Addiko Bank Ag · VIE:ADKO
Addiko Bank — Q3 2022 Earnings Presentation
48 slides from Addiko Bank's earnings presentation, Nov 9, 2022
Slide 1: 3Q22 Results Presentation
3Q22 Results Presentation Herbert Juranek (CEO) Edgar Flaggl (CFO) Tadej Krašovec (CRO) Ganesh Krishnamoorthi (CMO & CIO) Constantin Gussich (Investor Relations) 9 November 2022
Slide 2: Executive Summary & Business Update
Executive Summary & Business Update Financials & Risk Update Outlook & Wrap-Up Additional Materials
Slide 3: Key Highlights 3Q22
Key Highlights 3Q22 • 3Q22 YTD net profit doubles to €19.6mn (3Q21: €9.6mn), YTD EPS at €1.01 − Third quarter result 2022 after tax of €7.0mn (2Q22: €6.1mn, 1Q22: €6.5mn) − Cost of Risk at -49bps or €-16.3mn including prudent management overlay Earnings • Return on Tangible Equity (@14.1% CET1 ratio
Slide 4: Key Topics
Key Topics • Opinion from auditor for mandatory reclassification of treasury portfolio in EU entities Reclassification obtained and executed in 3Q22 due to the change in the overall strategy of the bank of Financial • Previous investment strategy in the EU entities of the group replaced by the decis
Slide 5: Strong Growth in Focus Portfolio
Strong Growth in Focus Portfolio Focus portfolio development Development during 3Q22 Gross performing loans (€mn) YoY +10% +9% 2,702 2,473 2,446 2,352 Zoom-in 1,177 view • Transformation Program continued to 1,040 1,103 1,057 SME yield results in business development • YTD growth in focus book a
Slide 6: Foundations Set to Become the Leading Specialist Bank for Consumer & SME Customers
Foundations Set to Become the Leading Specialist Bank for Consumer & SME Customers in the CSEE Region Business Update Improving dynamics YoY €mn, digital users and clients in thousands YoY • Pricing: gradual repricing of new loans 1,008 +30% • NCI: 16% YoY growth driven by packages & 777 94 -31%
Slide 7: Digital Roadmap Executed with Cost Savings YoY
Digital Roadmap Executed with Cost Savings YoY EURO Enabled 200 Introduction of E2E lending Consumer introduction in partners Variable Pricing Online Croatia New Mobile App Risk engine Introduction of E2E lending SME for accounts integration Variable Pricing Online • Technology has been key to − New
Slide 8: The Addiko Ecosystem for Consumer & SME Customers
The Addiko Ecosystem for Consumer & SME Customers Game changers drive the Addiko Consumer & SME Ecosystem 2023+ Plug & Play platform Digital Consumer 2022 lending Digital SME lending Cards & 2021 Payments Until Brand & USP refresh 2020 Shift to higher yielding BNPL Platform BNPL with FinTech partner
Slide 9: Financials & Risk Update
Executive Summary & Business Update Financials & Risk Update Outlook & Wrap-Up Additional Materials
Slide 10: Financial Performance 3Q22 at a Glance
Financial Performance 3Q22 at a Glance 5.60% Financial Performance 3Q22 3Q21 4Q21 1Q22 2Q22 3Q22 5.10% YTD, €mn 60.5 62.5 64.0 4.60% 60.1 58.2 3Q21 YoY 4.10% 19.1 19.3 YTD NCI 17.9 17.3 17.0 3.60% Net Netinterest interest income income 129.3 126.8 +2.0% 3.02% 3.08% 2.83% 2.86% 2.87% 3.10% NIM Net fe
Slide 11: Recent Capital Development
Recent Capital Development Capital development1 % CET1/TCR, YTD, RWA in €mn Addiko Group RWFL 3,598 3,751 3,716 3,538 1.14% 1.02% 0.05% 0.00% 0.84% 1.01% 1.41% 0.02% 0.18% 21.3% 19.1% 21.6% 19.7% 18.8% CET1/ TCR fully-loaded Market value development of illustrative & highly affected Croatian governm
Slide 12: NPE Development
NPE Development NPE volume & ratio development Quarterly NPE formation & exit €mn, YTD €mn, QTD 4Q21 1Q22 2Q22 3Q22 NPE ratio 3.5% 2.9% 2.8% 2.8% 2.8% Formation 35.3 16.4 19.9 23.7 NPE ratio (on-balance loans)1 4.7% 4.0% 3.9% 3.8% 3.9% 4.0 20.0 1.4 4.2 3.6 3.7 7.3 2.1 244 12.9 12.5 12.3 194 11.3 187
Slide 13: Cost of Risk at a Glance
Cost of Risk at a Glance Credit loss expenses on financial assets 3Q22 YTD, €mn, positive number for release • 3Q22 YTD credit loss 2.7 0.0 (3.4) expenses of €-16.3mn resulting in -0.49% cost of Impairments (negative) risk (on net loans): Releases (positive) (16.3) (16.3) (15.6) − Consumer: -1.04% −
Slide 14: Outlook & Wrap-Up
Executive Summary & Business Update Financials & Risk Update Outlook & Wrap-Up Additional Materials
Slide 15: Transformation Program Status
Transformation Program • Significant revenue growth combined with efficient cost management delivered, confirming that initiatives taken are successful Status • 18-months Transformation Program launched at 1H21 to be finished by year-end 2022 • Management in preparation of next steps • Extract value
Slide 16: Wrap-Up
Wrap-Up Outlook 2022 confirmed in challenging environment (as revised upwards in 1H22): – Gross performing loans: c. €3.3bn with >10% growth in focus ➔ – Net Banking Income: above €240mn as a result of improved business activities despite the ➔ accelerated run-down in non-focus (previously: stable a
Slide 17: Additional Materials
Executive Summary & Business Update Financials & Risk Update Outlook & Wrap-Up Additional Materials
Slide 18: Addiko at a Glance
Addiko at a Glance Overview of Addiko Operating as one region - one bank 3Q22, % of Group Assets (rounded) ✓ Fully licensed bank with HQ in Austria, focused 100% on Central ✓ and South Eastern Europe ✓ Addiko Bank AG is regulated by the Austrian Financial Market Austria ✓ (2%2) Authority (“FMA”)1 an
Slide 19: Clear Strategy to Transform Loan Book Towards Consumers & SMEs
Clear Strategy to Transform Loan Book Towards Consumers & SMEs Strategic pillars Near term – key insights Competitive specialist strategy • CSEE with higher growth CSEE compared mature markets in our market for our focus Pure-Play segments Consumer & SME • Still underserved niches • Growth in focus
Slide 20: Addiko's Commitment to the Sustainable Development Goals
Addiko’s Commitment to the Sustainable Development Goals ESG in Addiko - It is the little things that count Next steps • CRO appointed as ESG Environment Social Governance Officer in Addiko • Implementation plan for 21 initiatives defined Good governance • Roll-out during 2022, Together with our Soc
Slide 21: Balance Sheet Composition
Balance Sheet Composition Assets Liabilities and Equity 3Q22, €bn 3Q22, €bn 5.8 5.8 Other ✓• Liquid balance sheet Other Assets 0.1 0.2 Liabilities ✓• Strong deposit base 0.1 Due to Credit - LCR ratio: 249% (1H22: 246%) 0.4 Institutions - Loan-deposit ratio Direct (customer) : 70.7% (YE21: ✓• Liquid
Slide 22: Acceleration of Growth in Focus Areas Consumer & SME
Acceleration of Growth in Focus Areas Consumer & SME Gross performing loans in focus segments Gross yield by segment1 Gross loans of focus segments as % of total gross performing loans 3Q22 YTD QTD QTD QTD Full year 3Q22 2Q22 1Q22 2021 yield yield yield yield Consumer 6.9% 6.8% 6.9% 7.0% 7.1% % in f
Slide 23: Consumer and SME Lending Development
Consumer and SME Lending Development Consumer (from 1Q21 Micro shifted to SME) SME €mn, YTD €mn, YTD CAGR: 11.9% CAGR: 10.8% 1,476 1,525 1,431 1,389 1,342 1,312 1,306 1,332 1,370 1,188 1,164 1,177 1,103 1,106 1,059 1,040 1,055 1,092 1,057 1,028 928 791 774 646 Gross Performing Loans 2016 2017 2018 2
Slide 24: Non-Focus Reduction Accelerated in Line with Transformation Program
Non-Focus Reduction Accelerated in Line with Transformation Program Non-Focus portfolio development Mortgages, Large Corp. & Public Fin. gross performing loans (€mn) YoY -16% -19% -17% -24% -36% 1,469 1,252 Large 1,008 Corp. & 724 841 Public 613 642 449 307 180 Mortgages 744 639 559 535 46
Slide 25: Digital Lending Platforms in All Major Markets
Digital Lending Platforms in All Major Markets WebLoan Group Application Processing System (GAPS) Simple entry point for loan requests with Simple branch loan Application Processing System instant initial offer (final approval & closure in including CDE (Credit Decision Engine) branch) Achievements
Slide 26: Digital Transformation Reflected
Digital Transformation Reflected Digital capabilities YTD +13% YoY Registered Mobile Banking 150 188 221 230 251 +4% Mobile banking users (vs. PQ) Users (ths.)2 +11% YoY +3% Digital users (vs. PQ) 266 246 238 210 177 24% Bank@Work (1H22: 26%, 1Q22: 28%, YE21: 28%, 3Q21: 28%) 38% Digital consumer loa
Slide 27: Financials: Financial Performance 3Q22 in Detail
Financials: Financial Performance 3Q22 in Detail Key financials P&L •1 Operating result at €55.6mn up 28.0% YoY: in €mn YTD QTD − Net banking income up 4.8% YoY driven by 3Q22 (YTD) 3Q21 (YTD) +/- PY 3Q22 2Q22 +/- PQ strong development in Consumer & SME, Net interest income 129.3 126.8 2.0% 44.7 43.
Slide 28: Financials: Key Performance Drivers 3Q22
Financials: Key Performance Drivers 3Q22 Net interest income Net fee and commission income €mn €mn NIM 285bp 297bp 287bp 302bp 308bp % of 43% 43% 41% 44% 43% +2.0% NII 129.3 +8.2% 126.8 +11.9% +13.7% +5.0% +3.0% +12.5% +1.0% 49.5 55.4 41.3 43.4 44.7 17.0 19.1 19.3 3Q21 (YTD) 3Q22 (YTD) 1Q22 (QTD) 2Q
Slide 29: Financials: Interest Income Dynamics
Financials: Interest Income Dynamics Interest income by quarter1 Gross yield by quarter2 €mn 3Q21 4Q21 1Q22 2Q22 3Q22 49.2 47.0 47.1 47.5 45.4 7.0% 7.0% 7.0% 6.9% 6.8% 7.0 Consumer Other 6.9 6.7 7.2 6.5% 6.5% 6.3% 6.5% 6.4% Public & 6.4 1.6 new new new new new Large 1.9 business business business bu
Slide 30: Financials: Breakdown of Other Interest Income
Financials: Breakdown of Other Interest Income Treasury interest income by quarter €mn • HTC bond portfolio: New Hold-to-Collect (HTC) strategy Other interest income (total) 6.9 7.2 6.4 6.7 7.0 implemented in EU entities as of 1 July 2022 The presentation of the interest income in 1Q22 and 2Q22 repr
Slide 31: Financials: Interest Expense Dynamics
Financials: Interest Expense Dynamics Interest expense by quarter Cost of funding by quarter1 €mn 4.5 Group Cost Treasury 4.4 4.4 4.1 4.1 of Funding2 Deposits – 0.6 0.35% 0.35% 0.34% 0.34% 0.37% Credit 0.9 0.9 Deposits - 1.0 1.0 0.5 0.30% Institutions 0.3 Network 0.25% 0.25% 0.24% 0.24% 0.4 0.4 Dire
Slide 32: Financials: Commission Income Dynamics
Financials: Commission Income Dynamics Net fee and commission income by quarter Key highlights €mn 19.3 • Solid improvement of net fee and commission 19.1 17.9 0.9 income in 3Q22: up 11.9% vs. 3Q21 17.3 17.0 1.3 Non-Focus 1.3 and Other 1.3 1.1 • Bancassurance up c. 31% YoY due to accelerated busines
Slide 33: Financials: Other Income & Other Result
Financials: Other Income & Other Result Other income breakdown (YTD) €mn 3Q21 3Q22 Lower regulatory charges for recovery and resolution fund 1 Deposit guarantee -4.1 -4.6 and positive outcome of a real estate tax dispute in Croatia 1 Bank levies and other taxes -2.8 -1.9 Recovery and Resolution Fund
Slide 34: Financials: Development of Operating Expenses
Financials: Development of Operating Expenses Operating expenses development by quarter Other Administrative expenses €mn 3Q22 YTD, €mn Other2 5.7 12% Advertising 5.2 11% Total: 23.5 2.2 IT €45.5mn 52% Legal & Advisory 5% 43.6 8.9 41.7 41.9 20% 40.7 41.1 Depreciation 4.6 Premises Expenses 4.4 4.3 An
Slide 35: Financials: Balance Sheet
Financials: Balance Sheet Detailed balance sheet overview (YTD) €mn 2016 2017 2018 2019 2020 2021 3Q22 Liquid Assets 3,287.6 2,582.5 2,211.8 2,034.5 2,121.8 2,406.5 2,322.9 Cash reserves 1,878.2 1,285.9 1,002.9 899.4 1,156.3 1,361.7 1,204.2 Investment Portfolio 1,409.4 1,296.6 1,208.9 1,135.1 965.5
Slide 36: Financials: Income Statement
Financials: Income Statement Detailed income statement overview (YTD) €mn New P&L logic 2016 2017 2018 2019 2020 2019 2020 2021 3Q21 3Q22 Interest income calculated using the effective interest method 232.2 226.0 209.6 207.4 194.3 207.4 194.3 185.5 138.9 141.2 Other interest income 6.0 8.3 4.2 3.4 2
Slide 37: Financials: Breakdown by Entity
Financials: Breakdown by Entity 3Q22 YTD Addiko Bank d.d., Addiko Bank d.d., Addiko Bank d.d., Addiko Bank a.d., Addiko Bank a.d., Addiko Bank A.D., (€mn, IFRS) Zagreb Ljubljana Banja Luka Sarajevo Beograd Podgorica Net interest income 39.8 30.5 11.8 11.0 25.1 8.1 Net commission income 20.4 11.0 6.6
Slide 38: Risk: Strong Risk Management Framework
Risk: Strong Risk Management Framework Non-performing loan portfolio (YTD) NPE Volumes, 1,229 761 606 404 329 277 244 244 230 238 238 194 187 183 183 €mn NPE Coverage Ratio1 61.7% 67.5% 67.0% 75.4% 73.2% 73.8% 73.2% 73.6% 75.6% 71.7% 71.2% 71.9% 72.2% 76.7% 78.9% (Ex-Collateral) 14.3% NPE Ratio2 9.2
Slide 39: Risk: Robust Asset Quality in Portfolios
Risk: Robust Asset Quality in Portfolios Focus Non-Focus Consumer SME €mn, rounded €mn, rounded €mn, rounded > 90 1,836 1,827 1,742 days 1,766 1,770 32 32 1,691 61-90 48 39 49 24 29 1,634 49 41 39 > 90 1,579 75 days days 48 72 45 74 31-60 61-90 62 days days < 30 > 90 31-60 days days days 61-90 1,129
Slide 40: Risk: Provision Coverage Evolution
Risk: Provision Coverage Evolution Stage 1, 2 and 3 assets1 Business segments: Stage 1 & 2 (Performing) coverage1 €mn 3Q22 (YTD) ECL coverage By Segment 1H22 1Q22 2021 1H21 4,717 238 4,474 4,456 4,477 4,408 Focus Focus 1.9% 1.9% 1.9% 2.0% 2.5% 194 187 183 183 584 Consumer 2.8% 2.9% 2.8% 2.8% 3.5% 49
Slide 41: Risk: NPE Formation and Exit Dynamics
Risk: NPE Formation and Exit Dynamics NPE movements YE21 vs. 3Q22 – group level €mn Previous risk framework (before 1.1.2016) New risk framework (from 1.1.2016) 194 3 42 183 (18) (39) 2021 NPE reduction NPE formation NPE reduction NPE formation 3Q22 Quarterly NPE formation & exit - group level Consu
Slide 42: Risk: Update on NPE and Cost of Risk Development
Risk: Update on NPE and Cost of Risk Development Focus Non-Focus3 €mn Consumer (from 1Q21 Micro shifted to SME) SME €mn €mn NPE Coverage Ratio (Excl. 84.8% 81.4% 78.8% 79.3% 70.4% 65.8% 64.1% 76.3% 68.5% 66.5% 72.4% 81.2% Collateral)1 6.8% 6.6% 5.9% 6.1% 4.5% 4.9% 4.6% 4.0% 4.0% 3.9% NPE Ratio2 3.5%
Slide 43: Risk: Tightly Monitored NPE Development
Risk: Tightly Monitored NPE Development Consumer (from 1Q21 Micro shifted to SME) SME Mortgages Large Corporates Public Finance €mn €mn €mn €mn €mn NPE Coverage 84.8% 78.8% 79.3% 70.4% 64.1% 76.3% 71.6% 77.6% 79.4% 53.4% 53.5% 85.8% 49.6% 40.6% 90.0% Ratio1 11.2% 9.4% 8.3% 4.5% 4.6% 4.4% 4.0% 4.0% N
Slide 44: Risk: CHF Loans Significantly Managed Down
Risk: CHF Loans Significantly Managed Down CHF portfolio overview CHF conversion across countries €mn % of Total 5.5% 4.4% 3.4% 1.9% 1.7% 1.3% 1.3% 1.3% 1.3% Credit Risk • In the past, several legislation initiatives on CHF loans have been started Exposure1 but eventually rejected, questioning the c
Slide 45: Capital: Capital Position Remains Strong
Capital: Capital Position Remains Strong Capital development transitional1 Capital requirement & guidance % CET1/TCR, YTD, RWAs transitional in €mn SREP 2021 (valid as of 1 March 14.60% 13.75% RWA 3,625 €+139.1mn 3,764 €-36.0mn 3,728 €-174.4mn 3,553 2022) 3.50% − P2R: 3.25% (4.1% in SREP 4.92% T1/ T
Slide 46: Capital: Further Details
Capital: Further Details Breakdown of capital position and capital requirements Transitional 21.3% IFRS 9 22.2% 21.8% fully-loaded 20.3% 19.8% 20.0% 17.7% 13.75% Addiko is using the standardized approach 4.92% AT1/ T2 for its RWA calculation, with most of its RWAs stemming from credit risk CET1 2019
Slide 47: Capital: Credit Risk RWA in Focus vs. Non-Focus
Capital: Credit Risk RWA in Focus vs. Non-Focus Risk weighting for focus portfolio is in line with overall contribution to loan book Credit risk RWA Credit risk RWA: breakdown by segment1 3Q22, €mn 3Q22, €mn Public Large Finance Corporate 163 27 Mortgages 2,993 2,977 278 Corporate Consumer (13) Cent
Slide 48: Disclaimer
Disclaimer THESE RESULTS AND STATEMENTS (HEREINAFTER REFERRED TO AS “MATERIALS”) WERE CAREFULLY PREPARED BY ADDIKO BANK AG. HOWEVER, THE MATERIALS HAVE NOT BEEN INDEPENDENTLY VERIFIED. THEREFORE, ADDIKO BANK AG MAKES NO REPRESENTATION AND GIVES NO WARRANTY, NEITHER IMPLIED NOR EXPRESSED, AND ASSUMES