Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q4 2022 Earnings Presentation
53 slides from Erste Group Bank's earnings presentation, Feb 28, 2023
Slide 1: Q4 2022 preliminary results presentation
Q4 2022 preliminary results presentation Vienna, 28 February 2023 Erste Group confirms guidance for 2023, targets share buy-back Willi Cernko, 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: Positive operating jaws drive 2022 net profit growth
EXECUTIVE SUMMARY: P&L PERFORMANCE Positive operating jaws drive 2022 net profit growth QoQ net profit development YTD net profit development in EUR m in EUR m +12.5% 268 141 829 130 2,165 31 17 +1.5% 1,923 98 176 43 68 2 518 510 43 Q3 22 Operating Operating Risk costs Other Taxes on Minorities Q4 2
Slide 5: Upgraded 2022 financial guidance fully delivered
EXECUTIVE SUMMARY: P&L DASHBOARD Upgraded 2022 financial guidance fully delivered Net interest margin Cost/income ratio Risk cost ratio in % in % in bps 60.7 2.24 2.25 58.1 G22: <55% G22: <20 bps 37 2.14 2.15 28 2.08 24 51.6 51.9 13 49.8 -18 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Q4 21 Q1 22 Q2 22 Q3 22
Slide 6: Customer business drives balance sheet growth
EXECUTIVE SUMMARY: BALANCE SHEET PERFORMANCE Customer business drives balance sheet growth YTD total asset development YTD equity & total liability development in EUR bn in EUR bn +5.3% 323.9 323.9 0.0 0.4 1.8 3.8 0.3 21.8 307.4 13.4 9.8 2.6 307.4 6.6 0.8 3.1 31/12/21 Cash Trading, Loans to Net loan
Slide 7: A high quality balance sheet gets even stronger in 2022
EXECUTIVE SUMMARY: BALANCE SHEET DASHBOARD A high quality balance sheet gets even stronger in 2022 Loan/deposit ratio Loan & deposit growth Asset quality in % yoy, in % in % 13.0 96.8 12.1 94.6 11.3 90.9 91.9 91.8 10.2 10.4 90.2 12.0 G22: ~2% 85.6 84.9 85.5 9.3 83.3 8.6 8.3 2.4 2.3 2.2 2.0 2.0 G
Slide 8: Presentation Topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 8
Slide 9: Slowing growth in 2023 – but labour markets expected to stay strong
MACROECONOMIC AND BUSINESS UPDATE: ECONOMIC FORECASTS * Slowing growth in 2023 – but labour markets expected to stay strong Real GDP growth Consumer price inflation Unemployment rate 2022 in % avg, in % avg, in % 2023 6.1 18.5 9.4 9.2 4.7 4.8 4.6 15.1 13.7 14.5 12.8 6.8 6.8 12.0 11.1 10.7 11.9 11.8
Slide 10: Retail business is in good shape
MACROECONOMIC AND BUSINESS UPDATE: RETAIL BUSINESS (1) Retail business is in good shape Loan stock continues to grow, as new business volumes decline Housing and consumer loans − Trend of declining demand for housing loans continued in Q4 22, reflecting in EUR bn significant increase in interest rat
Slide 11: George drives retail growth
MACROECONOMIC AND BUSINESS UPDATE: RETAIL BUSINESS (2) George drives retail growth Clients continue to go digital # of George users − Usage of digital channels continues to increase; more than 8.9 million users in m, eop onboarded to George across 6 markets +13.5% − Current accounts and consumer loa
Slide 12: Corporates and Markets businesses continue strong organic growth
MACROECONOMIC AND BUSINESS UPDATE: CORPORATE BUSINESS Corporates and Markets businesses continue strong organic growth Broad-based Corporate volume growth throughout 2022 Net loan stock of Corporate segment − Highest growth in Austria, Czech Republic, Romania and Slovakia +18.0% − Increase especiall
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: Strong net loan growth continues
OPERATING TRENDS: NET LOAN STOCK AND GROWTH Strong net loan growth continues Net loan stock Growth rates 2022 - an exceptional year for loan growth − Extraordinary development in Corporates (+18.0% yoy) 180.3 1.7% Group 198.8 − Retail demand also strong throughout the year, up 7.3%, despite rate 12.
Slide 15: Core customer deposits stable qoq, up yoy
OPERATING TRENDS: CUSTOMER DEPOSIT STOCK AND GROWTH Core customer deposits stable qoq, up yoy Customer deposits Growth rates Erste Group’s favourable deposit mix is a key competitive advantage – overweight retail, sight, EUR deposits 210.5 -3.6% Group 232.5 6.4% 224.0 Key Q4 22 deposit drivers 45.4
Slide 16: Volume growth and rate hikes drive NII up in 2022
OPERATING TRENDS: NET INTEREST INCOME (NII) AND NET INTEREST MARGIN (NIM) Volume growth and rate hikes drive NII up in 2022 Net interest income Net interest margin NII grows almost 20% in 2022 on the back of exceptional volume growth and higher interest rates 1,306 2.08% Group 1,548 2.24% 2.25% 1,56
Slide 17: Fee income reaches new quarterly high
OPERATING TRENDS: NET FEE AND COMMISSION INCOME Fee income reaches new quarterly high Net fee income by segment Net fee income by fee type in EUR m in EUR m +1.5% +1.2% 613 615 615 622 613 615 615 622 600 600 6 6 6 30 25 5 28 6 36 29 67 61 68 55 55 57 81 62 52 59 Other 43 41 50 46 44 50 50 40 46 49
Slide 18: Cost inflation in 2022 limited to 6.2%, 2023 updrift expected at 7-8%
OPERATING TRENDS: OPERATING EXPENSES Cost inflation in 2022 limited to 6.2%, 2023 updrift expected at 7-8% Operating expenses by segment Operating expenses by type in EUR m in EUR m +2.4% +8.9% 1,235 1,235 1,194 1,165 1,194 1,165 59 16 68 1,096 68 1,050 1,096 Residual other admin 61 21 55 24 150 1,0
Slide 19: Cost/income ratio target delivered early, positive operating jaws ahead
OPERATING TRENDS: OPERATING RESULT AND COST/INCOME RATIO (CIR) Cost/income ratio target delivered early, positive operating jaws ahead Operating result Cost/income ratio in EUR m in % +31.5% 1,106 1,060 1,028 50 7 Other 10 51 10 140 61 RS 76 55 93 842 801 92 103 HR 49 4 48 10 135 46 36 123 125 HU 82
Slide 20: Management overlays and FLI updates drive risk costs in 2022
OPERATING TRENDS: CREDIT RISK/RISK COSTS Management overlays and FLI updates drive risk costs in 2022 Risk costs by segment * Risk cost ratio * in EUR m in bps 184 78 141 107 Other RS G23: <35 bps 37 59 HR 28 HU 24 SK 13 15 9 RO 2 CZ -3 AT/OA -18 AT/SB AT/EBOe Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 2018 2019
Slide 21: Stable and resilient portfolio keeps NPL ratio at historic low
OPERATING TRENDS: CREDIT RISK/ASSET QUALITY Stable and resilient portfolio keeps NPL ratio at historic low NPL ratio NPL coverage ratio NPL ratio remains at post-IPO best − No significant increase in hard defaults due to geopolitical crisis 2.4 in % 90.9 in % Group 2.0 96.8 − Slight qoq increase in
Slide 22: Other result impacted by one-time items
OPERATING TRENDS: OTHER RESULT Other result impacted by one-time items Other result by segment Other result by accounting categories in EUR m in EUR m Other RS HR -16 HU SK 0 -71 -22 RO -2 0 -123 CZ AT/OA -83 0 -83 AT/SB -89 -54 -89 AT/EBOe -96 -40 -132 -96 -157 -157 -132 Q4 21 Q1 22 Q2 22 Q3 22 Q4
Slide 23: ROTE of 13.8% achieved in 2022
OPERATING TRENDS: NET RESULT, EARNINGS PER SHARE (EPS) & RETURN ON TANGIBLE EQUITY (ROTE) ROTE of 13.8% achieved in 2022 Net result by segment EPS & ROTE in EUR m in EUR +9.7% 688 Other 518 RS 510 15.2% 449 HR 13.8% 472 12.7% HU 11.2% SK RO 4.83 5.1% 4.02 4.17 CZ 3.23 AT/OA AT/SB 1.57 AT/EBOe Q4 21
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: Stable wholesale funding as customer deposits grow strongly
WHOLESALE FUNDING AND CAPITAL: ISSUED DEBT AND INTERBANK FUNDING Stable wholesale funding as customer deposits grow strongly Liabilities and equity Debt securities Interbank deposits Comments in EUR bn in EUR bn in EUR bn Increase in CDs attributable to increased business 323.9 activity in Group Mar
Slide 26: 2022 funding plan successfully executed, 2023 volumes in similar range
WHOLESALE FUNDING AND CAPITAL: LONG TERM FUNDING 2022 funding plan successfully executed, 2023 volumes in similar range Maturity profile of debt 5.7 4.6 4.8 4.4 3.4 2.7 2.0 1.6 0.9 0.6 0.7 0.2 0.0 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035+ Senior unsec. bonds Senior non-prefer
Slide 27: MREL issuance comes at an increasing cost
WHOLESALE FUNDING AND CAPITAL: MREL UPDATE (MINIMUM REQUIREMENT FOR OWN FUNDS AND ELIGIBLE LIABILITIES) MREL issuance comes at an increasing cost MPE resolution groups 3-year MREL issuance plan 196 ~1,000 – 3,000 in EUR bn, in EUR m, as at Dec 2022 average pa 91 68 ~500-1,000 ~300-600 ~300-400 25 24
Slide 28: Business growth and one-time effect drive risk-weighted assets in 2022
WHOLESALE FUNDING AND CAPITAL: CAPITAL AND RISK-WEIGHTED ASSETS (RWA) Business growth and one-time effect drive risk-weighted assets in 2022 Basel 3 capital Risk-weighted assets in EUR bn in EUR bn 140.8 143.9 135.5 138.2 129.6 5.8 7.0 6.3 5.5 3.7 14.5 14.6 14.8 14.8 14.3 25.6 25.2 26.2 24.8 24.3 3.
Slide 29: Strong capital levels underpin enhanced capital return
WHOLESALE FUNDING AND CAPITAL: COMMON EQUITY TIER 1 (CET1), TIER 1 AND TOTAL CAPITAL RATIOS Strong capital levels underpin enhanced capital return CET 1 ratio development Basel 3 capital ratios (final) in % in % 14.50 19.1 14.20 18.5 0.71 18.2 0.10 17.9 17.9 1.29 1.68 0.24 0.50 0.04 16.2 0.03 13.5 1
Slide 30: Presentation Topics
PRESENTATION TOPICS EXECUTIVE SUMMARY MACROECONOMIC AND BUSINESS UPDATE OPERATING TRENDS WHOLESALE FUNDING AND CAPITAL FINANCIAL OUTLOOK APPENDIX Page 30
Slide 31: Confirmation of robust 2023 financial outlook, share buy-back targeted
FINANCIAL OUTLOOK Confirmation of robust 2023 financial outlook, share buy-back targeted Variable Guidance Key assumptions/additional comments GDP > 0% No year-on-year decline in real GDP in 2023 Loans ~ +5% Loan growth expected to slow from exceptional 2022 levels NII ~ +10% NII momentum maintained
Slide 32: Appendix: Erste Group Basics, Detailed Financials & ESG Profile
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 32
Slide 33: 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: 4.5m Customers: 2.0m Hungary Employees: 10,010 Employees: 3,585 Customers: 1.0m Branches: 398 Branches: 190 Employees: 3,352 Retail loan share: 25.3% Retail loan share
Slide 34: 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 35: 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 20.8% 23.2% 23.0% 25.0% AT 20.1% AT 23.9% AT 23.8% AT 26.1% 24.6% 26.8% 21.3% 12.1% CZ 25.3% CZ 26.6% CZ 22.4% CZ 14.1% 25.3% 26.1% 22.5% 13.1% 24.7% 28.
Slide 36: 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 2021 2022 YOY-Δ Q4 21 Q3 22 Q4 22 YOY-Δ QOQ-Δ Net interest income 4,975.7 5,950.6 19.6% 1,306.2 1,548.2 1,565.4 19.8% 1.1% Interest income 5,108.9 8,622.7 68.
Slide 37: 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 Dec 21 Mar 22 Jun 22 Sep 22 Dec 22 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 45,495 46,225 42,818 44,552 35,685 -21.6% -21.6% -19.9% Financial assets held for tr
Slide 38: 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 Dec 21 Mar 22 Jun 22 Sep 22 Dec 22 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities held for trading 2,474 2,917 3,005 3,175 3,264 31.9% 31.9% 2.8% Derivatives
Slide 39: Capital requirements (SREP) for 2023 slightly up on higher CCyB
APPENDIX: REGULATORY CAPITAL POSITION/REQUIREMENT (SREP – SUPERVISORY REVIEW AND EVALUATION PROCESS) Capital requirements (SREP) for 2023 slightly up on higher CCyB Erste Group Consolidated Erste Group Unconsolidated ECB Capital Relief Fully loaded Fully loaded Measures 1) Fully loaded Fully loaded
Slide 40: 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 41: 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 % 35.82% resolution approach − In Q2 22, Erste Group Bank AG received its MREL requ
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 206.1 3.4 0.1 2% 1% 1% 1% 1% 1% 0% Other Other 3.3 30% 29% 4.9 4.2 24% 23% CHF Savings banks 184.2 0.2 7.4
Slide 43: LCR at excellent 138.0%
APPENDIX. FINANCIAL AND TRADING ASSETS LCR at excellent 138.0% By geography By debtor type Liquidity buffer in EUR bn in EUR bn +3.9% 27.7% 58.0 55.8 100% 7.2% 6.5% 6.0% 23.8% 50.9 9.1% 13.3% 13.2% 21.9% 14.3 16.7 12.1 1.0 1.1 78.6 0.7 4.0 4.7 74.0 5.2 5.8 6.0 65.5 5.9 6.2 6.5 6.3 83.6% 80.3% 80.8%
Slide 44: Erste Group supports the well-being in the CEE region
APPENDIX: ESG PROFILE (1)/ESG COMPASS OF ERSTE GROUP Erste Group supports the well-being in the CEE region Priority objectives Our promise Leading Green Transition Customers Providing prosperity to our clients Erste Group strives to be a in an inclusive, secure and role model and leading sustainable
Slide 45: Sustainability is embedded into the DNA of Erste Group
APPENDIX: ESG PROFILE (2) /MAIN ESG PILLARS Sustainability is embedded into the DNA of Erste Group Sustainable Working Finance together mobilize financial resources and customer advice actively participate in public initiatives and for social-ecological goals and support customers thus make a positi
Slide 46: Erste Group has set itself ambitious ESG targets
APPENDIX: ESG PROFILE (3) Erste Group has set itself ambitious ESG targets 25% Erste Group through its Social Banking green investments by 2026 in our corporate book to be reached continues to be the leader in offering financial services to NGOs, start-ups 37% and individuals in difficult situations
Slide 47: Environment
APPENDIX: ESG PROFILE (4)/ENVIRONMENT Environment ESG assets under management by Erste NET ZERO JOURNEY Asset Management EUR 15.0bn Scope 1+2 decrease of emissions (tonnes of CO2e) pathway towards climate neutrality 2023 2017 76,677 2020 54,491 2021 44,414 21.7% 2022 39,393 of total assets under man
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 scenarios Portfolio decarbonization interim targets 2030 Portfolio selection Metric Baseline 2022 Target Reduction Housing mortgages kgCO2e/m² 53.3 30.5 -43% Commercial real estate kgCO
Slide 49: Erste Group has strong ESG ratings
APPENDIX: ESG PROFILE (5)/ESG RATINGS AND INDICES Erste Group has strong ESG ratings 2021 2022 Erste Group maintains rating of AA in the MSCI ESG Ratings assessment AA AA (5.3) (5.8) In 2022, Erste Group improved its assessment by Sustainalytics by 3.6 points, Low Risk Low Risk low risk category con
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 3.84% 5.78% 4.77% 2.80% 1.07% 1.07% 11.52% Erste Foundation direct 3.84% Sparkassen Beteiligungs Gmbh & Co KG 17.14% 32.28% Austria 2.78% North America Foundations 4.08% Wiene
Slide 51: Erste Group Bank AG boasts strong issuer ratings
APPENDIX: CREDIT RATINGS Erste Group Bank AG boasts strong 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 Capital & Earn
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