Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q3 2018 Earnings Presentation
46 slides from Erste Group Bank's earnings presentation, Nov 2, 2018
Slide 1: Erste Group investor presentation Q3 18 results
Erste Group investor presentation Q3 18 results 2 November 2018 Volume growth and interest rate hikes drive operating performance Andreas Treichl, CEO Erste Group Gernot Mittendorfer, CFO Erste Group Willibald Cernko, 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 • 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) +24.4% 1,228 11 13 1 +3.6% 174 0 89 -25 454 159 41 988 438 3 -14 10 Q2 18 Operating Operating Risk costs Other Taxes on Minorities Q3 18 1-9 17 Operating Operating Risk
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 2.39% 2.29% +3.7% 2.32% 2.27% -0.02% -0.02% 1,923 1,994 59.6% 71 3,372 58.8% 3,229 1,131 1,158 707 696 -19 -102 -29 1-9 17 1-9 18 Q2 18 Q3 18 1-9 17
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) +6.4% +6.4% 234,827 234,827 41 438 107 3,155 132 8,779 8,858 220,659 10,846 6,559 1,581 220,659 2,737 558 31/12/17 Cash Trading, Loans to Net loans Intangibl
Slide 7: Executive summary – Key balance sheet data
Executive summary – 31/12/17 Key balance sheet data 30/09/18 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn +6.3% 92.4% 92.8% 70.7% 68.8% 63.2% 63.2% 139.5 148.3 89.2 95.5 4.0% 3.5% 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 – Strong economic outlook for 2018 and 2019
2018 Business environment – 2019 Strong economic outlook for 2018 and 2019 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (ave, in %) 4.7 4.7 4.3 4.3 3.9 4.2 3.8 3.7 3.8 3.7 3.6 3.5 3.4 3.5 3.2 3.2 3.3 3.3 3.3 3.0 3.0 2.8 2.7 1.7 2.9
Slide 10: Business environment – CZ further increases key policy rate to 175bps in November 2018
Business environment – 3M Interbank 10YR GOV CZ further increases key policy rate to 175bps in November 2018 Austria Czech Republic Romania 1.96% 2.13% 4.76% 4.90% 1.89% 4.71% 0.59% 0.68% 0.72% 3.77% 0.58% 0.82% 3.12% 2.47% 2.46% -0.33% -0.32% -0.33% -0.32% 1.06% 1.39% 0.67% 0.32% 0.92% 1-9 17 1-9 1
Slide 11: Business environment – Emerging market volatility has minor impact on CEE currencies
Business environment – Emerging market volatility has minor impact on CEE currencies EUR/CZK EUR/RON -3.7% +0.5% +1.0% +2.2% -0.2% -0.3% 26.6 25.6 25.6 25.7 25.5 25.8 4.55 4.65 4.65 4.65 4.67 4.65 1-9 17 1-9 18 Q2 18 Q3 18 31/12/17 30/09/18 1-9 17 1-9 18 Q2 18 Q3 18 31/12/17 30/09/18 • Czech Nationa
Slide 12: Business environment – Market shares: mostly stable or increasing shares across the region
30/09/17 Business environment – 30/06/18 Market shares: mostly stable or increasing shares across the region 30/09/18 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 20.0% 20.3% 19.2% 20.7% AT 20.2% AT 21.1% AT 19.7% AT 21.1% 23.1% 20.2% 25.2% 12.7% CZ 23.4% CZ 20.9% CZ 2
Slide 13: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 13
Slide 14: Business performance: performing loan stock & growth
YoY 30/09/17 Business performance: performing loan stock & growth – QoQ 30/06/18 Performing loans continue to grow in Q3 18 30/09/18 136.1 7.8% • Rising performing loan volume trend continued in Q3 18 Group 143.2 146.7 2.4% across all geographies (except HR); yoy loan growth 30.7 exceptionally stron
Slide 15: Business performance: customer deposit stock & growth
YoY 30/09/17 Business performance: customer deposit stock & growth – QoQ 30/06/18 Deposit build-up continues in Q3 18 30/09/18 148.4 7.7% • Continuation of exceptional deposit growth across all Group 156.8 159.8 1.9% geographies despite zero/low interest rate environment as 33.6 retail and corporate
Slide 16: Business performance: NII and NIM
Business performance: NII and NIM – Q3 17 Q2 18 NII advances further qoq and yoy Q3 18 1,086 2.39% • Yoy NII increase mainly driven by CZ due to higher business Group 1,131 2.32% 1,158 2.27% volumes and rising interest rates; also strong contribution 160 1.60% from RO; NIM decline due to changed bal
Slide 17: Business performance: operating income
YoY Q3 17 Business performance: operating income – QoQ Q2 18 Operating income up yoy on strong NII and fees Q3 18 1,644 4.7% • Yoy mainly up on strong rise in NII and improved fee income, Group 1,719 1,722 0.2% lower net trading result partially compensated by 253 improvement in gains/losses from fi
Slide 18: Business performance: operating expenses
YoY Q3 17 Business performance: operating expenses – QoQ Q2 18 Moderate cost development despite wage pressure in CEE Q3 18 1,010 1.6% • Yoy cost increase mainly driven by higher PEREX following Group 1,012 1,026 1.4% wage increases 160 3.1% • Qoq up on office operating expenses; minor increase in A
Slide 19: Business performance: operating result and CIR
YoY Q3 17 Business performance: operating result and CIR – QoQ Q2 18 Operating result up 9.8% yoy, slightly down qoq on lower dividends Q3 18 Operating result YoY & QoQ change Cost/income ratio 634 61.4% Group 707 9.8% -1.6% 58.8% 696 59.6% 93 63.2% AT/EBOe 113 2.0% 58.0% -16.1% 63.4% 95 122 66.5% A
Slide 20: Business performance: risk costs (abs/rel)
Q3 17 Business performance: risk costs (abs/rel*) – Q2 18 Continued net releases of risk provisions Q3 18 -33 -0.09% • Yoy and qoq development characterised by continuation of Group -19 -0.02% -0.02% healthy asset quality, resulting in net releases in most -29 -7 -0.09% geographies AT/EBOe 2 0.08% -
Slide 21: Business performance: non-performing loans and NPL ratio
30/09/17 Business performance: non-performing loans and NPL ratio – 30/06/18 NPL ratio improves further, now standing at 3.5% 30/09/18 6,189 4.3% • NPL volume stable at EUR 5.3bn in Q3 18, despite continued Group 5,321 3.6% 5,337 3.5% loan growth 635 2.0% AT/EBOe 612 1.9% 618 1.9% • NPL sales of EUR
Slide 22: Business performance: allowances for loans and NPL coverage
30/09/17 Business performance: allowances for loans and NPL coverage* – 30/06/18 NPL provision coverage at comfortable 70.7% 30/09/18 4,302 69.5% • NPL provision coverage qoq broadly stable at group level, Group 3,833 72.0% 3,774 70.7% exceptionally strong in CZ, RO, SK and RS 379 59.7% AT/EBOe 385
Slide 23: Business performance: other result
Q3 17 Business performance: other result – Q2 18 Other result improves yoy and qoq Q3 18 -59 • Yoy and qoq other operating result improved on negative Group -72 -31 valuation effects in the Holding in Q2 and positive one-off in -2 AT/OA in Q3 (reversal of provisions in Commercial Real AT/EBOe -10 Es
Slide 24: Business performance: net result
Q3 17 Business performance: net result – Q2 18 Net profit rises qoq and significantly yoy Q3 18 363 • Yoy profitability rises on better operating performance across Group 438 454 all major geographies 70 • Qoq improvement mainly attributable to better other result AT/EBOe 75 76 12 • Year-on-year seg
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
Assets and liabilities: YTD overview – Loan/deposit ratio stable at 92.8% at Sep 18 (Dec 17: 92.4 %) Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 234.8 234.8 220.7 15.2 6.5% 100% 220.7 2.9 1.6% 100% 9.9% 3.4 19.1 7.4% 8.1% 1.2% 21.8 16.3 44.3 18.9% 19.4% 42
Slide 27: Assets and liabilities: customer loans by country of risk
Assets and liabilities: customer loans by country of risk – Net customer loans up 6.3% and NPLs down 7.6% ytd Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +6.3% +6.5% 6.2 -7.6% 148.3 146.7 138.0 139.5 4.5 136.1 137.7 4.5 0.2 5.8 3.5 7.4 3.6 7.2 0.4 3.5 6.8 6.8
Slide 28: Assets and liabilities: financial and trading assets
Assets and liabilities: financial and trading assets * – LCR at excellent 139.4% By geography By debtor type Liquidity buffer +4.1% in EUR bn in EUR bn 39.9 41.0 39.4 100% 27.4% 9.3% 9.2% 9.4% 26.7% 9.3 24.9% 8.3 8.6 7.8% 7.8% 7.9% 55.5 21.9% 0.8 0.8 0.7 3.2 3.7 51.2 3.3 46.1 47.3 5.2 5.0 5.0 5.1 4.
Slide 29: Assets and liabilities: customer deposit funding
Assets and liabilities: customer deposit funding – Customer deposits grow by 1.9% qoq, up 5.9% ytd By customer type By product type Highlights in EUR bn in EUR bn • Continued deposit inflows driven by Retail +5.9% segment with highest demand for overnight deposits amid low interest rate environment
Slide 30: Assets and liabilities: debt vs interbank funding
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 +12.6% +16.7% 28.2 19.2 19.1 Sub debt 25.7 25.1 Overnight deposits 5.9 Senior unsec. bonds 16.3 5.4 6.0 Term depo
Slide 31: Assets and liabilities: LT funding
Assets and liabilities: LT funding – Limited LT funding needs Maturity profile of debt in EUR bn 3.0 3.1 2.7 2.3 2.0 1.5 1.6 1.4 1.4 1.3 0.6 0.6 0.1 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030+ Senior unsec. bonds Covered bonds Capital exc Tier 1 Debt CEE • In January 2018 Erste
Slide 32: Assets and liabilities: capital position
Assets and liabilities: capital position – B3FL CET1 ratio stable at 12.4%, ex Q3 18 interim profit Basel 3 capital (phased-in) Risk-weighted assets (phased-in) Basel 3 capital ratios (phased-in) in EUR bn in EUR bn 18.5% 18.0% 17.6% 17.4% 17.2% 19.9 20.3 20.1 20.3 20.1 114.0 116.3 117.0 110.8 110.0
Slide 33: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 33
Slide 34: Conclusion – Outlook 2018
Conclusion – Outlook 2018 • Real GDP growth of approx. 3-4% expected in 2018 in CEE and Austria Macro outlook • Real GDP growth to be driven by solid domestic demand, as real wage growth and 2018 low unemployment support economic activity in CEE • Solid public finances across CEE • ROTE for 2018 tar
Slide 35: Presentation topics
Presentation topics • Executive summary • Business environment • Business performance • Assets and liabilities • Outlook • Additional information Page 35
Slide 36: Additional information: new segmentation
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 37: Additional information: income statement
Additional information: income statement – Year-to-date and quarterly view Year-to-date view Quarterly view in EUR million 1-9 17 1-9 18 YOY-Δ Q3 17 Q2 18 Q3 18 YOY-Δ QOQ-Δ Net interest income 3,229.3 3,372.0 4.4% 1,086.3 1,131.2 1,158.2 6.6% 2.4% Interest income 4,224.1 3,799.4 -10.1% 1,411.9 1,263
Slide 38: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 22,104 21,796 25,246 16,888 15,237 -31.1% -30.1% -9.8% Financial assets held for trading 6,850 6,349 6,603 6,888 6,034 -11.9% -5.0% -1
Slide 39: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 3,551 3,423 2,940 3,070 2,865 -19.3% -16.3% -6.7% Derivatives 3,206 2,934 2,384 2,529 2,153 -32.9% -26
Slide 40: Additional information: regulatory capital position/requirement (SREP)
Additional information: regulatory capital position/requirement (SREP) – Introduction of CCyBs in CZ & SK push internal CET1-target for 2020 to 13.5% • Combined impact of countercyclical buffers amounts to 45bps in 2019 • Management buffer targeted in 100-150bps range from 2019 Erste Group Consolida
Slide 41: 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) 148.5 152.0 148.5 152.0 152.0 142.3 143.5 146.0 142.3 143.5 146.0 148.5 5.8 5.5 5.
Slide 42: 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: 4.6m Customers: 2.2m in 7 geographically connected Employees: 10,062 Employees: 4,133 countries CZ Br
Slide 43: 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 local cur
Slide 44: Additional information: 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 45: Additional information: shareholder structure
Additional information: shareholder structure – Total number of shares: 429,800,000 By investor By region Unidentified * Erste Foundation 1 Unidentified * Identified Trading ** 8.3% Identified Trading ** 8.3% 11.3% Savings Banks & BlackRock Inc. 2.3% Savings Banks Rest of world 2.3% Foundations 2 Au
Slide 46: 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