Erste Group Bank Ag · VIE:EBS
Erste Group Bank — FY2020 Earnings Presentation
62 slides from Erste Group Bank's earnings presentation, Feb 26, 2021
Slide 1: Erste Group investor presentation FY 2020 preliminary results
Erste Group investor presentation FY 2020 preliminary results 26 February 2021 Erste Group ends FY2020 on a strong note 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 topics • Macroeconomic update • Business update • Operating trends • Asset quality and impairments • Capital trends and dividends • Key takeaways and outlook • Q4 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Ad
Slide 4: Macroeconomic update
Macroeconomic update – CEE economies prove their resilience, end 2020 stronger than expected • Real GDP declined 1%-8% in 2020 in core markets CEE Recovery Index • CZ & SK: manufacturing less impacted by recent policy measures 1.2 (0 = point of lowest activity, based on weekly indicators) • RO & HU:
Slide 5: Business update – Retail – what's happening on the ground? (1)
Business update – Retail – what‘s happening on the ground? (1) • Diverging demand trends throughout 2020 Quarterly new sales volumes (2019 vs 2020, in EUR m) • New housing loans sales up 36.0% in 2020 as customers attach higher importance to owning real-estate Housing loans Consumer loans 2019 2020
Slide 6: Business update – Retail – what's happening on the ground? (2)
Business update – Retail – what‘s happening on the ground? (2) • Changing customer interactions Development of digital sales Number of George users • Branch traffic dropped significantly after first lockdown in (2019 vs 2020, in thd pieces) (2019 vs 2020, in thd) spring 2020, but recovered strongly
Slide 7: Business update – Corporates – what's happening on the ground?
Business update – Corporates – what‘s happening on the ground? • Most corporate clients hold up well Corporate loan stock development • State guarantees for loans were widely used (particularly in (gross, business line view, in EUR bn) Austria); low additional demand • M&A and investment activity st
Slide 8: Operating trends: loan volume
Operating trends: loan volume – Net loans grew 3.6% in 2020, supported by state measures • Net loan growth biased towards real business Composition of net loan growth in 2020 • Impact of state-guaranteed loans: approx. EUR +1.9bn (in EUR bn) • Moratoria effect (reduced redemptions): EUR +1.3bn • Cur
Slide 9: Operating trends: revenues and costs
Operating trends: revenues and costs – Fees post record quarter in Q4 20, NII moves sideways • NII ends 2020 in positive territory, while Q4 20 was NII development down both qoq and yoy • Lower funding costs (TLTRO, deposit tiering) in 2020 +0.6% • Flat performance of retail and SME business in 2020
Slide 10: Credit risk: risk provisions
Credit risk: risk provisions – Significant forward-looking provisioning in 2020, risk costs to decline in 2021 Risk costs in 2020, preview 2021 • Risk costs rise significantly in 2020 as expected (baseline scenario, in bps of average gross customer loans) economic effects of Covid-19 policy response
Slide 11: Credit risk – Asset quality
Credit risk – Asset quality: NPL ratio inches up, initial post-moratoria trends promising NPL ratio and NPL coverage • NPL ratio inches up from 20y-low in % • Gross NPL inflows increased to EUR 2.1bn in 2020 (2019: 91.1 95.5 88.6 EUR 1.5bn), mainly driven by portfolio UTP assessment 77.1 80.9 (EUR 0
Slide 12: Credit risk – Gross credit exposure overview
Credit risk – Gross credit exposure overview Gross credit exposure by NACE code Focus exposures (gross) of which Active Exposure w/ as of Industry / Category Savings Moratoria State Dec 20 Banks ratio Guarantee Transport & comms Tourism Other 3% 2% Metals € 3.6bn € 0.8bn 0.9% € 61m Construction 5% 4
Slide 13: Credit risk – Further details on selected exposures
Credit risk – Further details on selected exposures Snapshot: real estate* Snapshot: consumer loans RRE - Non-profit housing associations Czechia RRE - Other RRE for rent & sale Austria Savings banks 3% 8% RRE - Development projects 19% 19% Austria EBOe Mixed portfolio Slovakia 25% CRE - Office Croa
Slide 14: Capital position – CET1 ratio allows for dividend distributions
Capital position – CET1 ratio of 14.2% (fully loaded) allows for dividend distributions 0.37 0.36 in % 0.51 0.70 0.76 0.12 0.02 14.20 13.72 FL CET1 target: 13.5% Reg. min CET1 10.2% (MDA threshold; P2G excluded) YE’19 ∆ RWA SME ∆ RWA 2020 Eligible Accrual for Minorities OCI CET1 - other YE’20 Suppor
Slide 15: Conclusion – Key takeaways and outlook for 2021
Conclusion – Key takeaways and outlook for 2021 Q4 20 key takeaways 2021 outlook • CEE economies held up better than expected in • Real GDP to rise in mid-single digits in 2021 in Operating 2020, while Austria underperformed Erste Group’s markets contingent on further environment • Loan growth slowe
Slide 16: Presentation topics
Presentation topics • Key topics • Macroeconomic update • Business update • Operating trends • Asset quality and impairments • Capital trends and dividends • Key takeaways and outlook • Q4 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Ad
Slide 17: Executive summary – Group income statement performance
Executive summary – Group income statement performance QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m) -46.7% 1,470 101 63 -57.5% 343 55 89 783 1,256 199 76 230 146 36 332 15 46 Q3 20 Operating Operating Risk costs Other Taxes on Minorities Q4 20 2019 Operating Operating
Slide 18: Executive summary – Key income statement data
Executive summary – Key income statement data Net interest income & margin Operating result & cost/income ratio Cost of risk 2.18% in EUR m in EUR m in EUR m 2.08% -1.3% 1.00% 2.04% 2.05% 2,973 2,935 1,295 4,747 4,775 55.6% 58.7% 0.46% 806 772 1,192 1,186 425 195 39 2019 2020 Q3 20 Q4 20 2019 2020 Q
Slide 19: 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) +12.9% +12.9% 277,394 1,933 277,394 2,555 9 182 5,781 306 403 1,588 17,224 25,145 11,631 245,693 245,693 204 31/12/19 Cash Trading, Loans to Net loans Intang
Slide 20: Executive summary – Key balance sheet data
Executive summary – 31/12/19 Key balance sheet data 31/12/20 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn 92.2% +3.6% 86.9% 88.6% 65.2% 160.3 166.1 77.1% 59.9% 100.4 99.6 2.5% 2.7% Loan/deposit ratio Loans/total assets Net loans Credit RWA NPL coverage
Slide 21: Presentation topics
Presentation topics • Key topics • Macroeconomic update • Business update • Operating trends • Asset quality and impairments • Capital trends and dividends • Key takeaways and outlook • Q4 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Ad
Slide 22: Business environment – Economic rebound expected in 2021
Business environment – 2020 2021 Economic rebound expected in 2021 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (avg, in %) 5.5 5.1 3.9 4.0 4.2 4.5 4.1 4.3 3.0 3.6 3.8 2.7 3.2 3.3 3.4 1.3 1.8 2.7 2.9 0.4 0.2 0.4 2.4 1.9 -0.8 -0.2 -0
Slide 23: Business environment – Policy rate cuts in 2020
Business environment – 3M Interbank 10YR GOV Policy rate cuts in 2020; CZ has rate hike potential in H2 21 Austria Czech Republic Romania 0.05% 1.12% 4.54% 3.88% 0.91% 3.98% 3.31% -0.23% 2.12% -0.29% 1.12% -0.42% 0.34% 0.35% 1.56% 2.97% -0.36% -0.43% 0.86% 1.91% 1.93% 2.24% -0.47% -0.52% 2019 2020 2
Slide 24: Business environment – CEE currencies weakened versus the euro
Business environment – CEE currencies have weakened versus the euro since Covid-19 outbreak EUR/CZK EUR/RON +3.1% +0.6% +3.3% +1.9% +0.5% +1.7% 25.7 26.5 26.5 26.7 25.4 26.3 4.75 4.84 4.84 4.87 4.79 4.87 2019 2020 Q3 20 Q4 20 31/12/19 31/12/20 2019 2020 Q3 20 Q4 20 31/12/19 31/12/20 • CZK reached it
Slide 25: Business environment – Stable market shares across the region
Business environment – 31/12/19 30/09/20 Stable market shares across the region 31/12/20 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 20.8% 22.0% 20.6% 22.0% AT 20.8% AT 22.4% AT 21.6% AT 24.3% 23.8% 21.0% 25.3% 12.2% CZ 23.9% CZ 20.9% CZ 25.4% CZ 12.2% 23.9% 21.2% 25.
Slide 26: Presentation topics
Presentation topics • Key topics • Macroeconomic update • Business update • Operating trends • Asset quality and impairments • Capital trends and dividends • Key takeaways and outlook • Q4 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Ad
Slide 27: Business performance: performing loan stock & growth
Business performance: performing loan stock & growth – YoY 31/12/19 QoQ 30/09/20 Performing loans continued to grow, up 3.9% yoy, 0.7% qoq 31/12/20 159.3 3.9% • Yoy growth higher in Corporates (+4.4%) and Group 164.3 165.5 0.7% Savings Banks (+5.0%) than in Retail (+3.0%), 34.1 2.7% supported by sta
Slide 28: Business performance: customer deposit stock & growth
Business performance: customer deposit stock* & growth – YoY 31/12/19 QoQ 30/09/20 Deposit growth continues apace 31/12/20 173.8 9.9% • 2020 sees best deposit growth since 2007 as retail Group 184.8 3.4% 191.1 and corporate clients park cash in overnight account AT/EBOe 37.3 40.6 12.9% • Strong Q4 d
Slide 29: Business performance: NII and NIM
Business performance: NII and NIM – Q4 19 Q3 20 NII down yoy and qoq, pointing to continued pressure Q4 20 1,229 2.20% • NII down yoy due to decline in CZ resulting from rate Group 1,192 2.04% 1,186 2.05% cuts and CZK depreciation, modification losses in AT AT/EBOe 166 161 1.57% 1.49% • No material
Slide 30: Business performance: operating income
Business performance: operating income – YoY Q4 19 QoQ Q3 20 Q4 20: record fee quarter, resurgence in trading & FV result Q4 20 1,862 0.4% • Revenues slightly up yoy, pushed by resurging net Group 1,814 3.0% 1,869 trading & FV result, record fees, while NII was down AT/EBOe 288 280 -1.9% • Qoq impro
Slide 31: Business performance: operating expenses
Business performance: operating expenses – YoY Q4 19 QoQ Q3 20 Cost down yoy, up qoq on year-end seasonality Q4 20 1,122 -2.2% • Yoy costs down due to lower personnel expenses on Group 1,008 8.8% 1,097 the back of release of bonus accruals AT/EBOe 194 166 -1.0% • Seasonal increase qoq on higher IT a
Slide 32: Business performance: operating result and CIR
Business performance: operating result and CIR – YoY Q4 19 QoQ Q3 20 CIR at solid 58.7% in Q4 20 Q4 20 Operating result YoY & QoQ change Cost/income ratio 739 60.3% Group 806 4.4% -4.2% 55.6% 772 58.7% 94 67.4% AT/EBOe 114 -3.7% 59.4% -20.5% 68.0% 90 109 74.1% AT/SB 157 45.6% 0.8% 62.5% 159 64.5% 82
Slide 33: Business performance: risk costs
Business performance: risk costs (abs/rel*) – Q4 19 Q3 20 Continued forward-looking provisioning in Q4 20 Q4 20 Group 82 195 0.20% 0.46% • 2020 risk costs in line with guidance: 78bps of 425 1.00% average gross customer loans 1 0.02% AT/EBOe 15 0.17% 39 0.44% • Yoy increase due to incorporation of e
Slide 34: Business performance: non-performing loans and NPL ratio
Business performance: non-performing loans and NPL ratio – 31/12/19 30/09/20 NPL ratio deteriorates slightly yoy and qoq 31/12/20 4,142 2.5% • NPLs increased with EUR +550mn (+14%) in Q4 20, resulting Group 3,983 2.4% 4,533 2.7% in still benign NPL ratio of 2.7% 500 1.4% AT/EBOe 426 1.2% 578 1.6% •
Slide 35: Business performance: allowances for loans and NPL coverage
Business performance: allowances for loans and NPL coverage – 31/12/19 30/09/20 NPL coverage up yoy to 88.6%, down qoq 31/12/20 3,174 77.1% • NPL coverage increases yoy due to rising Group 3,789 95.5% 4,002 88.6% allowances, down qoq as Q4 20 saw NPL inflows 290 58.0% with lower coverage levels AT/E
Slide 36: Business performance: other result
Business performance: other result – Q4 19 Q3 20 Other result improved significantly yoy on lack of material one-offs Q4 20 -224 • Other result improves significantly yoy, as Q4 20 is Group -42 -58 not affected by material one-off items AT/EBOe -6 7 • Qoq: minor deterioration primarily due to higher
Slide 37: Business performance: net result
Business performance: net result – Q4 19 Q3 20 Q4 20 net profit impacted by higher provisioning Q4 20 247 • Yoy profitability hit by Covid-19 induced risk cost Group 343 146 development; outweighing improved operating result 65 • Qoq performance driven by higher risk costs, while AT/EBOe 102 48 oper
Slide 38: Presentation topics
Presentation topics • Key topics • Macroeconomic update • Business update • Operating trends • Asset quality and impairments • Capital trends and dividends • Key takeaways and outlook • Q4 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Ad
Slide 39: Assets and liabilities: YTD overview
Assets and liabilities: YTD overview – Loan/deposit ratio at 86.9% (Dec 19: 92.2%) Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 277.4 277.4 100% 2.6 100% 4.4% 5.3% 1.0% 245.7 35.8 12.9% 245.7 24.8 8.9% 0.9% 10.7 18.0% 2.4 13.1 44.3 46.8 16.9% 9.4% 23.1 21.5
Slide 40: Assets and liabilities: customer loans by country of risk
Assets and liabilities: customer loans by country of risk – Net customer loans up by 3.6%, NPLs by 4.5% Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +3.6% +0.4% 164.5 166.1 159.3 164.3 159.9 160.3 5.5 +4.5% 5.7 5.7 5.2 8.5 8.4 5.2 8.5 8.3 8.5 2.1 2.2 8.4 2.2 2.
Slide 41: Assets and liabilities: financial and trading assets
Assets and liabilities: financial and trading assets* – LCR at excellent 182.5% By geography By debtor type Liquidity buffer +5.8% in EUR bn in EUR bn 43.0 43.8 41.4 7.8% 8.0% 100% 11.8% 25.9% 25.3% 10.6 9.7% 9.2% 24.6% 10.6 9.4% 10.0 64.8 64.6 0.8 0.7 0.6 3.4 3.7 55.5 3.6 5.7 5.8 6.0 5.2 6.2 6.0 78
Slide 42: Assets and liabilities: customer deposit funding
Assets and liabilities: customer deposit funding – Customer deposits* up 9.9% in 2020, driven by customer business By customer type By product type Highlights in EUR bn in EUR bn • Continued deposit inflows driven by Retail +9.9% segment with strong contribution from Corporate segment (esp. public s
Slide 43: Assets and liabilities: debt vs interbank funding
Assets and liabilities: debt vs interbank funding – Stable wholesale funding reliance, as customer deposits grow strongly Debt securities issued Interbank deposits in EUR bn in EUR bn +1.0% +88.5% 30.4 29.7 30.7 26.4 Sub debt 24.8 Overnight deposits 2.9 6.0 5.4 Senior non-preferred bonds 2.1 Term de
Slide 44: Assets and liabilities: LT funding
Assets and liabilities: LT funding – Stable LT funding needs in 2021 with focus on senior preferred funding Maturity profile of debt in EUR bn 3.8 3.5 3.0 3.2 2.9 2.4 2.1 1.4 1.2 0.9 0.7 0.1 0.0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033+ Senior unsec. bonds Senior non-preferre
Slide 45: Assets and liabilities: LT funding – Targeting MPE approach
Assets and liabilities: LT funding – Targeting MPE approach Resolution strategy Austrian resolution group • Direct presence in 7 geographically connected countries • Major entities within the Austrian resolution group*: • Erste Group’s setup suggests a multiple point of entry (MPE) • Erste Group Ban
Slide 46: Assets and liabilities: LT funding – MREL issuance volume
Assets and liabilities: LT funding – Expected total MREL-related issuance volume unchanged MREL resolution groups (December 2020) Preliminary 3year* MREL issuance plan (avg. p.a.) in EUR bn in EUR m 174 1,000 – 2,500 78 59 ~450-550 20 21 17 9 ~200-300 ~250-300 ~200-350 ~100-200 9 10 7 10 6 AT CZ SK
Slide 47: Assets and liabilities: MREL for the Austrian resolution group
Assets and liabilities: MREL for the 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 33.50% (MPE) resolution approach • In April 2020, Erste Group Bank AG received its
Slide 48: Assets and liabilities: capital position
Assets and liabilities: capital position – CET1 ratio at a strong 14.2%, phased-in at 14.5% Basel 3 capital Risk-weighted assets Basel 3 capital ratios in EUR bn in EUR bn 19.7% 19.3% 19.1% 18.5% 17.7% 23.6 118.6 120.5 116.1 120.2 115.3 16.5% 22.4 15.9% 22.0 22.0 15.9% 21.3 15.0% 2.8 14.7 3.4 3.3 3.
Slide 49: Presentation topics
Presentation topics • Key topics • Macroeconomic update • Business update • Operating trends • Asset quality and impairments • Capital trends and dividends • Key takeaways and outlook • Q4 20 presentation • Executive summary • Business environment • Business performance • Assets and liabilities • Ad
Slide 50: 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 51: Additional information: income statement
Additional information: income statement – Year-to-date and quarterly view Year-to-date view Quarterly view in EUR million 2019 2020 YOY-Δ Q4 19 Q3 20 Q4 20 YOY-Δ QOQ-Δ Net interest income 4,746.8 4,774.8 0.6% 1,229.5 1,192.4 1,185.6 -3.6% -0.6% Interest income 5,544.0 5,107.9 -7.9% 1,404.6 1,237.7
Slide 52: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Dec 19 Mar 20 Jun 20 Sep 20 Dec 20 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 10,693 23,031 18,433 27,848 35,839 >100.0% >100.0% 28.7% Financial assets held for trading 5,760 7,706 6,984 6,764 6,356 10.4% 10.4% -
Slide 53: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Dec 19 Mar 20 Jun 20 Sep 20 Dec 20 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 2,421 3,322 2,737 2,845 2,625 8.4% 8.4% -7.7% Derivatives 2,005 2,945 2,308 2,253 2,037 1.6% 1.6% -9.6
Slide 54: 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 Phased-in Fully loaded 2018 2019
Slide 55: Capital position – Erste Group applies regulatory quick fixes conservatively
Capital position – Erste Group applies regulatory quick fixes conservatively Applied by Phased-in/ Estimated impact Quick Fix From Comment Erste Group Fully loaded on CET1 ratio* SME Supporting Regulator pulled forward permanent Q2 20 Fully-loaded +51 bps Factor introduction from 2021 to Q2 20 Sover
Slide 56: 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) 167.4 168.3 170.0 167.4 168.3 170.0 168.3 170.0 163.4 164.3 163.4 164.3 167.4 4.1
Slide 57: 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: 2.2m geographically connected countries Employees: 9,820 Employees: 3,770 CZ Bra
Slide 58: 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 59: 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 60: 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 61: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Unidentified * Erste Foundation direct Unidentified * 5.90% Sparkassen Beteiligungs 9.14% Identified Trading ** 9.49% Identified Trading ** Gmbh & Co KG T. Rowe Price Rest of world Group Inc. 2.
Slide 62: 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