ERSTE & STEIERMÄRKISCHE BANK d.d. Investor presentation Zagreb, October 9th, 2018
Agenda Erste Bank – About us 1. 2. Macroeconomic Update 3. Business Overview 4. Indicative Terms of Bonds 5. Appendix 2
Erste Group at a Glance Erste Group Footprint Key financials 1H 2018 branches Slovakia # 1 Czech Republic # 1 London New York Customers: 4.7m Customers: 2.2m Total assets EUR 230bn Hong Kong Germany Employees: 10,171 Employees: 4,250 Net profit EUR 774mn Branches: 510 Branches : 270 Czech NPL coverage 72,0% Hungary # 3 Republik Slovakia Customers: 0.9m NPL ratio 3,6% Employees: 3,047 Austria Hungary Branches: 115 CET 1 ratio* 12,5% Romania Croatia Romania # 1 Total capital ratio* 17,3% Customers: 3.4m Serbia Loan/deposit ratio 92,3% Employees: 7,265 Branches: 508 Leverage ratio 6,4% Austria # 1 Croatia # 3 Serbia # 10 A (positive) / Credit rating** A2 (positive) / Customers: 3.7m Customers: 1,2m Customers: 0.4m A- (stable) Employees: 16,283 Employees: 3,452 Employees: 1,069 * Basel 3, fully-loaded Branches: 905 Branches: 153 Branches: 85 Direct presence ** S&P / Moody‘s / Fitch Indirect presence # possition on the market based on asset size 3
ERSTE&STEIERMÄRKISCHE BANK d.d. - Introduction Member of Erste Group – one of the leading FIs in eastern - part of EU - Primary focus on retail clients and SMEs - 3rd Bank in Croatia in terms of assets (14.53% of market share as of June 2018) - More than 870.000 clients - 132 branches - 13 commercial, 8 entrepreneurial and 9 profit centres - More than 2.500 employees (The whole Group in Croatia more than 3.500) AWARDS - #2 Employer Partner for 2018 EBRD – Award for the best Bank in Croatia for TFP programme for 2017 - The Banker and PWM – the best private banking services in Croatia for 2017 - - The winner of the Gold Kuna for the most successful Bank in 2005, 2006, 2008, 2010, 2011 and 2012 4
Key events since formation 2018 Integration of Erste Factoring into the Bank 2011 Acquisition of shares in Erste Card Club d.d. 2009 Acquisition of 100% equity stake in Opportunity bank AD Podgorica (now Erste bank AD Podgorica) 2003 Acquisition of Riječka banka d.d . 2000 Formation of ERSTE & STEIERMARKISCHE BANK d.d. through merger of Bjelovarska, Trgovačka and Čakovečka banks 5
Ownership structure and group members 100% Erste nekretnine d.o.o. 100% Erste bank AD Podgorica 100% 59.02% Erste Card Club d.o.o. Erste Group Bank AG 75% ERSTE & Erste factoring d.o.o. STEIERMARKISCHE BANK Steiermärkische Bank 40.98% 50% Erste&Steiermärkische S -leasing d.o.o. und Sparkassen AG 100% Izbor nekretnina d.o.o. 80% Erste Group IT HR d.o.o. 6
Agenda Erste Bank – About us 1. 2. Macroeconomic Update 3. Business Overview 4. Indicative Terms of Bonds 5. Appendix 7
Macroeconomic developments Stable mid-term growth prospects, with focus on domestic demand Components of GDP Real GDP growth 4% 3,5% 8% 6,5% 2,9% 6,0% 2,8% 2,7% 3% 6% 4,9% 2,3% 3,8% 3,8% 3,6% 3,6% 3,4% 4% 2,9% 2% 2% 1,0% 1% 0% 0% -2% -1,6% -0,1% -2,8% -4% -1% 2014 2015 2016 2017 2018e 2019e 2014 2015 2016 2017 2018e 2019e Private consumption growth Investments • • GDP growth shifted into higher gear in 2Q18 and landed at 2.9% y/y vs. As far as the outlook goes, we see the headline figure remaining 2.5% seen in 1Q18 supported by sound domestic demand profile going into 2H18, on both • private consumption and investments side Detailed structure revealed supportive domestic demand, where both • private consumption and investment (3.6% y/y and 3.1% y/y, as follows) Net exports contribution is seen, despite positive 2Q18 performance, kept similar growth pattern as seen in 1Q18. On the other hand, positive remaining on FY18 scale overall in modest red amid normalization of surprise came from the external demand side, where stronger exports growth rates in tourism and more pronounced domestic-demand driven performance (5.6% y/y) outpaced imports increase (4.7% y/y), thus imports pressures. resulting in marginally positive net exports contribution to the 2Q18 GDP • Bottom line, we confirm our FY18 forecast at 2.8% (with risks looking broadly balanced), followed by similar growth performance in next year Source: Croatian Bureau of Statistics, Erste Group Research 8
Macroeconomic developments Fiscal position expected to remain balanced, with public debt further declining Unemployment and inflation Public debt and general government deficit 20% 100% 17,3% 84,0% 83,8% 16,3% 80,6% 78,0% 74,4% 71,4% 16% 80% 13,1% 11,3% 12% 60% 9,6% 8,7% 8% 40% 4% 1,8% 20% 1,7% 1,1% 0,8% 0,0% 0% 0% -0,2% -0,9% -0,5% -0,5% -3,3% -1,1% -5,1% -4% -20% 2014 2015 2016 2017 2018e 2019e 2014 2015 2016 2017 2018e 2019e Unemployment rate (%) Inflation (%) Public debt (% of GDP) General government deficit (% of GDP) • • Labor market continues to reflect positive economic trends as Following 2017 budget surplus of 0.8% of GDP and additional drop in the unemployment rate is anticipated to move into the single-digit region, public debt trajectory, fiscal developments should remain on encouraging while wage growth approached mid-single digit region track, with 2018 expect to bring balanced budget and continued reduction • of public debt towards 75% of GDP. Short-term downside risks are Though inflation moved in a tight band at the beginning of the 2018, dominantly related to uncertainty over shipyard-related guarantees recent months bought more pronounced acceleration as CPI moved (negative one-off up to 1.5% of GDP) above 2% mark, given stronger oil price dynamics – we see inflation • remaining at close levels also in remainder of the year, with average FY18 Improved outlook continued to positively reflect on the rating profile as both Fitch and S&P upgraded the outlook to ‘positive’ in 2H18, hence seen at 1.7% mark, followed by similar CPI footprint also during 2019 increasing the likelihood that Croatia could receive an upgrade to IGR in 2019 Source: Croatian Bureau of Statistics, Erste Group Research 9
Agenda Erste Bank – About us 1. 2. Macroeconomic Update 3. Business Overview 4. Indicative Terms of Bonds 5. Appendix 10
Positive trends in economy affect loan activity Total assets Loans vs. deposits, L/D ratio 59 58,3 83% 90,00% 81% 80% 50 44,8 58 42,0 43,8 80,00% 57,2 36,2 35,1 40 34,9 70,00% 57 56,1 60,00% 30 56 50,00% 20 55 40,00% 10 54 30,00% 53 0 20,00% 2016 2017 1H 2018 2016 2017 1H 2018 Loans to customers (HRK bn) Total assets (HRK bn) Deposits from customers (HRK bn)* L/D ratio (%) *Bank deposits included *uključuje depozite banaka • • Loans to customers increased by 0.4% y/y in 2017 based on the In 2017 total assets increased by 1.9% y/y, compared to the previous increase of loans to corporate and retail segments. The increase in year. The largest contributor to this assets growth in 2017 was the these segments more than compensated significant repayments of increase of highly liquid assets of HRK 1bn. The excess liquidity is loans to the public sector directed towards cash and deposits, which increased by 11.9% y/y and • Deposits in 2017 grew by 4.3% y/y compared to 2016. with main securities that grew by 8.1% y/y compared to 2016, while in the same contributors being retail and corporate segments. The trend of growth period loans to financial institutions decreased by 15.4% y/y) • In 2018 growth is based on loan activity – more details on slide 12 in the volume of demand deposits vs. the decrease in the volume of term deposits is notable • Loan growth is backed by appropriate growth of deposit base thereby maintaining L/D ratio at adequate level Source: audited non-consolidated financial reports for 2016 and 2017 and non-audited non-consolidated financial reports for 1H 2018 (GFI-KI ) 11
Pronounced growth of loans volume in 1H 2018 Change of funding structure in 1H 2018 (HRK mn) Change of assets structure in 1H 2018 (HRK mn) 58.259 58.258 143 7 23 323 160 1.014 1.154 57.206 57.206 17 95 806 579 31/12/17 Cash Loans to Securities Loans Other 30/06/18 31/12/17 Loans Deposits Securities Subord. Other Equity 30/06/18 fin. inst. & deriv. issued Instr. • In the first half of 2018 the loan portfolio grew by HRK 1.15 bn. Although • The deposits growth of HRK 1b was backed by deposits from corporate, the deleveraging of the public sector continued in 2018, the previously retail as well as public sector whereby demand deposits keep increasing mentioned increase in loans to corporate and retail sectors more than further vis-a-vis term deposits that keep decreasing further compensated for this • The growth in equity of HRK 323 mn was based mainly on the profit • Highly liquid assets optimization continued in 2018, whereby the spill-over realized in 1H 2018 from loans to financial institutions in favor of more profitable securities and loans to clients is notable Source: audited non-consolidated financial reports for 2016 and 2017 and non-audited non-consolidated financial reports for 1H 2018 (GFI-KI ) 12
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