H1 2018 results presentation Strong net profjt of EUR 774 mn based on improved operating performance and benign risk environment
Business environment Strong economic outlook for Erste Group‘s markets Real GDP growth (in %) Wage growth (avg, in %) Summary CEE macroeconomic growth set to be well above Euro- 14.2 area in both 2018 and 2019 12.8 12.3 11.6 euro area 2018 Real wage growth driven 7.8 by continued strong economic 4.2 4.1 4.0 3.9 3.6 6.5 3.5 3.4 growth and low unemploy- 3.3 3.2 3.1 5.7 3.0 2.8 2.7 4.6 ment 2.2 3.8 3.4 2.7 2.6 2.1 0.8 AT CZ SK RO HU HR RS AT CZ SK RO HU HR RS 2018 2019 Source: Erste Group Research 2017 Q1 2018 Source: Erste Group Research, Bloomberg 2
Business environment Sustainable CEE public debt outlook well below Eurozone average Gross public debt (% of GDP) 132.0 131.8 125.7 Maastricht Average for 109.5 limit for Eurozone 108.5 108.2 public debt (2017) 98.3 97.0 78.4 78.0 73.6 73.6 72.9 64.1 61.3 61.0 60.4 57.3 55.6 55.1 50.9 50.6 45.9 37.9 35.0 34.6 34.0 25.6 CZ RO PL SK RS* DE SI HU HR AT FR ES PT IT Source: European Commission, Erste Group Research 2017 2028 CEE COUNTRIES * only 2019 forecast 3
Business environment Rising interest rates across CEE Austria Czech Republic Romania 0.75 0.73 0.72 0.57 1.89 0.71 1.88 1.87 4.76 4.46 4.61 3.71 -0.33 -0.33 -0.33 -0.33 0.89 0.92 2.46 0.86 1.85 2.15 0.64 0.29 1–6 17 1–6 18 Q1 18 1–6 18 Q1 18 Q2 18 1–6 17 1–6 18 Q1 18 Q2 18 1–6 17 Q2 18 ECB cut discount rate to zero in March 16 National bank decided to lift its benchmark rate from historic Central bank increased policy rate from historic low of 1.75% low of 0.05% to 1.00% in Aug and Nov 2017 & Feb and June 2018 to 2.50% in January, February and May 2018 Maintains expansionary monetary policy stance Slovakia Hungary Croatia 3.29 2.90 2.65 1.07 2.39 0.85 0.81 0.77 0.38 0.26 0.26 0.25 -0.33 -0.33 0.21 -0.33 -0.33 0.06 0.10 0.02 1–6 17 1–6 18 Q1 18 1–6 18 Q1 18 Q2 18 1–6 17 1–6 18 Q1 18 Q2 18 Q2 18 1–6 17 As part of euro zone ECB rates are applicable National bank cut the benchmark interest Central bank maintains discount rate at in SK rate to record low of 0.9% in May 2016 3.0% since 2015 3M INTERBANK (%) 10YR GOV (%) Source: Bloomberg 4
Business performance Net profjt of EUR 774mn based on improved operating performance QoQ net profjt reconciliation (EUR mn) YoY net profjt reconciliation (EUR mn) + 30.4 % + 24.0 % 438 774 51 6 53 29 25 11 4 178 625 36 336 81 64 73 Q1 18 Q2 18 1–6 17 1–6 18 Operating Operating Risk Other Taxes on Minorities Operating Operating Risk Other Taxes on Minorities income expenses costs result income income expenses costs result income 5
Business performance 7.1% YoY loan growth and continued customer deposits infmow, up 7.7% Customer loans (net; EUR bn) Customer deposits (EUR bn) Loan / deposit ratio (%) 145.6 135.1 92.8 Group 151.0 139.5 92.4 144.7 156.8 92.3 30.5 33.7 90.6 AT/EBOe 31.4 33.7 93.2 31.8 34.8 91.3 40.1 41.2 97.4 AT/SB 41.1 42.6 96.6 42.1 44.6 94.4 24.0 32.4 73.9 CZ 25.0 34.6 72.3 26.8 35.3 75.9 7.1 10.4 68.5 RO 7.2 11.3 63.7 7.5 11.3 66.5 10.9 12.1 90.2 SK 11.7 12.5 93.6 12.4 13.3 93.5 3.3 4.9 67.7 HU 3.6 5.0 72.1 3.6 5.5 66.5 5.8 5.8 100.5 HR 5.8 6.0 97.5 6.0 6.1 97.9 0.8 0.7 114.9 RS 0.9 0.8 110.1 1.1 0.9 113.5 JUN 17 DEC 17 JUN 18 6
Business performance Strong retail loan growth of 6.5% YoY Retail Highlights for H1 2018 NEWLY-GRANTED MORTGAGES +6.1% YoY INFLOW OF RETAIL DEPOSITS +8.0% YoY EUR 3.87 bn EUR 7.92bn provided to over 51,000 households continued infmow in all markets CONSUMER LENDING +8.7% Y o Y BANCASSURANCE VOLUMES EUR 3.99bn EUR 622 mn Average loan size: EUR 6,000 total premium written in H1 2018 7
Business performance Digital sales with growing contribution to overall lending growth 20% 53% QoQ jump in mobile of our active sales on stronger clients opt for mobile app usage digital banking 15% of total new 50% consumer loans sold digitally YoY increase in mobile trans- actions 8
Business performance George is the digital assistant of over 2.6 million customers Two new markets added in H1 2018: 687,000 Czech clients use George app 6x more than previous ofgering 402,000 most downloaded bank app in Slovakia 1,551,000 Austria‘s leader in digital banking: 80% YoY more active users of George app Fall 2018 9
Business performance Corporate loan growth driven by large companies and SMEs H1 2018 Corporate Highlights TOTAL GROSS LOANS TOP PERFORMING SUBSIDIARIES* EUR 51.2bn Slovakia Hungary Czechia + 21.5% + 16.7% + 14.1% up 6.1% YoY SME LENDING TOP GROWTH SECTORS* IN OUR PORTFOLIO 10.3% YoY loan volume growth Natural Resources 1,300 new SME clients acquired Telecom & Media Automotive and Agriculture + 48% + 20% + 13% *(YOY VOLUME) 10
Business performance Higher operating revenues due to strong NII and fees Operating revenues (EUR mn) Operating expenses (EUR mn) + 2.5% 3,374 3,293 136 189 + 3.6% 103 12 959 911 2,076 2,004 232 228 628 624 2,214 2,143 1,217 1,151 1-6 17 1-6 18 1-6 17 1-6 18 Net interest income Net fee and commission income Personnel expenses Other administrative expenses Net trading result Other income Depreciation and amortisation 11
Business performance Operating result higher in most markets Operating result (EUR mn) 1,289 Group 1,298 195 AT/EBOe 203 223 AT/SB 204 340 CZ 363 151 RO 137 148 SK 148 85 HU 88 101 HR 105 12 RS 9 1-6 17 1-6 18 12
Business performance Continued releases of risk provisions Performance summary Absolute (EUR mn) Relative (%) * 104 0.15 Group YoY improvement due to con- -73 -0.12 tinued asset quality improve- -0.09 -14 AT/EBOe ments, particularly in Corpo- -9 -0.07 rate business (esp. in HR); net -12 -0.06 AT/SB releases in most markets -4 -0.02 -10 -0.08 CZ Risk costs seen higher in -35 -0.27 H2 18, but remaining at 0.34 14 RO historically low levels -0.38 -6 20 0.36 SK 12 0.19 -33 -1.82 HU -19 -0.96 88 2.79 HR 9 0.23 Relative risk costs are defined as -1 -0.12 RS annualised risk costs over average 0.71 4 gross customer loans 1-6 17 1-6 18 13
Business performance NPL ratio improves to 3.6%, lowest level in ten years NPL volume (EUR mn) NPL ratio (%) NPL coverage (excl collateral; %) 5,776 4.0 68.8 Group 5,321 3.6 72.0 631 2.0 57.1 AT/EBOe 612 1.9 63.0 1,758 4.2 58.3 AT/SB 1,722 4.0 61.6 525 2.1 92.5 CZ 543 2.0 96.1 632 8.1 92.7 RO 539 6.7 95.3 458 3.8 79.7 SK 454 3.6 80.3 209 5.5 89.3 HU 179 4.7 77.2 783 12.3 70.9 HR 721 11.0 75.3 32 3.3 112.0 RS 22 2.0 142.8 Dec 17 Jun 18 14
Business performance Excellent capital generation across the years Common equity tier one capital ratio (Basel 3, fully loaded) 12.9 % 12.8 % 12.5 % 12.0 % 11.4 % 11.2 % 10.6 % 9.4 % 9.2 % 8.3 % JUN 2018 DEC 2009 DEC 2010 DEC 2011 DEC 2012 DEC 2013 DEC 2014 DEC 2015 DEC 2016 DEC 2017 Tie decline in H1 2018 was mainly attributable to one-time efgects (buy-out of last large minority shareholder in BCR and currency efgects), as well as a rise in RWA 15
Outlook Macro outlook 2018 Business outlook 2018 Risk factors for guidance Real GDP growth of approx. 3-4% ROTE for 2018 targeted at 10%+ Impact from other than expected (based on average tangible equity in 2018) expected in 2018 in CEE and Austria interest rate development Assumptions for 2018 : slightly growing Real GDP growth to be driven by Political or regulatory measures revenues (assuming 5%+ net loan growth solid domestic demand , as real wage against banks and interest rate hikes in CZ and RO); growth and low unemployment slightly falling expenses due to lower pro- support economic activity in CEE Geopolitical risks and global ject-related costs; risk costs to remain at economic risks historically low levels Solid public fjnances across CEE 16
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