Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q2 2024 Earnings Presentation
53 slides from Erste Group Bank's earnings presentation, Aug 2, 2024
Slide 1: Q2 2024 preliminary results presentation
Q2 2024 preliminary results presentation Vienna, 2 August 2024 Upgrading financial outlook for 2024 Peter Bosek, CEO Erste Group Stefan Dörfler, CFO Erste Group Alexandra Habeler-Drabek, CRO Erste Group
Slide 2: 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 CORRECTNES
Slide 3: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 3
Slide 4: Strategy: continuity & progress
EXECUTIVE SUMMARY: PRIORITIES UNDER MY LEADERSHIP Strategy: continuity & progress Strategic continuity… … and strategic progress Full commitment to growth Elevating George to the next level − Organic growth: fully capturing existing and emerging growth − Rolling out digital client advice in a struct
Slide 5: Robust top line drives ytd net profit growth
EXECUTIVE SUMMARY: P&L PERFORMANCE Robust top line drives ytd net profit growth QoQ net profit development YTD net profit development in EUR m in EUR m +9.4% 76 155 360 1,629 25 93 77 +8.0% 1,490 846 783 3 57 18 64 54 17 Q1 24 Operating Operating Risk costs Other Taxes on Minorities Q2 24 1-6 23 Ope
Slide 6: Strong ytd performance triggers 2024 guidance upgrade
EXECUTIVE SUMMARY: P&L DASHBOARD Strong ytd performance triggers 2024 guidance upgrade Net interest margin Cost/income ratio Risk cost ratio in % in % in bps 2.50 2.49 G24: <50% G24: <20 bps 2.45 2.47 2.43 30 18 49.8 6 -2 0 46.2 46.0 46.3 44.7 Q2 23 Q3 23 Q4 23 Q1 24 Q2 24 Q2 23 Q3 23 Q4 23 Q1 2
Slide 7: Pick-up in core business volume growth
EXECUTIVE SUMMARY: BALANCE SHEET PERFORMANCE Pick-up in core business volume growth YTD total asset development YTD equity & total liability development in EUR bn in EUR bn +2.1% 344.1 344.1 0.0 0.0 0.5 3.4 0.7 4.2 337.2 337.2 13.5 0.3 10.5 7.4 5.4 0.5 31/12/23 Cash Trading, Loans to Net loans Intan
Slide 8: Balance sheet metrics rock solid as volume trends improve
EXECUTIVE SUMMARY: BALANCE SHEET DASHBOARD Balance sheet metrics rock solid as volume trends improve Loan/deposit ratio Loan & deposit growth Asset quality in % yoy, in % in % 96.7 96.7 G24: ~5% 85.1 83.7 7.0 80.6 89.3 88.4 87.4 87.9 3.7 3.1 85.0 6.9 2.8 2.7 2.3 2.3 2.4 3.9 2.0 2.0 1.4 -0.4 -1.2 Q2
Slide 9: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 9
Slide 10: Moderate economic recovery projected for 2024
MACROECONOMIC AND BUSINESS UPDATE: ECONOMIC FORECASTS * Moderate economic recovery projected for 2024 Real GDP growth Consumer price inflation Unemployment rate 2024 in % avg, in % avg, in % 2025 5.2 8.9 8.6 3.4 3.5 3.4 3.8 4.0 4.4 5.6 3.0 2.8 3.4 3.7 4.0 4.0 5.7 2.2 2.5 2.6 2.0 3.3 3.0 3.1 5.2 5.1
Slide 11: Retail business: volume growth returns
MACROECONOMIC AND BUSINESS UPDATE: RETAIL BUSINESS Retail business: volume growth returns Slightly growing loan book Housing and consumer loans − Housing loan volumes started to rebound across the group, first rate cuts support new sales; sustainable growth trend likely to be triggered by lower inte
Slide 12: Corporate loan demand edges up
MACROECONOMIC AND BUSINESS UPDATE: CORPORATES & MARKETS BUSINESS Corporate loan demand edges up Loans resumed moderate growth; pipeline builds up Net loan stock of Corporate segment − SME lending at par with repayments due to muted demand, stronger new loans in large corporate and real estate busine
Slide 13: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 13
Slide 14: Pick-up in loan demand, particularly in CEE
OPERATING TRENDS: NET LOAN STOCK AND GROWTH Pick-up in loan demand, particularly in CEE Net loan stock Growth rates Acceleration of loan demand in Q2 24 − Growth more pronounced in Retail than in Corporate business, up 204.9 1.5% 2.2% vs 1.4% qoq, driven by organic growth in HR and RO, inorganic Gro
Slide 15: Healthy customer deposit volume trends
OPERATING TRENDS: CUSTOMER DEPOSIT STOCK AND GROWTH Healthy customer deposit volume trends Customer deposits Growth rates Erste Group’s favourable deposit mix is a key competitive advantage – overweight retail, sight, EUR deposits 241.1 2.1% Group 235.3 -0.4% 240.2 Key Q2 24 deposit drivers 45.7 3.5
Slide 16: NII outlook upgrade after another strong quarterly performance
OPERATING TRENDS: NET INTEREST INCOME (NII) AND NET INTEREST MARGIN (NIM) NII outlook upgrade after another strong quarterly performance Net interest income Net interest margin NII grows 2.4% yoy, -0.9% qoq − Yoy increase driven by strong CEE performance, more than 1,792 offsetting declines in Austr
Slide 17: 2024 fee guidance upgraded to yoy growth ~10%
OPERATING TRENDS: NET FEE AND COMMISSION INCOME 2024 fee guidance upgraded to yoy growth ~10% Net fee income by segment Net fee income by fee type in EUR m in EUR m +12.5% -0.2% 702 712 711 702 712 711 663 33 6 31 6 33 7 663 17 27 21 16 632 6 632 24 27 34 69 69 73 17 59 29 6 64 Other 25 18 24 67 62
Slide 18: Operating expenses track well inside guidance
OPERATING TRENDS: OPERATING EXPENSES Operating expenses track well inside guidance Operating expenses by segment Operating expenses by type in EUR m in EUR m +2.9% -1.3% 1,345 1,345 1,283 1,265 1,283 1,265 1,230 84 1,230 Residual other admin 1,202 26 61 1,202 162 89 71 20 74 22 107 79 22 69 70 Other
Slide 19: 2024 CIR guidance upgraded to <50%
OPERATING TRENDS: OPERATING RESULT AND COST/INCOME RATIO (CIR) 2024 CIR guidance upgraded to <50% Operating result Cost/income ratio in EUR m in % +2.5% 1,489 1,505 1,468 1,432 73 14 78 14 1,354 72 18 75 18 Other 118 138 75 3 152 133 RS 107 129 111 105 115 HR 136 103 128 159 164 152 HU 234 250 SK 59
Slide 20: 2024 risk cost outlook upgraded to <20 bps
OPERATING TRENDS: CREDIT RISK/RISK COSTS 2024 risk cost outlook upgraded to <20 bps Risk costs by segment * Risk cost ratio * in EUR m in bps 156 78 0 Other G24: <20 bps 95 31 RS HR 30 HU SK 15 18 9 6 RO 2 6 -2 0 CZ AT/OA -8 AT/SB AT/EBOe 2019 2020 2021 2022 2023 Q2 23 Q3 23 Q4 23 Q1 24 Q2 24 Q2 23
Slide 21: NPL and NPL coverage ratios at comfortable levels
OPERATING TRENDS: CREDIT RISK/ASSET QUALITY NPL and NPL coverage ratios at comfortable levels NPL ratio NPL coverage ratio Excellent NPL performance in CEE − Austria also strong, with slowdown in new NPL inflows compared to 2.0 in % 96.7 in % previous quarters Group 2.3 83.7 2.4 80.6 − AT/OA: NPL ra
Slide 22: Other result negatively impacted by one-off
OPERATING TRENDS: OTHER RESULT Other result negatively impacted by one-off Other result by segment Other result by accounting categories in EUR m in EUR m Other 24 RS 0 0 -7 HR -22 -27 -27 -49 HU -7 -49 SK -36 -86 RO -1 -127 CZ -48 -129 -127 AT/OA -129 AT/SB AT/EBOe -279 -279 Q2 23 Q3 23 Q4 23 Q1 24
Slide 23: 2024 ROTE target upgraded to >15%
OPERATING TRENDS: NET RESULT, EARNINGS PER SHARE (EPS) & RETURN ON TANGIBLE EQUITY (ROTE) 2024 ROTE target upgraded to >15% Net result by segment EPS & ROTE in EUR m in EUR -5.6% 896 820 846 Other 20.2% 783 19.1% 688 RS 17.2% 17.2% HR 14.7% HU SK 1.98 1.90 1.87 1.87 RO 1.54 CZ AT/OA AT/SB AT/EBOe Q2
Slide 24: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 24
Slide 25: Issuance activity in H1 2024 drives debt securities
WHOLESALE FUNDING AND CAPITAL: ISSUED DEBT AND INTERBANK FUNDING Issuance activity in H1 2024 drives debt securities Liabilities and equity Debt securities Interbank deposits Comments in EUR bn in EUR bn in EUR bn Retail & SME deposits constitute core LT funding 337.2 344.1 source 28.5 29.0 43.8 47.
Slide 26: Majority of 2024 funding plan already executed
WHOLESALE FUNDING AND CAPITAL: LONG TERM FUNDING Majority of 2024 funding plan already executed Maturity profile of debt 8.7 in EUR bn 7.2 5.6 5.1 4.7 2.8 2.1 1.6 1.3 0.9 1.0 0.3 0.0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036+ Debt CEE Tier 2 Covered bonds Senior non-preferred
Slide 27: RWAs increase on business effects and operational risk ytd
WHOLESALE FUNDING AND CAPITAL: CAPITAL AND RISK-WEIGHTED ASSETS (RWA) RWAs increase on business effects and operational risk ytd Basel 3 capital Risk-weighted assets in EUR bn +3.7% in EUR bn 149.9 153.2 147.7 148.0 146.5 6.5 6.8 5.9 5.6 6.3 14.7 14.6 16.4 16.2 14.8 +6.9% 29.1 28.7 30.1 28.1 27.7 3.
Slide 28: CET 1 ratio remains at strong level
WHOLESALE FUNDING AND CAPITAL: COMMON EQUITY TIER 1 (CET1), TIER 1 AND TOTAL CAPITAL RATIOS CET 1 ratio remains at strong level CET 1 ratio development (final) Basel 3 capital ratios (final) in % in % 19.9 19.6 19.0 19.2 15.66 0.50 18.7 0.27 0.26 15.49 1.09 0.07 0.70 17.3 17.2 16.4 16.7 16.1 15.7 15
Slide 29: Presentation topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 29
Slide 30: Broad-based 2024 guidance upgrade
FINANCIAL OUTLOOK Broad-based 2024 guidance upgrade 2024 old 2024 new Variable Key assumptions/additional comments guidance guidance Real GDP > 2% > 2% Moderately improving economic outlook Loans ~ +5% ~ +5% Loan growth on better economic outlook, declining interest rates, but back-end-loaded NII ~
Slide 31: Presentation topics: Appendix
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX: ERSTE GROUP BASICS, ERSTE GROUP DETAILED FINANCIALS & ERSTE GROUP ESG PROFILE Page 31
Slide 32: Banking leadership in Central and Eastern Europe (1)
APPENDIX: ERSTE GROUP‘S GEOGRAPHIC FOOTPRINT Banking leadership in Central and Eastern Europe (1) Czech Republic Slovakia Customers: 4.6m Customers: 1.9m Hungary Employees: 9,574 Employees: 3,491 Customers: 1.0m Branches: 356 Branches: 167 Employees: 3,333 Retail loan share: 26.7% Retail loan share:
Slide 33: Banking leadership in Central and Eastern Europe (2)
APPENDIX: ERSTE GROUP STRATEGY Banking leadership in Central and Eastern Europe (2) Eastern part of EU Focus on CEE, limited exposure to other Europe Retail Corporate Capital Public Interbank banking banking markets sector business Acting as Financial SME and large Focus on customer Financing Focus
Slide 34: Commanding market shares across the CEE region
APPENDIX: MARKET SHARES Commanding market shares across the CEE region Gross retail loans Retail deposits Gross corporate loans Corporate deposits 21.4% 24.2% 23.8% 24.2% AT 21.4% AT 24.1% AT 24.4% AT 22.2% 26.3% 25.4% 22.7% 16.9% CZ 26.7% CZ 24.4% CZ 22.3% CZ 13.8% 26.7% 24.3% 22.3% 14.9% 24.6% 27.
Slide 35: Strong track record of profitability
APPENDIX: ERSTE GROUP FINANCIALS/PROFIT AND LOSS ACCOUNT Strong track record of profitability Year-to-date view Quarterly view in EUR million 1-6 23 1-6 24 YOY-Δ Q2 23 Q1 24 Q2 24 YOY-Δ QOQ-Δ Net interest income 3,561.1 3,687.5 3.5% 1,792.2 1,852.4 1,835.0 2.4% -0.9% Interest income 7,153.3 7,850.7
Slide 36: Strong balance sheet dominated by customer loans
APPENDIX: ERSTE GROUP FINANCIALS/BALANCE SHEET/ASSETS Strong balance sheet dominated by customer loans Quarterly data Change in EUR million Jun 23 Sep 23 Dec 23 Mar 24 Jun 24 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 32,810 31,922 36,685 29,425 26,231 -20.1% -28.5% -10.9% Financial assets held for tr
Slide 37: Liabilities dominated by retail deposits
APPENDIX: ERSTE GROUP FINANCIALS/BALANCE SHEET/ EQUITY AND LIABILITIES Liabilities dominated by retail deposits Quarterly data Change in EUR million Jun 23 Sep 23 Dec 23 Mar 24 Jun 24 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 2,788 2,428 2,304 1,805 2,003 -28.1% -13.0% 11.0% Derivativ
Slide 38: Capital requirements for 2024 slightly up on higher buffers
APPENDIX: REGULATORY CAPITAL POSITION/REQUIREMENT (SREP – SUPERVISORY REVIEW AND EVALUATION PROCESS) Capital requirements for 2024 slightly up on higher buffers Erste Group Consolidated Erste Group Unconsolidated Fully loaded Fully loaded 2022 2023 Q2 2024 YE 2024 2022 2023 Q2 2024 YE 2024 Pillar 1
Slide 39: MREL compliance at point of entry level (bail-in)
APPENDIX: MULTIPLE POINT OF ENTRY (MPE) RESOLUTION STRATEGY MREL compliance at point of entry level (bail-in) 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 spořitelna sporiteľňa Hungary Croatia
Slide 40: Austrian resolution group: MREL requirement based on RWA fulfilled
APPENDIX: DETAILS ON AUSTRIAN RESOLUTION GROUP Austrian resolution group: MREL requirement based on RWA fulfilled MREL capacity based on TREA (RWA)* Key take-aways Erste Group adopted multiple point of entry (MPE) in % 39.37% resolution approach − In Q2 24, Erste Group Bank AG received its MREL requ
Slide 41: MREL issuance progresses to plan
APPENDIX: MULTIPLE POINT OF ENTRY (MPE) RESOLUTION STRATEGY MREL issuance progresses to plan MPE resolution groups MREL issuance plan (by year-end 2024) 201 ~ 750–1,500 in EUR bn, in EUR m 93 as of Jun 2024 ~1,000-1,250 82 29 26 22 ~350-500 14 13 ~ 250-350 ~250-350 11 11 ~150-250 7 7 AT CZ SK RO HR
Slide 42: Erste Group benefits from a highly diversified loan book
APPENDIX: GROSS CUSTOMER LOANS BY RISK CATEGORY, CURRENCY AND INDUSTRY Erste Group benefits from a highly diversified loan book Gross customer loans by industry By currency By business segment 215.4 in EUR bn 211.9 3.8 0.1 1% 2% 3.7 0.1 1% 1% Other Other 2.6 2.8 22% 1% 22% 1% 28% 28% 5.7 4.3 CHF Sav
Slide 43: Real estate snapshot
APPENDIX: CREDIT RISK/EXPOSURE HIGHLIGHT: REAL ESTATE (RE) Real estate snapshot Sound lending standards − Income producing projects (>80%) − Ring-fenced, A-class buildings in prime locations with risk-mitigating structures − Highly collateralised business with conservative valuation approach (applic
Slide 44: Financial asset portfolio creates strong net interest income tailwinds
APPENDIX. FINANCIAL ASSET DRILL-DOWN Financial asset portfolio creates strong net interest income tailwinds Financial assets – geographic view Financial assets – accounting view AC by issuer and currency in EUR bn +3.1% 56.8 54.8 56.5 3% 3% 5% 11.7 11.9 12.5 6% 1.3 15% 16% 2.1 2.7 1% 1.7 7% 4.1 1.2
Slide 45: Erste Group's embedded ESG strategy as a key to success
APPENDIX: ESG PROFILE (1)/ESG STRATEGY OF ERSTE GROUP Erste Group’s embedded ESG strategy as a key to success GREEN TRANSITION SOCIAL INCLUSION • We aim to achieve a net zero status for our • We promote financial inclusion through our portfolio by 2050. social banking activities, thereby • We streng
Slide 46: Erste Group's ESG targets
APPENDIX: ESG PROFILE (2) Erste Group’s ESG targets Leading the Green Transition Promoting Social Inclusion Sustainable 25% of sustainable corporate financing in 2026 Social EUR 1bn Social Banking financing by 2030 Finance 15% of sustainable retail mortgages in 2027 Banking 200,000 jobs created or p
Slide 47: Environment
APPENDIX: ESG PROFILE (3)/ENVIRONMENT Environment Net zero operations Sustainable finance Operational emissions (in tonnes CO2e): New corporate financing of → pathway towards net zero 2030 environmental objectives Committed amount (total), Jun 2024 in EUR m 54,596 Construction and real estate 1,164
Slide 48: Net-zero target setting to meet 1.5 degree climate scenarios
APPENDIX: ESG PROFILE (4)/ENVIRONMENT – NET-ZERO TARGET SETTING Net-zero target setting to meet 1.5 degree climate scenarios1 Portfolio decarbonization interim targets 2030 Volume Baseline Targets as of Jun 24 Scenario/ Emissions Sector Metric Methodology pathway scope Year Value 2030 reduction in E
Slide 49: Erste Group has strong ESG ratings
APPENDIX: ESG PROFILE (5)/ESG RATINGS AND INDICES Erste Group has strong ESG ratings 2023 2024 Erste Group maintains rating of AA in the MSCI ESG Ratings assessment. AA AA (5.5) (5.6) Erste Group’s assessment by Sustainalytics in the low risk category was confirmed. Low Risk 16.4 - Erste Group kept
Slide 50: Erste Group benefits from strong and well-diversified shareholder base
APPENDIX. SHAREHOLDER STRUCTURE Erste Group benefits from strong and well-diversified shareholder base By investor By region Erste Foundation direct 4.13% 5.76% 2.33% 0.35% Sparkassen Beteiligungs 0.35% 0.70% GmbH & Co KG 0.70% 12.23% Foundations 17.88% Wiener Städtische Austria 33.90% Versicherungs
Slide 51: Erste Group Bank AG boasts strong issuer ratings
APPENDIX: CREDIT RATINGS Erste Group Bank AG boasts strong issuer ratings Weighted Macro Profile SACP - Stand-Alone Credit Profile VR - Viability Rating Strong a (Individual Rating ) + ▲ a Financial Profile Anchor bbb+ Asset Risk baa1 Business position Strong +1 Capital baa1 SRF - Support Rating Flo
Slide 52: Geographical/operating and business segment view
APPENDIX: SEGMENT REPORTING 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 − Holding
Slide 53: Erste Group IR contact details
APPENDIX: INVESTOR RELATIONS CONTACTS AND SHARE INFO Erste Group IR contact details IR Team Role Phone Email Catherina Frass IR Assistant +4350100 17731 catherina.frass@erstegroup.com Gerald Krames IR Manager +4350100 12751 gerald.krames@erstegroup.com Peter Makray IR Manager +4350100 16878 peter.ma