarterly by divisions Central Europe - details In EUR m Croatia Serbia Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Net interest income 29.7 23.7 19.5 27.4 26.3 - 0.9 1.2 0.5 1.0 Risk provisions (2.2) (4.0) (6.1) (2.6) (4.7) - (0.7) (3.2) (1.4) 0.3 Net commission income 5.
Slide 51: Key financial data
> H1 2006 Results Key financial data EUR m YE 1998 YE 1999 YE 2000 YE 2001 YE 2002 YE 2003 YE 2004 YE 2005 H1 2006 Tier 1 Capital pursuant to § Austrian Banking Act 1,611 1,753 2,125 2,337 3,800 3,912 4,377 5,112 7,757 Total own funds pursuant to § Austrian Banking Act 1 3,176 3,296 3,956 4,308 6,98
Slide 52: Current shareholder structure
> Current shareholder structure Total number of shares: 308,946,175* By Investor Type By Region DIE ERSTE österreichische Spar-Casse Others Privatstiftung 30.5% Continental Europe 0.9% Austria Verein 6.4% 5.0% Employees Capital Research & Mgmt. 1.8% UK & Ireland 5.1% 17.2% Savings banks 7.2% Private
Slide 53: Investor relations contacts
> Investor relations contacts Erste Bank, Graben 21, 1010 Vienna Fax +43 (0)5 0100-13112 E-mail: investor.relations@erstebank.at Internet: www.erstebank.com Reuters: ERST.VI Bloomberg: EBS AV Datastream: O:ERS ISIN: AT0000652011 Investor relations Gabriele Werzer Tel: +43 (0)5 0100-11286 E-Mail: gab