Erste Group 2017 results: Net profit of EUR 1.31bn (ROTE 11.5%) - - PowerPoint PPT Presentation

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Erste Group 2017 results: Net profit of EUR 1.31bn (ROTE 11.5%) - - PowerPoint PPT Presentation

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Erste Group 2017 results: Net profit of EUR 1.31bn (ROTE 11.5%) prompts increased dividend proposal of EUR 1.20 per share Page 1 Business environment Strong macroeconomic development in Erste Group's markets 2017 2018 Real GDP growth (in %)

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Erste Group 2017 results: Net profit of EUR 1.31bn (ROTE 11.5%) prompts increased dividend proposal of EUR 1.20 per share

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Business environment Strong macroeconomic development in Erste Group's markets

Real GDP growth (in %) Unemployment rate (EOP , in %)

2018 2017

In 2018, all CEE countries seen above average GDP growth for euro area Domestic demand expected to remain the main driver of economic growth, also in 2018 Investment in automation needed to cope with labour shortages

Source: Erste Group Research

AT SK HU CZ RO HR RS AT SK HU CZ RO HR RS

4.7 3.9 3.5 2.8 2.8 4.4 7.0 3.4 3.4 4.0 3.0 2.9 2.9 1.8

euro area 2018

2.8 4.9 7.5 10.1 3.0 5.0 8.2 4.2 4.0 11.3 5.5 5.3 11.6 13.2

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Business environment Healthy public finances in Erste Group's markets

General government balance (in % of GDP) Public debt (in % of GDP)

2018 2017

  • 1.0
  • 0.5
  • 0.8
  • 3.0
  • 3.4

0.2 0.1

  • 1.5
  • 2.0

0.3 0.0 1.2

  • 1.0
  • 2.5

33 50 71 75 79 35 36 36 51 72 79 81

Maastricht limit: 60%

61.565.6

Maastricht limit: -3%

AT SK HU CZ RO HR RS AT SK HU CZ RO HR RS

Budget deficits within Maastricht limit in all markets, with the exception of Romania Public debt in major CEE markets below 60% Maastricht limit; Austria, Hungary and Croatia are exceptions, but show a positive trend

Source: Erste Group Research

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Slovakia Austria Hungary Croatia Romania Czech Republic

2016 2017 Q3 17 Q4 17

As part of euro zone, ECB rates are applicable in SK

2016 2017 Q3 17 Q4 17

ECB cut discount rate to zero in March 16 Maintains expansionary monetary policystance

2016 2017 Q3 17 Q4 17

National bank cut the benchmark interest rate to record low of 0.9% in May 2016

2016 2017 Q3 17 Q4 17

National bank decided to lift its benchmark rate from historic low of 0.05% to 0.75% in hikes between August 2017 and February 2018

2016 2017 Q3 17 Q4 17

Central bank maintains discount rate at 3.0% since 2015

2016 2017 Q3 17 Q4 17

Central bank increases policy rate from historic low of 1.75% to 2.25% in hikes in January and February 2018

Business environment: CZ further increases key policy rate to 75bps in Feb 2018

10YR gov (%) Source: Bloomberg 3M Interbank (%)

0.41 1.04 1.63 1.02 0.29 0.41 0.40 0.65 3.31 3.92 4.36 0.58 0.95 1.76 3.90 0.73 0.36 0.58 0.63 0.53

  • 0.26
  • 0.33
  • 0.33
  • 0.33

3.14 2.97 2.96 0.99 0.14 0.13 2.29 0.03 0.60 0.37 0.33 0.36 0.87 0.54 0.83 0.94

  • 0.26
  • 0.33
  • 0.33
  • 0.33
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34.6 151.0 139.5

Business performance

Strong growth in loans of 6.8% and exceptional inflow of customer deposits, up 9.4%

Customer loans (net, EUR bn) Customer deposits (EUR bn) Loan/deposit ratio (%)

Group AT/SB CZ SK HR AT/EBOe RO HU RS

100.8 97.5 70.4 72.1 89.7 93.6 66.8 63.7 73.2 72.3 94.7 92.4 96.1 93.2 98.8 96.6 31.8 33.7 30.6 31.4 29.2 21.4 25.0 39.9 42.6 39.5 41.1 10.6 11.3 7.1 7.2 138.0 130.7 11.4 12.5 10.2 11.7 5.7 6.0 5.8 5.8 4.6 5.0 3.2 3.6 0.8 0.7 117.9 0.9 0.8 110.1

31.12.16 31.12.17

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Business performance

Net inflow of EUR 6 bn in retail deposits, EUR 2.4 bn in investment products in 2017

Investment products vs Customer Deposits volumes (% share as per end-2017)

Customer deposits Managed investment products RS AT CZ RO SK HR Ø HU

70% 30% 60% 40% 77% 23% 82% 18% 86% 14% 62% 38% 100% 92%

8%

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Business performance Strong retail loan growth of 10.4% yoy

2017 Retail Highlights

NEWLY-GRANTED MORTGAGES

EUR 7.5 bn

to nearly 100,000 households across CEE

CONSUMER LENDING

EUR 7.4 bn

in newly disbursed unsecured loans

OVERALL MORTGAGE VOLUME

EUR 41.2 bn

Up 7.8%, on strong growth in CZ, SK and AT

OVERALL UNSECURED CONSUMER LENDING

EUR 13.7 bn

Up 6.1% yoy, reflecting high domestic demand

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Business performance Branches with new look and feel, tight link to digital channels

Branches serve a purpose Digital is key, but 5 of 6 Erste clients (also) visit branches Advisory competence sets us apart from the competition Proactive, data-driven and per- sonalised advisory More time and space to advise clients: data analytics re. client needs, paperless processes, self-service units Branches are being transformed at full speed In Vienna, up to 50 advisors at flagship stores; extended hours at service branches Ceska to keep modernizing around 50 branches per year BCR to invest EUR 50 mn in next two years

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Business performance George: the first pan-European digital banking platform

1 in 4 Erste clients are active digital users Around 20% of consumer loans were launched digitally in Austria, Czechia and Slovakia More than 30% of new deposits

  • pened fully digitally

Entry point for new cooperations API- based architecture allows cooperation with third parties Co-developed with customers, highly personalizable Protecting client data and pri- vacy remains central focus George: one platform across all

  • ur markets

Preparing to expand to all 16 million Erste customers in seven markets PSD2 to play to George’s strength as a continuously evolving open banking platform

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Business performance Corporate net loans reach EUR 47.5 bn

2017 Corporate Highlights

NET LOAN GROWTH

EUR 2.4 bn

net new loans in 2017

+24%

Automotive

+12%

Cyclical

+27.5% +19.7% +17.5%

Hungary Czech Republic Slovakia

+9%

Construction

BLOCKCHAIN TECHNOLOGY

Batavia: blockchain-based trade financing platform - promises to reduce transactions from 7 days to 1 hour

TOP GROWTH SECTORS* TOP PERFORMING SUBSIDIARIES*

*(YOY VOLUME)

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250 284 242 223 2017 2016 4,028 4,158 2017 2016

  • 0.3%

6,691 6,669

+3.2%

Net interest income Net trading result Net fee and commission income Other income Personnel expenses Depreciation and amortisation Other administrative expenses

Business performance

Pressure on revenues eases, increase in costs driven by regulatory requirements and IT

Operating revenues (EUR mn) Operating expenses (EUR mn)

1,783 4,375 1,852 4,353 1,236 2,339 1,310 2,389 460 453

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Business performance

Operating turnaround is under way, especially in AT, HU and RO

2017 2016

Performance summary

Group operating result still down, but growing positive momentum across geogra- phies

Austrian savings banks driven by rising net interest and fee income Romania due to better cost performance Hungary on the back of successful Citi integration

Operating result (EUR mn)

Group AT/SB RO RS HR HU AT/EBOe CZ SK

2,633 2,511

Cost/income ratio (%)

60.2 62.4 391 374 63.1 64.5 713 48.5

Operating turnaround in:

701 49.7 320 288 46.2 49.4 213 208 47.7 49.8 424 442 70.7 70.4 266 273 56.8 55.3 145 174 57.5 55.9 21 22 65.2 67.3

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Performance summary Absolute (EUR mn)

0.10 0.72 0.13

  • 0.69
  • 2.19

0.63

Relative (%) *

0.15 0.09

  • 0.09

0.36 0.01 0.53 0.31 1.75

  • 0.03

0.08

  • 0.87
  • 0.17

29 70 48 48 54

  • 62
  • 92

4 196 132

  • 26

30 116

  • 13

7 1

  • 35
  • 1

Group AT/SB RO RS HR HU AT/EBOe CZ SK

* Relative risk costs are defined as annualised risk costs over average gross customer loans

2017 2016

Business performance Risk costs hit another all-time low

Excellent credit risk environment across the board, with increases only due to single corporate cases

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6,678 928 5,776 781 631 695 525 475 458 632 8.1 339 209 5.5 89.3 56 32 3.3 112.0

NPL coverage (excl collateral; %)

NPL volume (EUR mn)

2017 2016

Business performance Asset clean-up is over; NPL ratio drops to 4.0%

NPL ratio (%)

4.9 4.0 69.1 68.8 2.5 2.0 59.3 57.1 3.2 2.1 4.5 3.8 72.1 79.7 704 11.2 72.4 783 12.3 70.9 4.9 4.2 58.1 58.3 11.8 82.8 92.5 85.3 92.7 9.7 75.0 6.8 99.1 1,980 1,758

Group AT/SB RO RS HR HU AT/EBOe CZ SK

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Business performance Further increase in pre-tax result

Pre-tax result (in EUR mn) Taxes on income (in EUR mn)

Other result improvement and lower risk costs lead to further improvement of pre-tax result Tax rate at 19.7% in 2017

2016 2017 2017 2016

1,950 2,078

  • 414
  • 410
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Business performance Proposed dividend raised to EUR 1.20 per share

Net result (in EUR mn) Dividend (EUR per share)

Highest net profit in corporate history Payout ratio is equal to 34.0%

2016 2017 Proposal 2015 2017 2016 2015

968 1,265 1,316 0.50 1.00 1.20

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Business performance Excellent capital generation across the years

Common equity tier one capital ratio (Basel 3, fully loaded)

DEC 2009 DEC 2017 DEC 2016 DEC 2015 DEC 2014 DEC 2013 DEC 2012 DEC 2011 DEC 2010

9.2% 9.4 % 11.2 % 11.4 % 12.0 % 12.8 % 8.3 % 10.6 % 12.9 %

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Outlook 2018

Macro outlook 2018 Risk factors for guidance Business outlook 2018

Real GDP growth of approx. 3- 5% expected in 2018 in CEE and Austria Real GDP growth to be driven by solid domestic demand, as real wage growth and declining unem- ployment support economic activity in CEE Solid public finances across CEE Dividend proposal: EUR 1.20 per share ROTE for 2018 targeted at 10%+ (based on average tangible equity in 2018) Assumptions for 2018: slightly gro- wing revenues (assuming 5%+ net loan growth and interest rate hikes in CZ and RO); slightly falling expenses due to lower project-related costs; increase in risk costs, but remaining at historically low levels Impact from other than expect- ed interest rate development Political or regulatory measures against banks Geopolitical risks and global economic risks