Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q2 2021 Earnings Presentation
50 slides from Erste Group Bank's earnings presentation, Jul 30, 2021
Slide 1: Erste Group investor presentation Q2 2021 results
Erste Group investor presentation Q2 2021 results 30 July 2021 Operating performance gains momentum, risk environment remains benign Bernd Spalt, 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 developments 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 developments – Setting the frame for today's presentation
Key developments – Setting the frame for today’s presentation • CEE macro recovery is in full swing, expected 2021 real GDP growth upgraded to 3-7% • Opening up of economies as vaccination rates advance • Economic growth in CEE & Austria has outperformed expectations so far this year • First rate hi
Slide 5: Executive summary – Group income statement performance
Executive summary – Group income statement performance QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m) +212.5% +58.5% 39 2 79 563 147 12 59 104 154 918 592 134 355 12 319 294 Q1 21 Operating Operating Risk costs Other Taxes on Minorities Q2 21 1-6 20 Operating Operating R
Slide 6: 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 +24.4% in EUR m in EUR m 2.10% 2.07% 2.13% 1.99% 1,688 675 2,397 2,449 1,357 60.3% 51.0% 0.08% 0.11% 1,172 1,277 962 725 83 47 36 1-6 20 1-6 21 Q1 21 Q2 21 1-6 20 1-6
Slide 7: 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) +9.4% +9.4% 303,435 303,435 17 338 434 961 3,074 6,064 670 15,185 3,999 12,583 9,872 277,394 277,394 213 31/12/20 Cash Trading, Loans to Net loans Intangible
Slide 8: Executive summary – Key balance sheet data
Executive summary – 31/12/20 Key balance sheet data 30/06/21 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn 86.9% 83.4% +3.7% 91.4% 59.9% 56.7% 166.1 172.1 88.6% 101.7 108.4 2.7% 2.5% Loan/deposit ratio Loans/total assets Net loans Credit RWA NPL coverag
Slide 9: Presentation topics
Presentation topics • Key developments 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 9
Slide 10: Macroeconomic update – CEE recovery stronger than expected
Macroeconomic update – CEE recovery stronger than previously expected, first rate hikes in CZ & HU • CEE economies have switched to higher gear • Q1 2021 real GDP growth outperformed expectations in Real GDP expectations for 2021 (in %) CEE & AT forecast as of 30 April • Successful vaccination drive
Slide 11: Macroeconomic update – Significant economic rebound expected in 2021 & 2022
Macroeconomic update – 2021 2022 Significant economic rebound expected in 2021 & 2022 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (avg, in %) 6.9 7.4 6.7 6.3 4.3 5.5 5.6 3.7 4.8 5.0 5.0 3.1 3.2 4.3 4.3 4.2 4.5 4.1 4.3 4.4 4.7 2.8 3
Slide 12: Business update – Retail – what's happening on the ground? (1)
Business update – Retail – what‘s happening on the ground? (1) • Strong demand for housing loans, continues in Q2 2021; re- financing as one of the key drivers in CEE Loan portfolio (in EUR billion) Housing loans Consumer loans • Demand for consumer loans has started to recover, but remains below 20
Slide 13: Business update – Retail – what's happening on the ground? (2)
Business update – Retail – what‘s happening on the ground? (2) • Branch operations back to “normal”, client traffic slightly below pre- Number of George users crisis levels (2020 vs 2021, in thsd) • Clients going digital: +22% • More than 7 million George users across 6 markets • Digital sales conti
Slide 14: Corporates & Markets – what's happening on the ground?
Business update Corporates & Markets – what‘s happening on the ground? • Recovery continues Corporate loan stock development • Loan demand mostly driven by large corporates and real (gross, business line view, in EUR bn) estate clients; SME picking up again • Early repayments of wholesale loans visi
Slide 15: Presentation topics
Presentation topics • Key developments 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 30/06/20 QoQ 31/03/21 Net loan growth accelerates in Q2 21, ytd +3.7% 30/06/21 163.7 5.1% • Yoy growth predominantly driven by Retail (+7.3%) Group 167.8 2.5% 172.1 and Savings Banks (+6.1%), Corporates at +3.3% AT/EBOe 34.8 35.9 4.0% • Qoq growth dyna
Slide 17: Operating trends: customer deposit stock & growth
Operating trends: customer deposit stock & growth – YoY 30/06/20 QoQ 31/03/21 Deposit growth decelerates in Q2 21, loan/deposit ratio at 83.4% 30/06/21 182.7 12.9% • Yoy growth due to exceptional inflows of retail Group 205.4 0.4% 206.3 deposits (+14.4%) and Savings Banks (+10.6%) 39.8 13.2% and sol
Slide 18: Operating trends: NII and NIM
Operating trends: NII and NIM – Q2 20 Q1 21 NII advances, mainly driven by TLTRO III booking Q2 21 1,168 2.04% • NII up yoy and qoq mainly attributable to TLTRO III Group 1,172 1.99% 1,277 2.13% booking in AT and SK 160 1.56% AT/EBOe 149 1.36% 173 1.59% AT/SB 265 262 1.69% 1.60% • Year-on-year segme
Slide 19: Operating trends: operating income
Operating trends: operating income – YoY Q2 20 QoQ Q1 21 Q2 21 delivers 3rd consecutive record fee quarter Q2 21 1,809 8.5% • Revenues up yoy, pushed by exceptional fee Group 1,829 7.3% 1,962 performance and higher NII (TLTRO III booking), 282 9.2% while net trading & FV result declined (Q2 2020 vs
Slide 20: Operating trends: operating expenses
Operating trends: operating expenses – YoY Q2 20 QoQ Q1 21 Costs normalise following regulatory cost seasonality in Q1 21 Q2 21 1,003 -0.4% • Yoy operating expenses slightly down as personnel Group 1,103 -9.4% 1,000 expenses and other administrative expenses 164 -2.8% decline, offsetting higher depr
Slide 21: Operating trends: operating result and CIR
Operating trends: operating result and CIR – YoY Q2 20 QoQ Q1 21 Strong operating performance results in excellent cost/income ratio Q2 21 Operating result YoY & QoQ change Cost/income ratio 805 55.5% Group 725 19.5% 60.3% 962 32.7% 51.0% 118 58.1% AT/EBOe 89 25.8% 68.4% 148 67.8% 51.8% 167 61.1% AT
Slide 22: Operating trends: risk costs
Operating trends: risk costs (abs/rel*) – Q2 20 Q1 21 Benign risk environment leads to significant guidance upgrade Q2 21 Group 36 614 1.48% 0.08% • Risk guidance upgraded to max 30bps due to good 47 0.11% portfolio performance across the Group after 60 0.68% phasing-out of moratoria and revision of
Slide 23: Operating trends: asset quality – NPL ratio and coverage
Operating trends: asset quality – NPL ratio and coverage 30/06/20 31/03/21 NPL ratio declines again as fallout from Covid-19 remains limited 30/06/21 2.4% 91.1% 89.5% • NPL ratio improves to 2.5% and NPL coverage Group 2.6% 2.5% 91.4% increases to 91.4% on stable NPL stock and 1.3% 73.6% 64.3% accel
Slide 24: Operating trends: other result
Operating trends: other result – Q2 20 Q1 21 Other result stable yoy, seasonally improved qoq Q2 21 -43 • Other result stable yoy in the absence of any major Group -125 -45 one-off effects AT/EBOe -16 9 • Qoq development attributable to full-year bookings of -7 resolution funds as well as HU banking
Slide 25: Operating trends: net result
Operating trends: net result – Q2 20 Q1 21 Net profit improves significantly up yoy and qoq Q2 21 58 • Yoy profitability up mainly on lower risk costs, supported Group 355 563 by improved operating income 36 • Qoq performance driven by significantly better operating AT/EBOe 49 performance and season
Slide 26: Presentation topics
Presentation topics • Key developments 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 26
Slide 27: 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 -1.4% +39.9% 30.7 30.2 29.4 Sub debt 34.6 Overnight deposits 5.4 5.0 Senior non-preferred bonds Term deposits
Slide 28: Wholesale funding and capital: LT funding
Wholesale funding and capital: LT funding – Stable LT funding needs in 2021 with focus on senior preferred funding Maturity profile of debt in EUR bn 3.6 3.3 3.3 2.9 2.4 2.1 2.2 1.2 0.9 0.9 0.8 0.6 0.0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033+ Senior unsec. bonds Senior non-p
Slide 29: Wholesale funding and capital: MREL update
Wholesale funding and capital: MREL update – MREL-related issuance progresses as planned MREL resolution groups (June 2021) Preliminary 3year MREL issuance plan (avg. p.a.) in EUR bn in EUR m 188 1,000 – 2,500 83 66 ~450-550 21 23 17 8* ~200-300 ~250-300 ~200-350 ~100-200 8 11 7 12 6 AT CZ SK RO HR
Slide 30: Wholesale funding and capital: CET1 waterfall
Wholesale funding and capital: CET1 waterfall – Strong fully loaded CET1 ratio of 14.15% In % 14.20 -0.82 0.76 -0.29 0.08 -0.02 14.15 0.09 0.15 CET1 Target 13.5% Reg. Min CET1 10.2% (MDA threshold; P2G excluded) YE’20 ∆ RWA Profit Dividend accrual OCI Risk Costs Minorities CET1 other Q2’21 & NPE • S
Slide 31: Wholesale funding and capital: capital & RWA
Wholesale funding and capital: capital & RWA – RWA increase driven by method effect, AT1 decline due to ECB call approval Basel 3 capital Risk-weighted assets Basel 3 capital ratios in EUR bn in EUR bn 19.7% 19.4% 19.3% 19.1% 18.7% 23.6 23.4 23.8 127.1 16.5% 121.0 16.3% 22.4 120.2 15.9% 15.9% 15.9%
Slide 32: Presentation topics
Presentation topics • Key developments 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 32
Slide 33: Conclusion – Key takeaways and outlook for 2021
Conclusion – Key takeaways and outlook for 2021 Q2 21 key takeaways 2021 outlook • Macro recovery on track in CEE, forecasts • Real GDP to rise ~3-7% in 2021 in Erste Group’s Operating upgraded significantly in Q2 21 markets environment • Loan growth accelerated at +3.7% ytd • Loan growth in mid sin
Slide 34: Presentation topics
Presentation topics • Key developments 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 34
Slide 35: 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: 2.1m geographically connected countries Employees: 9,701 Employees: 3,715 CZ Bra
Slide 36: 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 customer
Slide 37: Additional information: market shares
Additional information: market shares – 30/06/20 31/03/21 Commanding market shares across the CEE region 30/06/21 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 20.4% 22.1% 21.2% 23.7% AT 20.7% AT 22.6% AT 22.3% AT 26.0% 23.8% 21.1% 25.4% 12.7% CZ 24.0% CZ 21.6% CZ 26.1%
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 20 1-6 21 YOY-Δ Q2 20 Q1 21 Q2 21 YOY-Δ QOQ-Δ Net interest income 2,396.9 2,448.7 2.2% 1,167.9 1,172.1 1,276.5 9.3% 8.9% Interest income 2,645.2 2,434.1 -8.0% 1,253.5 1,208.
Slide 39: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Jun 20 Sep 20 Dec 20 Mar 21 Jun 21 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 18,433 27,848 35,839 53,954 48,421 >100.0% 35.1% -10.3% Financial assets held for trading 6,984 6,764 6,356 6,464 6,088 -12.8% -4.2% -
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 20 Sep 20 Dec 20 Mar 21 Jun 21 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 2,737 2,845 2,625 2,192 2,412 -11.9% -8.1% 10.0% Derivatives 2,308 2,253 2,037 1,631 1,392 -39.7% -31.
Slide 41: Additional information: regulatory capital position/requirement (SREP)
Additional information: regulatory capital position/requirement (SREP) – Capital requirements (SREP) for 2021; Erste Group target of 13.5% unchanged Erste Group Consolidated Erste Group Unconsolidated ECB Capital Relief Phased-in Fully loaded Measures 1) Fully loaded Fully loaded 2019 2020 Q2 2021 Q
Slide 42: 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 43: 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 31.46% (MPE) resolution approach Interim MREL Target**: 30.84% from 1.1.2022 • In
Slide 44: 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) 171.8 176.1 171.8 176.1 176.1 167.4 168.3 170.0 167.4 168.3 170.0 171.8 4.0 4.0 4.
Slide 45: Additional information: financial and trading assets
Additional information: financial and trading assets* – LCR at excellent 193.2% By geography By debtor type Liquidity buffer +9.7% in EUR bn in EUR bn 80.8 48.6 28.6% 44.3 7.9% 7.4% 100% 78.3 43.8 8.7% 28.0% 11.5 8.4% 9.1% 8.5% 23.0% 10.7 10.6 0.8 0.7 0.7 4.1 55.9 3.6 3.7 5.6 5.6 6.0 6.2 6.2 6.0 83.
Slide 46: 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 C
Slide 47: Additional information: ESG ratings, indices and alignment with UN SDGs
Additional information: ESG ratings, indices and alignment with UN SDGs ESG Indices and Ratings UN Sustainable Development Goals In principle, Erste Group supports all SDGs. Given its regional footprint Erste Group has been included in the Vienna Stock and business model, Erste Group is in fact able
Slide 48: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Erste Foundation direct Unidentified * Unidentified * 5.90% Sparkassen Beteiligungs Identified Trading ** 10.48% Gmbh & Co KG Identified Trading ** 10.48% BlackRock Inc. 1.16% Rest of world 10.6
Slide 49: 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 50: 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