Erste Group posts net profit of EUR 624.7 million in H1 17 Press - - PowerPoint PPT Presentation

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Erste Group posts net profit of EUR 624.7 million in H1 17 Press conference 4 August 2017

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Business environment – Central and Eastern Europe is the fastest growing EU region

2018 2017

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

CEE markets expected to grow by about 3-5% in 2017, well above the average for the euro zone Domestic demand is expected to be the main driver of economic growth in 2017 Consumption is supported by improving labour markets, wage increases and low inflation rates across the region

2.8 3.7 3.9 3.0 2.4 1.8 2.0 2.0 3.3 3.2 1.3 2.1 2.9 3.1 5.1 3.7 2.7 1.9 2.5 1.0 1.0 2.2 1.4 1.7 2%

euro zone (2017f)

Real GDP growth (in %) Inflation (CPI average, in %)

Page 3

Business environment – Solid public finances in the markets of Erste Group

2018 2017

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

Almost all countries in the CEE region appear set to fulfill the Maastricht budget deficit criteria Public debt ratio in most countries below Maastricht‘s 60% GDP limit, with Austria, Hungary and Croatia being exceptions

79 50 71 80 81 36 36 38 38 72 81

• 0.4
• 0.8
• 2.5
• 1.0
• 0.4
• 1.5
• 3.4 -3.4
• 1.5 -1.5
• 0.8
• 2.7
• 2.7

52

• 3%

Maastricht limit

60%

Maastricht limit

Budget deficit (in % of GDP) Public debt ratio (in % of GDP)

Page 4

Business environment – CEE economies are creating jobs much faster than the euro zone

2018 2017

Unemployment levels expected to continue to decline Solid economic growth is leading to labor shortages in some markets

AT RO CZ HU SK HR

5.7 7.8 5.5 4.1 10.0 5.7 3.6 3.6 5.4 4.2 10.9 8.6

Unemployment (in %)

Employment (in % of workforce population aged 15-64)

2013 Q1 2017Q1

EURO ZONE

RO CZ HU SK HR

66 73 66 63 68 57 63 67 60 57 52 60

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Business environment – Czech Rep. increases key policy rate by 20 bp in August 2017

ECB cut discount rate to zero in March 16 Maintains expansionary monetary policy stance Natl bank decided to lift benchmark rate from historic low of 0.05% to 0.25% in August 17 National bank cut the benchmark interest rate to record low of 0.9% in May 16 Central bank cut policy rate to historic low of 1.75% in May 15

0.58 0.60

• 0.18
• 0.18
• 0.26
• 0.26
• 0.33
• 0.33
• 0.33
• 0.33

0.29 1.25 0.29 0.82 0.29 0.71 0.81 0.35 0.41 0.65 0.63 0.49 0.70 0.57 1.07 0.56 0.98 0.47 3.29 0.51 3.22 0.58 3.46 3.66 3.75 0.85 3.11 3.51 3.46 0.28 0.62 0.66

1-6 16 1-6 17 Q1 17 Q2 17 1-6 16 1-6 17 Q1 17 Q2 17 1-6 16 1-6 17 Q1 17 Q2 17

0.25

Q1 17 1-6 16 1-6 17 Q1 17

As part of euro zone ECB rates are applicable in SK

1-6 16 1-6 17 Q2 17

0.16

Q2 17 1-6 16 1-6 17 Q1 17 Q2 17

Central bank maintains discount rate at 3.0% since 2015

3M Interbank 10YR GOV

Source: Bloomberg

Slovakia

IN %

Austria Czech Republic Hungary Romania Croatia

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Business performance: customer loans and deposits – Strong growth in loan volume (6% yoy) and deposits (11.6 % yoy)

130.4 138.0 30.0 30.6 30.5 127.4 130.7 135.1 145.6 30.8 31.8 33.7 97.6 96.1 90.6 97.7 94.7 92.8 38.7 39.5 40.1 37.8 39.9 41.2 102.4 98.8 97.4 20.4 21.4 24.0 28.1 29.2 32.4 72.5 73.2 73.9 7.0 7.1 7.1 9.7 10.6 10.4 72.7 66.8 68.5 9.6 10.2 10.9 10.9 11.4 12.1 87.5 89.7 90.2

Group AT/SB CZ SK AT/EBOe RO 30/06/16 31/12/16 30/06/17

IN EUR BN IN EUR BN IN %

Customer deposits Loan/deposit ratio

77.8 70.4 67.7 105.5 100.8 100.5 119.4 117.9 114.9 4.0 4.6 4.9 5.4 5.7 5.8 0.6 0.7 0.7 3.1 3.2 3.3 5.7 5.8 5.8 0.7 0.8 0.8

Customer loans (net)

HU HR RS

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Business performance: retail – Clients value Erste’s click and mortar offering

Customers increasingly rely on digital channels for their everyday banking needs: 1 in 4 clients are active digital users at Erste Growing relevance of digital channels also for consumer loans and deposit products: In Slovenska sporitelna, 1 in 3 consumer loans were launched digitally Branches retain their key role for providing advice on big-ticket financial decisions

MORTGAGES

EUR 3.5 bn

in nearly 50,000 newly granted mortgages

CONSUMER LENDING

EUR 2 bn

in newly disbursed consumer loans

RETAIL DEPOSITS

EUR 9 bn

in continued inflows across our markets

GROWTH IN ASSET MANAGEMENT

EUR 282 mn

retail inflow vs. EUR 62 mn in H1 16

Highlights in H1 17

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Business performance: corporate – Real progress in corporate lending: 5% yoy growth

Gross corporate loans

30/06/16 31/03/17 30/06/17

19.2 20.0 19.2 19.9 4.7 5.3 19.1 19.7 19.7 11.8 11.8 12.2 11.5 11.3 11.5 11.1 12.3 11.2 13.7 12.9 12.7 13.9 15.5 14.2 5.4 5.7 5.6 5.8 6.7 6.5 14.0 14.6 14.8 11.1 13.3 13.8 5.3 4.6 4.8 5.3

* Percentages represent market shares; AT market shares for 30/06/17 not yet available

EUR 46.2 bn total corporate loan portfolio

• f Erste Group

EUR 1.2 bn new loans granted in H1 17; Significant growth in AUT, CZ and SK Destination of new loans

Investment loans: ~50 % Overdrafts and working capital: ~30% Trade and Supply Chain Finance: ~10% Acquisition finance: ~5% AT % CZ SK RO HU HR RS

Corporate deposits Highlights

Page 9 18%

Natural Resources & Energy

13%

Public Sector

9%

Construction

9%

Automotive & Transportation

8%

Consumer goods

18%

Real Estate

4 %

Financial Institutions

4%

Healthcare

1%

Other

4%

TMT

5%

Hotel & Leisure

Business performance: corporate – 75% of new corporate loans in H1 17 granted to SMEs

Erste Group services ~100,000 companies,

• ut of which 75% are SMEs representing

~ 15% of the total CEE work force (in the private sector) 1,500 new SME clients added in H1 17; approval process for SME loans reduced to 2-4 days Growth industries in H1 17:

automotive & transportation (+16% loan volume vs FY 16) consumer goods (+8%) health care (+5%) real estate (+5%)

Structure of EUR 46.2bn total loan portfolio Highlights

7%

Machinery

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Business performance: operating income and expenses – Low interest rate environment impacts income, IT investments drive costs

Net interest income Net trading and fair value result Personnel expenses Depreciation and amortisation

Net fee and commission income

Other administrative expenses Other income

1-6 2016 1-6 2016 2,004 1,980 3,317 3,293 1-6 2017 1-6 2017

0.7%

136 103 228 118 120 218

1.2% Operating Income Operating Expenses

2,194 2,143 911 885 610 624 1,151 1,153

IN EUR MN IN EUR MN

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Business performance: operating result and cost/income ratio – Increase in fee and commission income could not offset NII pressure

1-6 2017 1-6 2016

IN % IN EUR MN

Group AT/SB AT/EBOe

1,336 1,289 59.7 60.8 179 195 64.7 63.4 202 223 71.7 70.0

CZ SK HR RO HU RS

360 340 47.4 49.7 146 151 53.9 50.9 167 148 44.6 47.8 72 85 56.5 55.8 107 101 47.1 50.4 10 12 66.8 62.6

Operating result Cost/income ratio

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Business performance: risk costs – Risk costs remain at historically low levels (15 bp at Group level)

Year-on-year risk per- formance characteri- sed by a reduced level

• f net releases and a

continuation of histo- rically low risk costs (except HR) Country trends:

HR: increase due to a single default in Corporates HU: reduced level of net releases in Retail and Corporates CZ: net releases and improved recoveries 1-6 2017 1-6 2016

Highlights

Group AT/SB CZ SK HR RO HU RS

26 2 0.02 16 0.08 26 0.27 16 0.48 0.31 104 0.04 0.15

• 14
• 0.09
• 0.06
• 0.10
• 0.15
• 0.34
• 3.34
• 1.59
• 12
• 10
• 72
• 33
• 15

14 0.31 21 20 0.49 0.42 88 2.65

AT/EBOe

IN % IN EUR MN

Absolute

1

• 1

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

Relative *

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Business performance: asset quality – NPL ratio improves for the 14th consecutive quarter to 4.7%

31/12/16 30/06/17

IN EUR MN IN % IN %

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

7.2 6,678 6,496 4.9 4.7 69.1 68.5 781 688 2.5 2.2 59.3 60.0 1,980 1,908 4.9 4.6 58.1 57.3 695 553 3.2 2.3 82.8 85.7 928 869 11.8 11.0 85.3 92.1 475 469 4.5 4.2 72.1 75.3 339 253 9.7 75.0 78.3 704 845 11.2 13.2 72.4 68.6 56 50 6.8 5.8 99.1 105.5

NPL volume NPL ratio

NPL coverage ratio (excl. collateral)

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Business performance: net profit – Solid result places Erste Group well on track to deliver ROTE of 10%+ in 2017

Erste Group Q2 17 net profit amounted to EUR 362.5m; qoq rise primarily due to improved NII and better other result (despite EUR 45.0m provisions for court rulings related to the passing on of negative interest rates to retail borrowers in AT) Revenues increased on higher NII, supported by seasonally higher dividend income Operating expenses improved primarily due to booking of full-year deposit insurance in Q1 17 25.8% yoy decline in net profit primarily driven by other result and increased, but still benign risk costs Other result declined mainly on non-recurrence of positive

• ne-off (sales of shares in VISA Europe: EUR 138.7 mn) in

Q2 16 After net releases in H1 16, risk costs rose to 15 bps of average gross customer loans, remaining well ahead of guidance

Q1 17 Operating Operating Risk Other Taxes on Minorities Q2 17 1-6 16 Operating Operating Risk Other Taxes on Minorities 1-6 17 income expenses costs result income income expenses costs result income 58 24 23 33 27 30 79 124 33 55 15 23

QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m)

262 362 842 625

Page 15 CET1 Credit RWA CET1 Tier2 Op risk

Total capital

AT1 Trading risk Tier1

31/12/16 31/12/16 18.8 101.8 13.4 18.5 13.2 18.7 106.8 19.9 30/06/17 30/06/17 31/12/16 30/06/17

0.7 3.2 0.0 3.6

Business performance: regulatory capital – CET1 (Basel 3, fully loaded) solid at 12.8%, impacted mainly by RWAinflation

Regulatory capital (EUR bn) Risk-weighted assets (EUR bn) Capital ratios (B3, phased-in; in %) 5.2 13.6 14.1 83.1 86.2 5.2 15.1 17.4 13.8 13.4

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Business performance: capital ratios (Basel 3, fully loaded) Excellent capital generation across the years

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

DEC 09 DEC 08 DEC 13 DEC 11 DEC 15 DEC 10 DEC 14 DEC 12 DEC 16 JUN 17

12.8% 8.3% 9.2% 9.4% 11.2% 11.4% 10.6% 12.0% 12.8% 5.2%

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• Real GDP growth of between 2.1-5.1% expected in 2017 in CEE and Austria
• Real GDP growth to be driven by solid domestic demand, as real wage growth and

declining unemployment support economic activity in CEE

• Solid public finances across CEE

Macro outlook 2017

• ROTE for 2017 targeted at 10%+ (based on average tangible equity in 2017)
• Assumptions for 2017: at best flat revenues (assuming 5%+ net loan growth); cost

inflation of 1-2% due to regulatory projects and digitalisation; increase in risk costs, remaining at historically low levels; positive swing in other operating result due to lower Austrian banking tax Business outlook 2017

• Impact from expansionary monetary central bank policies, inc negative interest rates
• Political risks, eg various elections in key EU economies
• Geopolitical risks and global economic risks
• Consumer protection initiatives

Risk factors for guidance

Conclusion – Outlook 2017