Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q3 2022 Earnings Presentation
55 slides from Erste Group Bank's earnings presentation, Nov 4, 2022
Slide 1: Q3 2022 results presentation
Q3 2022 results presentation 4 November 2022 On track for ~14% ROTE in 2022 & updating the financial path to 2024 Willi Cernko, CEO Erste Group Stefan Dörfler, CFO Erste Group Alexandra Habeler-Drabek, 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 • Key priorities and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 3
Slide 4: Key priorities under my leadership (1)
Key priorities under my leadership (1) – Strategic continuity, 2 key priorities & focus on higher share of wallet Unchanged geographic focus Unchanged vertical focus Unchanged product focus • Excel at capturing existing and newly • Retail (private individuals, micros) • Full suite of retail pr
Slide 5: Key priorities under my leadership (2)
Key priorities under my leadership (2) – Updating the financial path to 2024: CIR target upped to ~52% (from 55%) 2022e 2023e Key drivers • Healthy loan growth in 2022 and 2023 NII ~20% ~10% • Current euro zone forward rate curve materialises; increased deposit repricing, albeit from low levels
Slide 6: Executive summary – Group income statement performance
Executive summary – Group income statement performance QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m) -25.9% +13.5% 688 14 46 240 536 107 1,647 510 57 65 269 1 36 1,451 80 7 Q2 22 Operating Operating Risk costs Other Taxes on Minorities Q3 22 1-9 21 Operating Operating R
Slide 7: 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 +11.4% in EUR m in EUR m 2.19% 2.24% 2.15% 2,889 51.6% 2.04% 49.8% 158 0.37% 2,594 4,385 -0.18% 3,669 184 1,445 1,548 1,060 1,028 52 -85 1-9 21 1-9 22 Q2 22 Q3 22 1-9
Slide 8: 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) +9.1% +9.1% 335,297 1,071 335,297 62 62 201 304 18,526 21,927 5,720 307,428 4,691 307,428 4,273 944 701 31/12/21 Cash Trading, Loans to Net loans Intangibles
Slide 9: Executive summary – Key balance sheet data
Executive summary – 31/12/21 Key balance sheet data 30/09/22 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn 85.6% 85.5% +10.3% 96.8% 58.6% 59.3% 198.8 90.9% 180.3 111.2 120.4 2.4% 2.0% Loan/deposit ratio Loans/total assets Net loans Credit RWA (B3FL) NPL
Slide 10: Presentation topics
Presentation topics • Key highlights and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 10
Slide 11: Macroeconomic update
Macroeconomic update – 2022 2023 Better than expected economic growth in 2022, slowing growth in 2023 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (avg, in %) 6.2 8.8 5.5 15.8 5.0 13.6 14.0 14.3 4.6 12.2 5.5 5.1 11.0 10.5 10.5 2.7 1
Slide 12: Business update – Retail – what's happening on the ground? (1)
Business update – Retail – what‘s happening on the ground? (1) • Strong increase in interest rates leading to drop in demand for Loan portfolio housing loans, especially in the Czech Republic (incl. savings banks, in EUR billion) • New Euro-denominated mortgages still remain affordable for most of H
Slide 13: Business update – Retail – what's happening on the ground? (2)
Business update – Retail – what‘s happening on the ground? (2) • Supporting clients given high energy prices and inflation Number of George users (in million) • Campaign for raising awareness for energy saving and the impact of inflation on own budgets via George (“What would George do?”) +10% • Eve
Slide 14: Corporates & Markets – what's happening on the ground?
Business update Corporates & Markets – what‘s happening on the ground? Corporate loan stock development • Loan demand is boosted by the energy sector (gross, business line view, in EUR bn) • Loan volume grew by almost EUR 10bn since the beginning of the year; highest growth in Austria, Czech Republi
Slide 15: Presentation topics
Presentation topics • Key highlights and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 15
Slide 16: Operating trends: net loan stock & growth
Operating trends: net loan stock & growth – YoY 30/09/21 QoQ 30/06/22 Strong net loan growth continues in Q3 22 30/09/22 175.9 13.0% • Yoy growth dynamics show extraordinary Group 191.5 3.8% 198.8 development in Corporates (+20.1%), Retail and 36.8 6.9% Savings Banks (+8.1%) strong AT/EBOe 38.7 1.7%
Slide 17: Operating trends: customer deposit stock & growth
Operating trends: customer deposit stock & growth – YoY 30/09/21 QoQ 30/06/22 Strong deposit growth, loan/deposit ratio at 85.5% 30/09/22 207.5 12.0% • Yoy growth across all business lines, primarily from Group 225.5 232.5 3.1% Corporates (GLC, PS): + EUR 8.7bn, Group Markets 44.9 /FI: + EUR 7.6bn;
Slide 18: Operating trends: NII and NIM
Operating trends: NII and NIM – Q3 21 Q2 22 Volume growth and rate hikes drive NII up Q3 22 1,221 1.98% • NII up yoy and qoq on solid volume growth and Group 1,445 2.15% 1,548 2.24% improved rate environment AT/EBOe 160 170 1.40% 1.40% • 2022 outlook upgraded to ~20% NII increase, due to 180 1.45% h
Slide 19: Operating trends: operating income
YoY Operating trends: operating income – Q3 21 QoQ Q2 22 Strong core revenue growth, trading & FV result impacted by valuations Q3 22 1,944 9.2% • Revenues up yoy, pushed by exceptional NII Group 2,110 2,124 0.6% (+26.8%) and supported by fee income (+4.0%), 294 offsetting negative net trading & FV
Slide 20: Operating trends: operating expenses
Operating trends: operating expenses – YoY Q3 21 QoQ Q2 22 Costs normalise in Q3 22, cost inflation in 2022: ~6% Q3 22 1,038 5.6% • Yoy development due to higher personnel expenses Group 1,050 4.4% 1,096 (+6.3%) and higher administrative expenses (IT and 168 -7.2% office space) AT/EBOe 147 156 6.1%
Slide 21: Operating trends: operating result and CIR
Operating trends: operating result and CIR – YoY Q3 21 QoQ Q2 22 Operating result up 13.4% yoy, CIR at 51.6% Q3 22 Operating result YoY & QoQ change Cost/income ratio 906 53.4% Group 1.060 13.4% -3.0% 49.8% 1.028 51.6% 126 57.1% AT/EBOe 165 25.3% -4.1% 47.1% 158 49.6% 173 60.7% AT/SB 174 9.7% 9.1% 5
Slide 22: Operating trends: risk costs (abs/rel)
Operating trends: risk costs (abs/rel*) – Q3 21 Q2 22 Addressing uncertainty led to net allocation of EUR 184m in Q3 22 Q3 22 Group -85 -31 -0.07% -0.18% • Underlying credit risk performance of retail and 184 0.37% corporate customers remained strong in Q3 22; 3 0.03% individual downgrades and defau
Slide 23: Operating trends: asset quality – NPL ratio and coverage
Operating trends: asset quality – NPL ratio and coverage 30/09/21 30/06/22 NPL ratio at historic low, coverage ratio at comfortable level 30/09/22 2.4% 92.7% 91.8% • NPL ratio improves to 2.0% and NPL coverage Group 2.2% 2.0% 96.8% increases to 96.8% on slight reduction of NPL 1.5% 63.6% 62.9% volum
Slide 24: Operating trends: industries subject to new management overlays
Operating trends: industries subject to new management overlays Due to high gas / energy prices Industry Exposure Risk Mitigation Metals EUR 4.5bn • One of the most energy-intensive industries (eg. in steel- • 2021 was a very profitable year for the metals industry making, gas is used to reach the n
Slide 25: Operating trends: other result
Operating trends: other result – Q3 21 Q2 22 Other result stable Q3 22 -91 • Yoy and qoq stable Group -96 -89 AT/EBOe -1 3 • Year-on-year segment trends: -10 • AT/EBOe: Q3 21 benefitted from provision releases 0 AT/SB -10 • AT/OA: releases of provisions 7 • CZ: other result deteriorates on optimisat
Slide 26: Operating trends: net result
Operating trends: net result – Q3 21 Q2 22 Net profit declines on higher risk costs Q3 22 533 • Yoy profitability characterised by substantially better Group 688 510 operating performance, outweighed by higher risk costs 87 • Qoq development reflect higher risk costs following AT/EBOe 122 review of
Slide 27: Presentation topics
Presentation topics • Key highlights and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Wholesale funding and capital • Key takeaways and outlook • Additional information Page 27
Slide 28: Wholesale funding and capital: debt vs interbank funding
Wholesale funding and capital: debt vs interbank funding – Stable wholesale funding reliance, as customer deposits grow strongly Debt securities issued Interbank deposits in EUR bn in EUR bn +0.6% +13.4% 33.5 32.1 32.3 Sub debt 36.2 Overnight deposits 4.9 35.4 Senior non-preferred bonds 3.3 Term dep
Slide 29: Wholesale funding and capital: LT funding
Wholesale funding and capital: LT funding – 2022 funding target fulfilled, 2023 funding volumes expected in similar range Maturity profile of debt in EUR bn 5.4 4.7 3.8 3.8 2.7 2.5 2.0 1.5 1.5 1.2 0.6 0.2 0.0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034+ Senior unsec. bonds Senio
Slide 30: Wholesale funding and capital: MREL update
Wholesale funding and capital: MREL update – MREL issuance comes at an increasing cost MREL resolution groups (September 2022) Preliminary 3year MREL issuance plan (avg. p.a.) in EUR bn in EUR m 204 ~1,000 – 3,000 89 75 ~500-1,000 24 25 19 14 ~300-400 ~300-500 10 9 12 ~100-250 ~100-350 6 6 AT CZ SK
Slide 31: Wholesale funding and capital: CET1 ratio waterfall
Wholesale funding and capital: CET1 ratio waterfall – Fully loaded CET1 (pro forma) at 14.2% in % 14.50 -0.94 0.88 -0.31 0.16 14.18 0.24 -0.29 0.22 RWA -0.28 CET1 Target 13.5% Reg. Min CET1 10.4% (MDA threshold; P2G excluded) YE 21 ∆ RWA ∆ RWA H1 22 Profit H1 22 Q3 Profit OCI Minorities CET1 other P
Slide 32: Wholesale funding and capital: capital & RWA
Wholesale funding and capital: capital & RWA – Risk-weighted assets increase on business effects and market risk Basel 3 capital Risk-weighted assets Basel 3 capital ratios 1 in EUR bn in EUR bn 19.1% 18.9% 18.5% 18.3% 18.2% 25.6 25.2 138.2 140.8 16.2% 16.2% 24.8 135.5 15.8% 24.3 15.8% 15.7% 23.9 12
Slide 33: Presentation topics
Presentation topics • Key highlights and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 33
Slide 34: Conclusion – Key takeaways and outlook for 2022
Conclusion – Key takeaways and outlook for 2022 Q1-3 22 key takeaways 2022/23 outlook • Still strong real GDP growth in 2022, followed by • Continued strong business performance Operating significant slowdown in 2023 • Loan growth at +10.3% ytd environment • Loan growth to slow from >10% in 2022 to
Slide 35: Presentation topics
Presentation topics • Key highlights and executive summary • Macroeconomic and business update • Operating trends • Volumes • Revenues and costs • Impairments and asset quality • Capital and wholesale funding • Key takeaways and outlook • Additional information Page 35
Slide 36: 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 in 7 Customers: 4.5m Customers: 2.0m geographically connected countries Employees: 9,893 Employees: 3,601 CZ Bra
Slide 37: 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 Acting as Prosperi
Slide 38: Additional information: market shares
Additional information: market shares – 30/09/21 30/06/22 Commanding market shares across the CEE region 30/09/22 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 21.2% 23.4% 23.0% 25.6% AT 20.6% AT 23.5% AT 23.9% AT 26.5% 24.4% 21.2% 26.6% 12.1% CZ 25.1% CZ 21.7% CZ 26.9%
Slide 39: 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 21 1-9 22 YOY-Δ Q3 21 Q2 22 Q3 22 YOY-Δ QOQ-Δ Net interest income 3,669.5 4,385.2 19.5% 1,220.8 1,444.9 1,548.2 26.8% 7.1% Interest income 3,708.9 5,820.9 56.9% 1,274.8 1,88
Slide 40: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Sep 21 Dec 21 Mar 22 Jun 22 Sep 22 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 47,125 45,495 46,225 42,818 44,552 -5.5% -2.1% 4.0% Financial assets held for trading 6,244 6,473 6,823 6,110 5,375 -13.9% -17.0% -12.
Slide 41: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Sep 21 Dec 21 Mar 22 Jun 22 Sep 22 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 2,193 2,474 2,917 3,005 3,175 44.8% 28.3% 5.6% Derivatives 1,364 1,624 1,988 1,989 2,540 86.3% 56.4% 2
Slide 42: Additional information: regulatory capital position/requirement (SREP)
Additional information: regulatory capital position/requirement (SREP) – Capital requirements (SREP) for 2022 slightly up on higher CCyB Erste Group Consolidated Erste Group Unconsolidated ECB Capital Relief Fully loaded Fully loaded Measures 1) Fully loaded Fully loaded 2020 2021 Q3 2022 Q3 2022 YE
Slide 43: Additional information: Multiple point of entry resolution strategy
Additional information: Multiple point of entry resolution strategy – MREL compliance at Point of Entry Levels (bail-in) Ownership Structure 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 spořite
Slide 44: Additional information: MREL details Austrian resolution group
Additional information: MREL details Austrian resolution group: MREL requirement based on RWA fulfilled MREL capacity based on TREA (RWA)* Key take-aways in % • Erste Group’s setup is based on a multiple point of entry 33.61% (MPE) resolution approach • In Q2 2022, Erste Group Bank AG received its M
Slide 45: 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) 195.4 202.7 202.7 202.7 189.3 189.3 195.4 184.2 6.5 4.0 184.2 3.5 2.4 3.3 0.1 179.
Slide 46: Additional information: financial and trading assets
Additional information: financial and trading assets* – LCR at excellent 145.4% By geography By debtor type Liquidity buffer +9.7% in EUR bn in EUR bn 55.8 82.5 100% 78.6 48.9 50.9 7.5% 6.5% 6.5% 74.0 14.3 9.1% 12.8% 13.3% 28.9% 12.1 27.7% 12.0 23.8% 1.0 0.7 4.0 0.7 5.2 4.2 5.8 6.1 5.9 6.2 6.2 6.3 8
Slide 47: Additional information: Ratings – Composition of issuer ratings
Additional information: Ratings – Composition of Erste Group Bank AG’s issuer ratings Macro Profile SACP - Stand-Alone Credit Profile VR - Viability Rating Strong a (Individual Rating ) + Financial Profile ▲ a Asset Risk baa2 Anchor bbb+ Capital baa1 Business Position Strong +1 Profitability baa3 Ca
Slide 48: Additional information: ESG update (1) – ESG Compass of Erste Group
Additional information: ESG update (1) – ESG Compass of Erste Group Supporting the well-being in our region through socio-environmental objectives Priority Objectives Our Promise Leading Green Transition Customers providing prosperity to our clients in Erste Group strives to be a role an inclusive,
Slide 49: Additional information: ESG update (2) – main ESG pillars
Additional information: ESG update (2) – main ESG pillars Sustainability is embedded into the DNA of the organisation Sustainable Working Finance together mobilize financial resources and customer advice for actively participate in public initiatives and thus social-ecological goals and support cust
Slide 50: Additional information: ESG update (3) – ESG targets
Additional information: ESG update (3) ESG targets 37% Erste Group through its Social Banking 25% green investments by 2026 in our continues to be the leader in offering financial services to NGOs, start-ups and individuals in difficult situations. women in B/B-1 positions corporate book to be reach
Slide 51: Additional information: ESG update (4)
Additional information: ESG update (4) 2021 Environment NET ZERO JOURNEY GREEN FINANCING Scope 1+2 decrease of emissions (tonnes of CO2e) Green bonds arranged and own pathway towards climate neutrality 2023 emissions Arranged: EUR 4.5 bn 2017 76,677 (sovereigns & fin. institutions) + EUR 2bn corpora
Slide 52: Additional information: ESG update (5) – ESG ratings and indices
Additional information: ESG update (5) ESG ratings and indices 2020 2021 In 2019, Erste Group Bank AG received a rating of ‘AA’ in the MSCI ESG Ratings AA AA assessment. In 2022, Sustainalytics improved by 3.2 points its assessment of Erste Group and LOW RISK LOW RISK confirmed in ‘low risk’ categor
Slide 53: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Unidentified * Erste Foundation direct Unidentified * Identified Trading ** Identified Trading ** 6.38% 5.62% Sparkassen Beteiligungs 6.38% BlackRock Inc. Rest of world 1.46% Gmbh & Co KG 2.69%
Slide 54: Additional information: segment structure
Additional information: segment 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 • H
Slide 55: 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