Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Erste Bank — H1 2007 Earnings Presentation
58 slides from Erste Group Bank's earnings presentation, Jul 31, 2007
Slide 1: Erste Bank – BCR contribution demonstrates future growth potential
> Erste Bank – BCR contribution demonstrates future growth potential > H1 2007 Results > Teleconference Vienna, 31 July 2007 > Andreas Treichl, CEO Péter Kisbenedek, CFO
Slide 2: Disclaimer
> 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 CORRECTN
Slide 3: Presentation topics
> Presentation topics 1. H1 07 highlights 2. Financial statements 3. Divisional information 4. Asset quality 5. Outlook and targets 6. Appendix NB • According to revised IAS 19 (Employee Benefits), actuarial profits and losses can now be charged against equity without affecting net income when calcu
Slide 4: H1 financial highlights
> H1 07 financial highlights » Net profit up 25.1% to EUR 566.0 million Cash earnings per share * » Up 5.9% to EUR 479.3m excluding BCR contribution 2.0 1.89 » Total assets up 8.6% to EUR 197.4bn 1.54 1.82 1.5 1.41 » Tier 1 ratio at 6.4% (YE 06: 6.6%) in EUR 1.00 » Cash EPS improved to EUR 1.89 1.0
Slide 5: H1 divisional highlights
> H1 07 divisional highlights Visible improvement in BCR Operating result per segment * operating performance in EUR million 1-6 07 1-6 06 Change Austria Austria 536.9 480.3 11.8% Savings Banks 200.6 182.5 9.9% » Sustained, solid improvement of R&M contributed strongly to operating performance Retai
Slide 6: H1 operating highlights
> H1 07 operating highlights BCR integration progressing well » 7 of 42 integration and development projects successfully completed » Main emphasis on implementation of new customer service model » Roll-out of branch network reorganisation in July 2007 Greenfield development in Ukraine became operat
Slide 7: H1 cost development – impacted by Group projects
> H1 07 cost development – impacted by Group projects Deceleration of cost increase expected for H2 07 » Start-up costs for Group projects and holding structure implementation result in higher cost growth - Following years of contained increase administrative expenses » Updated outlook for 2007 – co
Slide 8: Update on BCR (cont)
> Update on BCR (cont) BCR H1 2007 (IFRS) local results (post restructuring costs) * in EUR million 1-6 07 1-6 06 Change Net interest income 265.3 236.4 12.2% Risk provisions for loans and advances (29.5) (17.8) 65.8% Net fee and commission income 105.4 77.3 36.3% Net trading result 52.7 36.1 46.1%
Slide 9: Update on BCR
> Update on BCR H1 07 financial highlights * » BCR Group net profit improved strongly – up 21.6% on H1 06 » Including EUR 11.4m of restructuring & transformation costs in operating expenses and EUR 21.2m in risk provisions » NII improved at an accelerated pace - up 12.2% » Overall NIM for BCR improv
Slide 10: Update on BCR – integration milestones
> Update on BCR – integration milestones Integration and development programme – 35 projects in progress » Main emphasis on retail business » New business structure for retail, SME and corporate successfully implemented in July 07 » Opening of dedicated regional mortgage centers starting in Buchares
Slide 11: Update on BCR – Outlook 2007
> Update on BCR – Outlook 2007 Erste Bank confirms full year 2007 Retail loan development at BCR outlook for BCR 12 9.1 8.4 » Operating performance will continue to 7.8 in RON billion 8 7.3 6.5 accelerate in H2 2007 » Tangible benefits from integration projects 4 implemented in H1 2007 1.9 2.0 2.1 2
Slide 12: Update on BCR – economic review
> Update on BCR – economic review Strong GDP growth continues GDP growth in good shape » Supported by strong domestic demand 140 10 8.4 120 7.7 » Industrial output growth +6.4% yoy, construction 115.9 8 100 up by 31.8% yoy (May 07) 5.2 101.2 in EUR bn 80 6 78.1 6.5 % » Gradual improvement of GDP str
Slide 13: Update on EB Ukraine – H1 highlights
> Update on EB Ukraine – H1 highlights Development programme covering 12 specific projects in progress » Renamed “Erste Bank Ukraine” in Q2 07 » Strong operating growth achieved since beginning 2007 » 35 branches opened so far » Expected to reach 75 – 80 outlets by year-end » Branch network to be ex
Slide 14: Presentation topics
> Presentation topics 1. H1 07 highlights 2. Financial statements 3. Divisional information 4. Asset quality 5. Outlook and targets 6. Appendix H1 2007 Results 31 July 2007 14
Slide 15: Group income statement (IFRS)
> Group income statement (IFRS)* Solid, double-digit growth in operating income Excluding BCR in EUR million 1-6 07 1-6 06 Change 1-6 07 Change Net interest income 1,857.5 1,481.8 25.4% 1,592.2 7.5% Risk provisions for loans and advances (239.3) (218.3) 9.6% (231.0) 5.8% Net fee and commission incom
Slide 16: Group balance sheet (IFRS) – Assets
> Group balance sheet (IFRS)* Assets – satisfactory growth from customer lending in EUR million Jun 07 Dec 06 Change Cash and balances with central banks 6,753 7,378 (8.5%) Loans and advances to credit institutions 21,405 16,616 28.8% Loans and advances to customers 104,389 97,107 7.5% Risk provisio
Slide 17: Group balance sheet (IFRS) – Liabilities
> Group balance sheet (IFRS)* Liabilities – rapid deposit growth continues in EUR million Jun 07 Dec 06 Change Amounts owed to credit institutions 40,989 37,688 8.8% Amounts owed to customers 93,235 90,849 2.6% Debt securities in issue 29,128 21,814 33.5% Trading liabilities 1,704 1,200 42.0% Underw
Slide 18: Presentation topics
> Presentation topics 1. H1 07 highlights 2. Financial statements 3. Divisional information 4. Asset quality 5. Outlook and targets 6. Appendix H1 2007 Results 31 July 2007 18
Slide 19: Divisional figures – core segments
> Divisional figures – core segments* Balanced growth throughout the home market Austria CEE Int'l Business Corp. Center Total in EUR million 1-6 07 1-6 06 1-6 07 1-6 06 1-6 07 1-6 06 1-6 07 1-6 06 1-6 07 1-6 06 Net interest income 807.2 766.5 989.5 627.9 73.6 70.7 (12.8) 16.8 1,857.5 1,481.8 Risk p
Slide 20: Core segment – Austria
> Core segment – Austria* Austria – strong performance of Retail & Mortgage segment Savings Banks Retail & Mortgage Large Corporates Treasury & IB Austria in EUR million 1-6 07 1-6 06 1-6 07 1-6 06 1-6 07 1-6 06 1-6 07 1-6 06 1-6 07 1-6 06 Net interest income 420.0 399.5 272.6 265.8 83.0 75.0 31.6 2
Slide 21: Savings Banks
> Savings Banks H1 07 highlights » Operating result increased by 9.9% yoy Savings Banks 1-6 07 1-6 06 Change » Despite a 3.9% decline qoq Operating income 623.5 598.3 4.2% » NII improved + 5.1% yoy Operating expenses (422.9) (415.8) 1.7% » Supported by stronger volumes mainly at Styrian savings bank
Slide 22: Retail and Mortgage
> Retail and Mortgage H1 07 highlights » Retail Austria – net profit improved by 24.2% yoy Retail & Mortgage 1-6 07 1-6 06 Change » Continued growth of commission income against flat costs » ROE positively impacted by Basel II: lower RWAs result in Operating income 476.5 456.5 4.4% lower allocated e
Slide 23: Retail and Mortgage – details
> Retail and Mortgage – details R & M Austria – All sub-segments contribute to excellent overall performance Operating profit (EUR m) Net profit (EUR m) 56.5 52.9 1-6 06 1-6 07 1-6 06 1-6 07 34.6 32.2 26.3 28.3 23.3 24.5 21.3 17.9 17.7 13.1 14.9 11.8 12.9 13.8 12.6 8.3 6.0 2.0 Branches SME Own SBs M
Slide 24: Large Corporates
> Large Corporates H1 07 highlights » Net profit improved by 12.0% yoy Large Corporates 1-6 07 1-6 06 Change » Substantial improvement qoq – up 60.1% Operating income 129.5 121.9 6.3% » Driven by declining risk provisions and improved other result Operating expenses (51.5) (47.4) 8.8% » Operating re
Slide 25: Treasury & Investment Banking
> Treasury & Investment Banking H1 07 highlights » Net profit contribution improved by 17.7% yoy Treasury & IB 1-6 07 1-6 06 Change » As expected below exceptionally strong Q1 07 (-53.5%) » Operating performance continued to improve (+21.1%) Operating income 158.0 135.8 16.3% » NII improved by 20.5%
Slide 26: Core segment – Central and Eastern Europe (1)
> Core segment – Central and Eastern Europe (1)* Operating performance supported by strong growth in Slovakia Czech Republic Romania Slovakia Hungary in EUR million 1-6 07 1-6 06 1-6 07 1-6 06 1-6 07 1-6 06 1-6 07 1-6 06 Net interest income 387.0 344.8 256.1 0.0 145.5 107.9 116.1 117.4 Risk provisio
Slide 27: Core segment – Central and Eastern Europe (2)
> Core segment – Central and Eastern Europe (2) Improved underlying performance in Croatia Croatia Serbia Ukraine CEE in EUR million 1-6 07 1-6 06 1-6 07 1-6 06 1-6 07 1-6 06 1-6 07 1-6 06 Net interest income 74.2 54.7 7.0 3.1 3.6 0.0 989.5 627.9 Risk provisions (5.9) (7.3) (0.3) (1.1) (2.5) 0.0 (88
Slide 28: Czech Republic
> Czech Republic H1 07 highlights » Net profit contribution up 8.4% yoy (6.8%)* » Operating result improved by 8.8% (7.5%) Czech Republic 1-6 07 1-6 06 Change » NII improved strongly up 12.1% yoy (10.9%) Operating income 586.8 537.6 9.1% » Based on continued strong growth of customer loans (retail O
Slide 29: Romania
> Romania H1 07 highlights » BCR consolidated since 12 October 2006 Romania 1-6 07 1-6 06 Change » NII improves by 14.5% qoq to EUR 256.1m » Loans to customers up 7.3% qoq (14.35% ytd) Operating income 426.8 0.0 na » Repricing of retail deposits supported by declining BUBOR Operating expenses (235.5
Slide 30: Slovakia
> Slovakia H1 07 highlights » Net profit contribution improved strongly by Slovakia 1-6 07 1-6 06 Change 30.2% (17.9%)* » Supported by continued strong growth in NII Operating income 200.9 155.2 29.4% » NII increased substantially by 34.9% (22.1%) Operating expenses (111.5) (89.1) 25.2% » Driven by
Slide 31: Erste Bank Hungary
> Erste Bank Hungary H1 07 highlights » Net profit contribution down by 9.5% (-13.4%)* Hungary 1-6 07 1-6 06 Change » Impact of one-off items in Q1 07 continues to affect results » Guidance of +15% net profit on local results confirmed (adjusted Operating income 195.8 166.8 17.4% for accrual correct
Slide 32: Erste Bank Croatia
> Erste Bank Croatia H1 07 highlights » Net profit contribution nearly doubled (up 92.8%)* Croatia 1-6 07 1-6 06 Change » First time consolidation of Diners Club Adriatic, Croatia Operating income 105.6 75.1 40.6% (DCA) affected key operating line items Operating expenses (53.8) (41.5) 29.6% » NII i
Slide 33: Erste Bank Serbia
> Erste Bank Serbia H1 07 highlights » Net profit contribution improved by EUR 7.8m or Serbia 1-6 07 1-6 06 Change 77.9% (79.7%) » Contribution slightly negative Operating income 9.9 5.4 81.2% » Comparison to 2006 continued to be affected by Operating expenses (13.5) (14.2) (5.3%) restructuring proc
Slide 34: Core segments – Int'l Business and Corp. Center
> Core segments – Int’l Business and Corp. Center Int’l Business – H1 07 highlights Corporate Center – H1 07 highlights » Operating result continued to improve » NII declined yoy mainly due to positive (+4.3%) yoy contribution from capital increase in H1 06 » Net profit slightly declined by 0.3% » M
Slide 35: Presentation topics
> Presentation topics 1. Q1 07 highlights 2. Financial statements 3. Divisional information 4. Asset quality 5. Outlook and targets 6. Appendix H1 2007 Results 31 July 2007 35
Slide 36: Group asset quality
> Group asset quality1 NPL coverage continues to improve substantially Low risk Mgmt attention Substandard Non-performing Total exposure Risk provisions NPL coverage Jun 07 Dec 06 Jun 07 Dec 06 Jun 07 Dec 06 Jun 07 Dec 06 Jun 07 Dec 06 Jun 07 Dec 06 Jun 07 Dec 06 Austria 82,688 81,200 10,808 10,119
Slide 37: Presentation topics
> Presentation topics 1. H1 07 highlights 2. Financial statements 3. Divisional information 4. Asset quality 5. Outlook and targets 6. Appendix H1 2007 Results 31 July 2007 37
Slide 38: Erste Bank outlook and targets
> Erste Bank outlook and targets Outlook 2007 confirmed Group net profit expected to increase by at least 25% » Over full-year 2006 results of EUR 932m Mid-term group targets confirmed Net profit(1) growth More than 20% p.a. average until 2009 Cost/income ratio Below 55% in 2009 Return on equity(2)
Slide 39: Presentation topics
> Presentation topics 1. H1 07 highlights 2. Financial statements 3. Divisional information 4. Asset quality 5. Outlook and targets 6. Appendix H1 2007 Results 31 July 2007 39
Slide 40: Overview of international exposures
> Overview of international exposures Credit risk by regions* Low risk Mgmt attention Substandard Non-performing Total exposure in EUR million Jun 07 Dec 06 Jun 07 Dec 06 Jun 07 Dec 06 Jun 07 Dec 06 Jun 07 Dec 06 Share of total Share of total Core market 109,314 104,644 17,351 15,954 3,451 2,791 3,9
Slide 41: Overview of international exposures (cont)
> Overview of international exposures (cont) Credit risk by industry sectors* Low risk Mgmt attention Substandard Non-performing Total exposure in EUR million Jun 07 Dec 06 Jun 07 Dec 06 Jun 07 Dec 06 Jun 07 Dec 06 Jun 07 Dec 06 Share of total Share of total Banking and insurance 54,567 51,423 1,753
Slide 42: Summary financials of CEE subsidiaries
> Summary financials of CEE subsidiaries Results (IFRS) as reported by local entities* 97.99% 69.17% 100.00% 99.94% in EUR million 1-6 07 1-6 06 Change 1-6 07 1-6 06 Change 1-6 07 1-6 06 Change 1-6 07 1-6 06 Change Net profit after minorities 185.6 173.1 7.3% 139.7 115.1 21.4% 66.2 52.0 27.3% 38.9 4
Slide 43: Financials (IFRS) of CEE subsidiaries
> Financials (IFRS) of CEE subsidiaries Leská spoNitelna * in EUR million 1-6 07 1-6 06 Change Net interest income 410.4 368.8 11.3% Risk provisions for loans and advances (32.6) (22.4) 45.8% Net fee and commission income 169.2 163.7 3.3% Net trading result 24.9 26.8 (7.3%) General administrative ex
Slide 44: Financials (IFRS) of CEE subsidiaries (cont)
> Financials (IFRS) of CEE subsidiaries (cont) Banca ComercialT RomânT (post restructuring costs) * in EUR million 1-6 07 1-6 06 Change Net interest income 265.3 236.4 12.2% Risk provisions for loans and advances (29.5) (17.8) 65.8% Net fee and commission income 105.4 77.3 36.3% Net trading result 5
Slide 45: Financials (IFRS) of CEE subsidiaries (cont)
> Financials (IFRS) of CEE subsidiaries (cont) Slovenská sporitePQa * in EUR million 1-6 07 1-6 06 Change Net interest income 149.7 118.9 25.9% Risk provisions for loans and advances (16.3) (8.3) 95.5% Net fee and commission income 46.0 44.6 3.1% Net trading result 9.5 7.6 23.7% General administrati
Slide 46: Financials (IFRS) of CEE subsidiaries (cont)
> Financials (IFRS) of CEE subsidiaries (cont) Erste Bank Hungary * in EUR million 1-6 07 1-6 06 Change Net interest income 120.1 124.6 (3.6%) Risk provisions for loans and advances (22.1) (14.8) 49.7% Net fee and commission income 59.4 33.4 78.0% Net trading result 20.3 18.3 11.1% General administr
Slide 47: Financials (IFRS) of CEE subsidiaries (cont)
> Financials (IFRS) of CEE subsidiaries (cont) Erste Bank Croatia * in EUR million 1-6 07 1-6 06 Change Net interest income 75.7 57.2 32.3% Risk provisions for loans and advances (6.1) (7.3) (16.2%) Net fee and commission income 22.0 13.0 69.3% Net trading result 2.7 7.3 (62.1%) General administrati
Slide 48: Financials (IFRS) of CEE subsidiaries (cont)
> Financials (IFRS) of CEE subsidiaries (cont) Erste Bank Serbia * in EUR million 1-6 07 1-6 06 Change Net interest income 7.8 3.4 >100.0% Risk provisions for loans and advances (0.3) (1.2) (71.7%) Net fee and commission income 2.2 2.6 (15.0%) Net trading result 0.7 (0.0) na General administrative e
Slide 49: Financials (IFRS) of CEE subsidiaries (cont)
> Financials (IFRS) of CEE subsidiaries (cont) Erste Bank Ukraine * in EUR million 1-6 07 1-6 06 Change Net interest income 6.5 2.4 >100.0% Risk provisions for loans and advances (2.5) (0.3) >100.0% Net fee and commission income 0.2 0.0 >100.0% Net trading result 2.2 0.0 >100.0% General administrati
Slide 50: EB Group – quarterly income statement (IFRS)
> EB Group – quarterly income statement (IFRS) in EUR million Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Net interest income 694.0 730.7 724.0 757.8 779.7 927.8 903.7 953.8 Net fee and commission income 304.9 334.9 342.2 355.5 338.8 409.4 438.9 446.0 Net trading result 66.4 70.1 91.2 45.0 51.6
Slide 51: EB Group – quarterly balance sheet (IFRS)
> EB Group – quarterly balance sheet (IFRS) in EUR million Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Cash and balances with central banks 2,906 2,728 2,787 2,658 2,355 7,378 6,861 6,753 Loans and advances to credit institutions 20,058 16,858 18,604 19,890 18,307 16,616 20,877 21,405 Lo
Slide 52: EB Group quarterly segment reporting – overview
> EB Group quarterly segment reporting – overview in EUR million Austria Central and Eastern Europe Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Net interest income 383.7 411.2 415.2 398.9 408.2 323.7 319.7 496.8 473.5 516.0 Risk provisions (78.5) (93.3) (60.6) (80.0) (66.1) (28.1) (2
Slide 53: EB Group quarterly segment reporting – Austria
> EB Group quarterly segment reporting – Austria in EUR million Savings Banks Retail & Mortgage Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Net interest income 198.4 222.5 217.6 206.5 213.5 132.0 133.6 137.9 136.6 136.0 Risk provisions (43.1) (46.1) (38.0) (43.1) (39.5) (24.4) (24.7)
Slide 54: EB Group – quarterly segment reporting – CEE 1
> EB Group – quarterly segment reporting – CEE 1 in EUR million Czech Republic Romania Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Net interest income 176.7 170.9 189.9 191.8 195.2 0.0 0.0 127.8 119.4 136.7 Risk provisions (11.3) (10.4) (20.0) (14.3) (18.3) 0.0 0.0 (8.2) (5.4) (2.8)
Slide 55: EB Group – quarterly segment reporting – CEE 2
> EB Group – quarterly segment reporting – CEE 2 in EUR million Croatia Serbia Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Net interest income 26.8 25.7 30.7 33.9 40.3 1.8 2.4 3.7 3.6 3.4 Risk provisions (4.7) (3.0) (2.0) (2.4) (3.5) 0.3 (0.5) (1.7) (0.6) 0.3 Net fee and commission i
Slide 56: Group capital adequacy
> Group capital adequacy* Tier 1 and solvency ratios remain within the target ranges in EUR million 1998 1999 2000 2001 2002 2003 2004 2005 2006 Jun 07 Tier 1 Capital pursuant to § Austrian Banking Act 1,611 1,753 2,125 2,337 3,800 3,912 4,377 5,112 6,185 5,901 Total own funds pursuant to 1 § Austri
Slide 57: Current shareholder structure
> Current shareholder structure Total number of shares: 316,268,125 (July 2007) By investor By region Austria Verein Others Capital Research 4.9% 2.5% DIE ERSTE Continental Europe and Mgmt. österreichische 14.4% 5.0% Spar-Casse Privatstiftung 30.6% UK & Ireland 14.0% Austria 53.1% Institutional inve
Slide 58: Investor relations contacts
> Investor relations contacts Erste Bank, Graben 21, 1010 Vienna Fax +43 (0)5 0100-13112 E-mail: investor.relations@erstebank.at Internet: www.erstebank.com Reuters: ERST.VI Bloomberg: EBS AV Datastream: O:ERS ISIN: AT0000652011 Investor relations Gabriele Werzer Tel: +43 (0)5 0100-11286 E-Mail: gab