Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q1 2017 Earnings Presentation
47 slides from Erste Group Bank's earnings presentation, May 5, 2017
Slide 1: Erste Group investor presentation Q1 17 results (unaudited)
Erste Group investor presentation Q1 17 results (unaudited) 5 May 2017 Excellent credit risk environment across CEE and lower banking taxes in Austria provide strong foundation for another 10%+ ROTE year Andreas Treichl, CEO Erste Group Gernot Mittendorfer, CFO Erste Group Willibald Cernko, CRO Erst
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 • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 3
Slide 4: Executive summary – Group income statement performance
Executive summary – Group income statement performance QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m) 86 275 9 29 262 50 262 12 10 38 9 313 86 67 114 47 Q4 16 Operating Operating Risk costs Other Taxes on Minorities Q1 17 1-3 16 Operating Operating Risk costs Other Taxes
Slide 5: 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 in EUR m in EUR m 2.51% 2.52% 61.5% 63.0% +16.7% 2.33% 2.33% 1,092 1,107 1,051 66 1,051 56 -3.4% 0.39% 666 0.19% 620 599 599 132 66 1-3 16 1-3 17 Q4 16 Q1 17 1-3 16 1
Slide 6: 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) 222,798 222,798 12 330 65 206 292 2,338 6,694 6,978 1,441 8,304 6,378 208,227 208,227 448 31/12/16 Cash Trading, Loans to Net loans Intangibles Other 31/03/1
Slide 7: Executive summary – Key balance sheet data
Executive summary – 31/12/16 Key balance sheet data 31/03/17 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn +1.8% 94.7% 91.9% 69.1% 67.6% 62.7% 59.7% 130.7 133.0 83.1 83.2 4.9% 4.9% Loan/deposit ratio Loans/total assets Net loans Credit RWA NPL coverage
Slide 8: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 8
Slide 9: Business environment – Continued solid CEE GDP growth expectations for 2017
2017 Business environment – 2018 Continued solid CEE GDP growth expectations for 2017 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (ave, in %) 5.9 3.4 4.3 4.1 3.7 3.4 3.6 2.7 2.7 2.5 3.1 3.2 2.9 3.4 3.1 2.7 2.9 2.8 2.8 2.4 2.4 2.2 2
Slide 10: Business environment – Slight interest rate increases on the long end in Q1 17
Business environment – 3M Interbank 10YR GOV Slight interest rate increases on the long end in Q1 17 Austria Czech Republic Romania 3.42% 3.66% 3.66% 0.57% 0.57% 3.29% 0.57% 0.58% 0.58% 0.41% 0.45% 0.45% -0.19% 0.57% 0.62% -0.33% -0.31% -0.33% 0.29% 0.28% 0.29% 0.28% 0.62% 0.62% 1-3 16 1-3 17 Q4 16
Slide 11: Business environment – Limited currency volatility in CEE
Business environment – Limited currency volatility in CEE EUR/CZK EUR/RON -0.1% 0.0% +0.1% +0.7% +0.3% +0.4% 27.0 27.0 27.0 27.0 27.0 27.0 4.49 4.52 4.51 4.52 4.54 4.55 1-3 16 1-3 17 Q4 16 Q1 17 31/12/16 31/03/17 1-3 16 1-3 17 Q4 16 Q1 17 31/12/16 31/03/17 • Czech National Bank ended its currency pe
Slide 12: Business environment – Market shares: mostly stable or increasing shares across the region
31/03/16 Business environment – 31/12/16 Market shares: mostly stable or increasing shares across the region 31/03/17 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 19.5% 19.1% 18.5% 18.9% AT 19.7% AT 19.9% AT 18.9% AT 19.0% 22.8% 19.2% 25.2% 11.9% CZ 23.0% CZ 19.7% CZ 2
Slide 13: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 13
Slide 14: Performing loan volume increases by 1.7% qoq
YoY 31/03/16 Business performance: performing loan stock & growth – QoQ 31/12/16 Performing loan volume increases by 1.7% qoq 31/03/17 123.8 5.7% • Rising performing loan volume trend continues in Q1 17 Group 128.6 130.8 1.7% across most geographies, supported by increased money 29.4 market business
Slide 15: Deposit growth accelerates to 4.9% qoq, 12.5% yoy
YoY 31/03/16 Business performance: customer deposit stock & growth – QoQ 31/12/16 Deposit growth accelerates to 4.9% qoq, 12.5% yoy 31/03/17 128.6 12.5% • Exceptional deposit growth across all geographies, despite Group 138.0 144.7 4.9% zero interest rate environment as retail and corporate clients
Slide 16: NII decline mainly due to lower income from government bond portfolio
Business performance: NII and NIM – Q1 16 Q4 16 NII decline mainly due to lower income from government bond portfolio Q1 17 1,092 2.51% Group 1,107 2.52% 1,051 2.33% • Yoy decline on lower interest income from government bonds 159 1.80% as well as lower unwinding impact; main segment impact in AT/EB
Slide 17: Operating income slightly lower yoy, down qoq on one-offs in Q4 16
YoY Q1 16 Business performance: operating income – QoQ Q4 16 Operating income slightly lower yoy, down qoq on one-offs in Q4 16 Q1 17 1,629 -0.7% • Yoy development primarily due to lower NII, while other Group 1,732 -6.6% components of operating income improved (most pronounced 1,618 in fee income)
Slide 18: Operating costs declined qoq despite deposit insurance contribution
YoY Q1 16 Business performance: operating expenses – QoQ Q4 16 Operating costs declined qoq despite deposit insurance contribution Q1 17 1,009 0.9% • Yoy cost increase driven by higher IT and personnel costs Group 1,065 -4.4% 1,018 • Qoq improvement driven by lower marketing and personnel 173 1.9% c
Slide 19: Operating result almost unchanged qoq and yoy
YoY Q1 16 Business performance: operating result and CIR – QoQ Q4 16 Operating result almost unchanged qoq and yoy Q1 17 Operating result YoY & QoQ change Cost/income ratio 620 61.9% Group 666 -3.4% 61.5% -10.1% 63.0% 599 73 70.3% AT/EBOe 115 19.3% 61.4% 87 -24.4% 66.9% 87 74.7% AT/SB 102 8.7% 73.1%
Slide 20: Risk costs remain at historically low levels in Q1 17
Q1 16 Business performance: risk costs (abs/rel*) – Q4 16 Risk costs remain at historically low levels in Q1 17 Q1 17 56 0.17% • Yoy risk performance characterised by continuation of Group 132 0.39% 66 0.19% historically low risk costs 9 0.12% • Qoq improvement mainly attributable to higher CEE real
Slide 21: NPL ratio remains unchanged at 4.9% in Q1 17
31/03/16 Business performance: non-performing loans and NPL ratio – 31/12/16 NPL ratio remains unchanged at 4.9% in Q1 17 31/03/17 8,856 6.7% • NPL volume relatively unchanged at EUR 6.7bn in Q1 17 as Group 6,678 4.9% 6,698 4.9% NPL inflows in AT/OA (Holding) and HR offset continuation of 836 2.8% d
Slide 22: NPL provision coverage at comfortable 67.6%
31/03/16 Business performance: allowances for loans and NPL coverage – 31/12/16 NPL provision coverage at comfortable 67.6% 31/03/17 5,891 66.5% • NPL provision coverage at 67.6% due to minor uptick in non- Group 4,613 69.1% 4,526 67.6% performing loans in Q1 17 531 63.5% AT/EBOe 463 59.3% 423 59.5%
Slide 23: Other result improves substantially in Q1 17
Q1 16 Business performance: other result – Q4 16 Other result improves substantially in Q1 17 Q1 17 -137 • Yoy improvement mainly as a result of sale of AfS securities Group -412 in Q1 17 and lower banking levy in Austria; main contributors -99 in Q1 17: banking levy incl. FTT of EUR 35.8m and recov
Slide 24: Q1 17 net result significantly up qoq following one-offs in Q4 16
Q1 16 Business performance: net result – Q4 16 Q1 17 net result significantly up qoq following one-offs in Q4 16 Q1 17 275 • Yoy profitability declined on lower operating result Group 86 262 • Qoq increase attributable to improvements in other result 42 AT/EBOe 29 63 • Year-on-year segment trends: 7
Slide 25: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 25
Slide 26: Assets and liabilities: YTD overview – Loan/deposit ratio down to 91.9%
Assets and liabilities: YTD overview – Loan/deposit ratio down to 91.9% at Mar 17 (Dec 16: 94.7%) Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 222.8 222.8 208.2 100% 208.2 4.3 2.3% 1.9% 100% 24.7 8.8% 11.1% 7.0% 4.8 22.9 10.3% 18.4 14.6 46.1 22.9% 20.7% 47.
Slide 27: Customer loans by country of risk – Net customer loans up 5.0% yoy
Assets and liabilities: customer loans by country of risk – Net customer loans up 5.0% yoy, NPLs down 24.4% Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +5.0% +5.7% -24.4% 130.6 133.0 128.6 130.8 8.9 126.7 3.3 123.8 3.3 0.4 3.3 6.6 3.4 6.3 3.3 6.4 0.8 3.3 6.2 0
Slide 28: Allowances for customer loans – lower interest income from NPLs weighs on NII
Assets and liabilities: allowances for customer loans – As asset quality improves lower interest income from NPLs weighs on NII Quarterly development (EUR m) Highlights • Development of interest income from NPLs: • 2013: EUR 270m • 2014: EUR 202m • 2015: EUR 162m 571 • 2016: EUR 106m 803 • P&L unwin
Slide 29: Financial and trading assets – LCR at excellent 152.6%
Assets and liabilities: financial and trading assets * – LCR at excellent 152.6% By geography By debtor type Liquidity buffer -1.5% in EUR bn in EUR bn 42.7 42.8 42.0 100% 26.7% 26.2% 9.8% 8.9% 9.4% 24.8% 24.9% 9.3 9.9 9.8 7.8% 7.3% 7.3% 1.3 1.0 0.9 54.0 2.0 2.4 51.2 3.0 4.8 4.8 45.4 46.1 5.0 5.6 5.
Slide 30: Customer deposit funding – Customer deposits grow by 4.9% qoq
Assets and liabilities: customer deposit funding – Customer deposits grow by 4.9% qoq, up 12.5% yoy By customer type By product type Highlights in EUR bn in EUR bn • Continued deposit inflows driven by Retail +12.5% segment with highest demand for overnight deposits amid low interest rate environmen
Slide 31: Debt vs interbank funding – Declining wholesale funding reliance
Assets and liabilities: debt vs interbank funding – Declining wholesale funding reliance, as customer deposits grow strongly Debt securities issued Interbank deposits in EUR bn in EUR bn +32.3% -9.8% 30.1 22.9 Sub debt 27.2 27.1 Overnight deposits 6.1 Hybrid issues 5.4 Term deposits 6.1 6.4 Senior u
Slide 32: LT funding – Limited LT funding needs
Assets and liabilities: LT funding – Limited LT funding needs Maturity profile of debt in EUR bn 3.0 2.8 2.7 2.8 2.3 1.9 1.9 1.2 1.3 0.7 0.7 0.6 0.2 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029+ Debt CEE Capital exc Tier 1 Covered bonds Senior unsec. bonds • In January 2017 Erste
Slide 33: Capital position – B3FL CET1 ratio remains solid at 12.5%
Assets and liabilities: capital position – B3FL CET1 ratio remains solid at 12.5%, impacted mainly by RWA inflation Basel 3 capital (phased-in) Risk-weighted assets (phased-in) Basel 3 capital ratios (phased-in) in EUR bn in EUR bn 18.7% 18.5% 18.4% 18.4% 17.6% 18.9 18.5 18.8 19.0 101.0 100.7 101.8
Slide 34: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 34
Slide 35: Conclusion – Outlook 2017
Conclusion – Outlook 2017 • Real GDP growth of between 1.5-4.5% expected in 2017 in CEE and Austria Macro outlook • Real GDP growth to be driven by solid domestic demand, as real wage growth and 2017 declining unemployment support economic activity in CEE • Solid public finances across CEE • ROTE fo
Slide 36: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 36
Slide 37: Additional information: new segmentation – Business line and geographic view
Additional information: new segmentation – Business line and geographic view Erste Group – Business segments ALM & Group Group Savings Intragroup Retail Corporates Local CC Corporate Markets Banks Elimination (ALM&LCC) Center • SME • Other Subsidiaries • Local Large Corporate • Asset/Liability Manag
Slide 38: Additional information: income statement – Year-to-date and quarterly view
Additional information: income statement – Year-to-date and quarterly view Year-to-date view Quarterly view in EUR million 1-3 16 1-3 17 YOY-Δ Q1 16 Q4 16 Q1 17 YOY-Δ QOQ-Δ Net interest income 1,092.2 1,051.3 -3.7% 1,092.2 1,107.0 1,051.3 -3.7% -5.0% Net fee and commission income 443.1 457.7 3.3% 44
Slide 39: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 14,641 12,982 14,743 18,353 24,731 68.9% 34.8% 34.8% Financial assets - held for trading 9,960 10,373 9,731 7,950 7,827 -21.4% -1.5% -
Slide 40: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities - held for trading 6,612 6,146 6,272 4,762 4,314 -34.8% -9.4% -9.4% Derivatives 5,782 5,341 4,933 4,185 3,855 -33.3% -7
Slide 41: Additional information: regulatory capital position
Additional information: regulatory capital position – Capital requirements (SREP) for 2017; Erste target of 12.75%+ unchanged • Almost unchanged capital requirements in 2017, excluding P2G significant decline vs 2016 Erste Group Consolidated Erste Group Unconsolidated Phased-in Fully loaded Phased-i
Slide 42: 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) 132.6 132.5 133.9 135.3 137.5 132.6 132.5 133.9 135.3 137.5 135.3 137.5 6.7 1.7 13
Slide 43: 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 Customers: 4.7m Customers: 2.3m in 7 geographically connected Employees: 10,213 Employees: 4,257 countries CZ Br
Slide 44: Additional information: strategy – A real customer need is the reason for all business
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 local cur
Slide 45: Additional information: Ratings – Composition of Erste Group Bank AG's 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 ba1 Anchor bbb Capital baa2 Business Position Strong +1 Profitability ba1 C
Slide 46: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Unidentified * Erste Foundation 1 Unidentified * 13.7% 11.1% 13.7% Savings Banks 2 Austria 4.7% Rest of world 2.9% 28.3% Other Syndicated 3 3.8% 9.9% Caixa 24.7% 0.8% Continental Europe Employee
Slide 47: 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