Erste Group Bank Ag · VIE:EBS
Erste Group Bank — Q3 2017 Earnings Presentation
47 slides from Erste Group Bank's earnings presentation, Nov 3, 2017
Slide 1: Erste Group investor presentation Q3 17 results
Erste Group investor presentation Q3 17 results 3 November 2017 Progressing as planned: on track for 10%+ ROTE in 2017; stable outlook for 2018 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) 1,179 23 51 8 121 988 38 27 362 10 14 363 11 31 71 25 Q2 17 Operating Operating Risk costs Other Taxes on Minorities Q3 17 1-9 16 Operating Operating Risk costs Other Ta
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 2.50% 2.39% -3.7% 2.44% 2.39% 58.8% 61.4% +13.1% 3,267 3,229 1,997 1,923 71 63 0.11% 1,092 1,086 690 634 -0.09% 39 -33 1-9 16 1-9 17 Q2 17 Q3 17 1-9
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) 221,715 1,367 221,715 84 541 83 1,531 7,351 10,351 6,889 208,227 3,751 4,047 4,594 208,227 1,211 31/12/16 Cash Trading, Loans to Net loans Intangibles Other
Slide 7: Executive summary – Key balance sheet data
Executive summary – 31/12/16 Key balance sheet data 30/09/17 Loan/deposit & loan/TA ratio Net loans & credit RWA NPL coverage ratio & NPL ratio in EUR bn +5.6% 94.7% 93.0% 69.1% 69.5% 62.7% 62.2% 130.7 138.0 83.1 89.1 4.9% 4.3% 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 2017 and 2018
2017 Business environment – 2018 Strong economic outlook for 2017 and 2018 Real GDP growth (in %) Dom. demand contribution* (in %) Net export contribution* (in %) Consumer price inflation (ave, in %) 6.1 6.1 4.5 3.5 3.4 4.1 3.9 4.1 4.0 4.0 3.7 3.4 3.6 2.5 2.2 3.4 3.3 3.1 3.4 2.4 3.0 2.8 2.7 2.6 2.9
Slide 10: Business environment – CZ further increases key policy rate to 50bps in November 2017
Business environment – 3M Interbank 10YR GOV CZ further increases key policy rate to 50bps in November 2017 Austria Czech Republic Romania 3.77% 3.75% 3.90% 0.82% 3.32% 0.59% 1.04% 0.35% 0.56% 0.63% 0.85% 0.40% 0.66% 0.73% -0.25% -0.33% -0.33% -0.33% 0.29% 0.32% 0.29% 0.40% 0.58% 0.67% 1-9 16 1-9 17
Slide 11: Business environment – CZK enters path of appreciation following depegging in April 2017
Business environment – CZK enters path of appreciation following depegging in April 2017 EUR/CZK EUR/RON -1.8% -1.7% -3.8% +1.5% +0.6% +1.3% 27.0 26.6 26.5 26.1 27.0 26.0 4.49 4.55 4.55 4.58 4.54 4.60 1-9 16 1-9 17 Q2 17 Q3 17 31/12/16 30/09/17 1-9 16 1-9 17 Q2 17 Q3 17 31/12/16 30/09/17 • Czech Nat
Slide 12: Business environment – Market shares: mostly stable or increasing shares across the region
30/09/16 Business environment – 30/06/17 Market shares: mostly stable or increasing shares across the region 30/09/17 Gross retail loans Gross corporate loans Retail deposits Corporate deposits 19.6% 19.4% 18.8% 19.6% AT 20.0% AT 20.1% AT 19.1% AT 20.6% 22.9% 19.4% 25.2% 12.2% CZ 22.9% 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: Business performance: performing loan stock & growth
YoY 30/09/16 Business performance: performing loan stock & growth – QoQ 30/06/17 Performing loans continue to grow in Q3 17 30/09/17 126.6 7.5% • Rising performing loan volume trend continues in Q3 17 Group 133.1 136.1 2.3% across most geographies; underlying loan growth particularly 30.2 strong in
Slide 15: Business performance: customer deposit stock & growth
YoY 30/09/16 Business performance: customer deposit stock & growth – QoQ 30/06/17 Deposits still marching ahead in Q3 17 30/09/17 134.0 10.7% • Exceptional deposit growth across all geographies yoy Group 145.6 1.9% despite zero interest rate environment as retail and corporate 148.4 clients parked c
Slide 16: Business performance: NII and NIM
Business performance: NII and NIM – Q3 16 Q2 17 NII slowly stabilising, NIM still under pressure Q3 17 1,073 2.43% Group 1,092 2.44% 1,086 2.39% • Yoy increase reflect higher structural contribution from 161 1.81% Holding ALM and higher NII in CZ resulting from increased AT/EBOe 166 1.75% volumes, c
Slide 17: Business performance: operating income
YoY Q3 16 Business performance: operating income – QoQ Q2 17 Operating income supported by fees, burdened by trading income Q3 17 1,643 0.1% • Yoy flat as higher NII and fees offset lower net trading result Group 1,675 -1.9% 1,644 • Qoq development burdened by lower net trading result and 252 0.4% s
Slide 18: Business performance: operating expenses
YoY Q3 16 Business performance: operating expenses – QoQ Q2 17 Operating costs driven by regulatory and IT project costs Q3 17 983 2.8% • Yoy cost increase mainly driven by higher personnel Group 985 1,010 2.5% expenses related to IT and regulatory projects 156 2.7% • Qoq mirrors yoy development AT/
Slide 19: Business performance: operating result and CIR
YoY Q3 16 Business performance: operating result and CIR – QoQ Q2 17 On group level still under pressure, CZ is positive highlight Q3 17 Operating result YoY & QoQ change Cost/income ratio 660 59.8% Group 690 -4.0% 58.8% -8.1% 61.4% 634 96 61.8% AT/EBOe 108 -3.3% 59.9% 93 -13.2% 63.2% 121 65.9% AT/S
Slide 20: Business performance: risk costs
Q3 16 Business performance: risk costs (abs/rel*) – Q2 17 Risk costs driven by across-the-board provision releases Q3 17 37 0.11% • Yoy risk performance characterised by net releases across Group 39 0.11% -33 -0.09% most geographies 6 0.08% • Qoq performance mirrors yoy development; improvement in A
Slide 21: Business performance: non-performing loans and NPL ratio
30/09/16 Business performance: non-performing loans and NPL ratio – 30/06/17 NPL ratio improves again, now standing at 4.3% 30/09/17 7,308 5.5% • NPL volume declined to EUR 6.2bn in Q3 17 as NPL inflows Group 6,496 4.7% 6,189 4.3% decline across most geographies (except AT/SB, RO, HU) 799 2.6% AT/EB
Slide 22: Business performance: allowances for loans and NPL coverage
30/09/16 Business performance: allowances for loans and NPL coverage – 30/06/17 NPL provision coverage further improves to 69.5% 30/09/17 4,948 67.7% • NPL provision coverage rose to 69.5%, as NPL stock Group 4,451 68.5% 4,302 69.5% declined faster than allowances for loans 492 61.5% AT/EBOe 413 60.
Slide 23: Business performance: other result
Q3 16 Business performance: other result – Q2 17 Other result stable with no significant one-offs in Q3 17 Q3 17 -61 • Yoy flat as improvements in HU (provisions booked in prior Group -68 -59 period) offset lower result in Other segment -5 • Qoq improvement on provisions for court rulings related to
Slide 24: Business performance: net result
Q3 16 Business performance: net result – Q2 17 Q3 17 net result stable qoq, up yoy on net provision releases Q3 17 337 • Yoy profitability improved on net provision releases Group 362 363 • Qoq stable as net releases of risk costs offset lower revenues 64 and increase in operating expenses AT/EBOe 6
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 down to 93.0% at Sep 17 (Dec 16: 94.7%) Assets (EUR bn) Assets (in %) Liabilities & equity (EUR bn) Liabilities & equity (in %) 221.7 221.7 208.2 100% 208.2 3.6 2.3% 100% 22.1 8.8% 10.0% 19.2 7.0% 8.7% 1.6% 4.8 18.4 14.6 43.5 22.9% 19.6% 47.6
Slide 27: Assets and liabilities: customer loans by country of risk
Assets and liabilities: customer loans by country of risk – Net customer loans up 5.6% ytd, NPLs down 7.3% ytd Net customer loans (EUR bn) Performing loans (EUR bn) Non-performing loans (EUR bn) +7.0% +7.5% -15.3% 138.0 136.1 7.3 129.0 130.7 3.5 126.6 128.6 3.5 0.2 3.3 3.4 6.8 1.0 3.3 3.4 6.6 1.0 0.
Slide 28: Assets and liabilities: allowances for customer loans
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 • 2016: EUR 106m 450 578 • P&L unwin
Slide 29: Assets and liabilities: financial and trading assets
Assets and liabilities: financial and trading assets * – LCR at excellent 144.7% By geography By debtor type Liquidity buffer -7.3% in EUR bn in EUR bn 43.1 42.8 39.9 100% 26.7% 27.2% 9.3% 8.9% 9.3% 24.8% 24.9% 9.8 9.9 7.5% 7.3% 7.8% 8.3 1.1 55.5 1.0 51.2 2.3 2.4 0.8 3.2 45.4 46.1 4.5 4.8 5.2 5.8 5.
Slide 30: Assets and liabilities: customer deposit funding
Assets and liabilities: customer deposit funding – Customer deposits grow by 1.9% qoq, up 7.5% ytd By customer type By product type Highlights in EUR bn in EUR bn • Continued deposit inflows driven by Retail +10.7% segment with highest demand for overnight deposits amid low interest rate environment
Slide 31: Assets and liabilities: debt vs interbank funding
Assets and liabilities: debt vs interbank funding – Limited wholesale funding reliance, as customer deposits grow strongly Debt securities issued Interbank deposits in EUR bn in EUR bn -6.0% +26.3% 27.3 27.2 19.2 25.7 Sub debt Overnight deposits 6.2 6.1 Hybrid issues 5.9 15.2 5.4 Term deposits Senio
Slide 32: Assets and liabilities: LT funding
Assets and liabilities: LT funding – Limited LT funding needs Maturity profile of debt in EUR bn 3.0 2.9 2.9 2.7 2.0 1.9 1.3 1.3 0.8 0.8 0.7 0.6 0.2 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029+ Senior unsec. bonds Covered bonds Capital exc Tier 1 Debt CEE • In January 2017 Erste
Slide 33: Assets and liabilities: capital position
Assets and liabilities: capital position – B3FL CET1 at 12.4% due to RWA inflation and non-inclusion of Q3 17 profits 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% 18.0% 19.9 19.9 106.8 110.8 18.5 18.8 19.0
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 & 2018
Conclusion – Outlook 2017 & 2018 • Real GDP growth of between approx. 2-4% 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 declining unemployment support economic activity in CEE • Solid public finances across CE
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
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
Additional information: income statement – Year-to-date and quarterly view Year-to-date view Quarterly view in EUR million 1-9 16 1-9 17 YOY-Δ Q3 16 Q2 17 Q3 17 YOY-Δ QOQ-Δ Net interest income 3,267.5 3,229.3 -1.2% 1,073.4 1,091.7 1,086.3 1.2% -0.5% Net fee and commission income 1,319.8 1,361.9 3.2%
Slide 39: Additional information: group balance sheet – Assets
Additional information: group balance sheet – Assets Quarterly data Change in EUR million Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 YOY-Δ YTD-Δ QOQ-Δ Cash and cash balances 14,743 18,353 24,731 25,842 22,104 49.9% 20.4% -14.5% Financial assets - held for trading 9,731 7,950 7,827 7,206 6,850 -29.6% -13.8%
Slide 40: Additional information: group balance sheet – Liabilities and equity
Additional information: group balance sheet – Liabilities and equity Quarterly data Change in EUR million Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 YOY-Δ YTD-Δ QOQ-Δ Financial liabilities - held for trading 6,272 4,762 4,314 3,960 3,551 -43.4% -25.4% -10.3% Derivatives 4,933 4,185 3,855 3,646 3,206 -35.0%
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) 137.5 139.6 142.3 137.5 139.6 142.3 142.3 133.9 135.3 133.9 135.3 137.5 139.6 6.5
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: 2.2m in 7 geographically connected Employees: 10,185 Employees: 4,236 countries CZ Br
Slide 44: 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 45: Additional information: Ratings
Additional information: Ratings – Composition of Erste Group Bank AG’s issuer ratings Financial Profile SACP - Stand-Alone Credit Profile VR - Viability Rating Asset Risk baa3 a (Individual Rating ) Capital baa1 Profitability baa3 ▲ a- Funding Structure a3 Anchor bbb+ Liquid Resources baa1 Business
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 * 11.5% 11.1% 11.5% Savings Banks 2 Rest of world Austria BlackRock Inc 5.0% 4.7% 3.5% 27.6% Other Syndicated 3 3.8% 9.9% Caixa Continental Europe
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