> Erste Bank - Strategy and execution

Transcription

1 > Erste Bank - Strategy and execution > Morgan Stanley - Pan European Banks Conference London, March 2006 > Andreas Treichl, CEO

2 > Presentation topics 1. Consistent strategy 2. Strong execution track record 3. Growth drivers 4. Financial targets 5. Appendix 2

3 > Consistent strategy since 1997 IPO Success factors of the Erste Bank model Business focus: Retail banking» Exploiting core business potentials» Growth drivers: Loans & wealth management Geographic focus: Central and Eastern Europe» Targeting a coherent home market of 70m people Efficiency focus: New Group Architecture» Developing group-wide initiatives to gain from synergies Value creation for shareholders 3

4 > Presentation topics 1. Consistent strategy 2. Strong execution track record 3. Growth drivers 4. Financial targets 5. Appendix 4

5 > Business focus - Exploiting core business potentials Turning around the Austrian Retail & Mortgage business Commission income (EUR m) CAGR: +9.1% Administrative expenses (EUR m) CAGR: -2.2% ROE 2.7% 5.0% 10.1% CIR 78.8% 76.0% 72.2% Operating result (EUR m) CAGR: +17.1% Net profit (EUR m) CAGR: +>100% 93.2» Focusing on.. profitability. strict cost management. growth opportunities (wealth management, mortgage lending etc)

6 > We managed transformational acquisitions.through stringent execution of our transition model» Complete restructuring within 18 months» Instant upgrade of key functions to Erste Bank Group standards» Keep local character to maximize market potential Net profit (m EUR) ROE 0.2% 22.3% 10.1% 20.7% Cost/income ratio 70.7% 56.9% 78.5% 55.4% Total assets (EUR bn) Clients (m) Branches Employees 15,742 10,755 6,275 4,836 6

7 > Our group has developed rapidly Net profit (in EUR m) 712 Customers (m) FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05* Cost/income ratio ROE *incl. BCR 71.8% 70.1% 67.9% 67.1% 67.9% 64.2% 64.1% 13.0% 14.3% 14.5% 15.3% 16.6% 17.0% 19.0% 61.8% 11.2% FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 7 FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05

8 > Geographic focus Central and Eastern Europe Customers Retail deposits Branches 5.3m; #1 33%; #1 646 Customers Retail deposits Branches 2.5m; #1 32%; #1 302 Population in extended home market (million) % 68 Customers Retail deposits Branches Customers Branches 0.8m 24%; #2 276 (2) 2.0m 711 Customers Retail deposits Branches 0.9m; #2 6%; #4 160 Erste Bank Group With BCR Erste Bank customers (million) % 15.2 Erste Bank Group With BCR Customers Retail deposits Branches 0.6m; #3 10%; #3 122 Customers Retail deposits Branches 0.3m 2% 66 Customers Retail deposits Branches 2.8m (1) ; #1 30%; #1 390 Erste Bank branches +14% 2,673 2,283 Note: Market share based on number of clients and retail deposits as per end of ) Approximately 5 million account holders, translating into an estimated 2.8 million customers 2) Including branches of majority owned regional savings banks Erste Bank Group With BCR 8

9 > BCR - expanding our future growth potential Integration procedures started with signing of SPA Pre closing Dec & Q1 2006» Transition Consultancy Committee ( TCC ) consisting of 10 EB senior managers has full access to BCR since January 2006» Two TCC team members attend meetings of the Executive Board» TCC team is assisted by 14 Romanian professionals who have been trained at Erste Bank since summer 2004 After closing of the acquisition in Q2 2006» Transition programme consisting of more than 20 teams covering all business functions of BCR will be headed by Erste Bank CEO» Full focus on realising BCR s revenue potential» Centralisation of back office functions» Optimisation of branch network and workforce» New BCR management team headed by present CEO will be in place by September 2006» Update on transition programme will be given in Q

10 > EB has defined clear financial targets for BCR Cost/income ratio Return on equity after tax 54% <48% >35% (1) 17% Erste Bank targets a return on investment (RoI) of around 10% for BCR by 2009 (2) (1) Based on a Tier 1 ratio of 9% (2) RoI defined as 62% of BCR net income divided by purchase price for the 62% stake in BCR; RoI calculation excludes funding costs 10

11 > Efficiency focus - New Group Architecture (NGA) NGA initiatives create synergies across the group» Group Performance Model is the strategic backbone of the NGA programme» Almost equal contribution to profit growth from revenue enhancement and efficiency improvement NGA projects E New revenues Group Large Corporates Group Cards Synergy Project Retail 2008 Sale of structured investment products EUR +14m EUR +25m EUR +45m EUR +45m Cost reduction Information Technology Group Procurement Procurement cost savings EUR +39m EUR +40m EUR +55m Positive pretax P&L effect: ~ EUR +53m ~ EUR +210m Targets announced at Erste Bank CMD in September

12 > Presentation topics 1. Consistent strategy 2. Strong execution track record 3. Growth drivers 4. Financial targets 5. Appendix 12

13 > Growth drivers Loan growth Quality growth in Central Europe» Attractive margins» Good repayment record» Benign risk environment Strong product demand» Mortgages and home improvement loans» Consumer finance» Car leasing Product penetration still very low» Loan stock/capita shows significant potential» Developed CEE: gathering momentum» Early stage CEE: just starting Long growth path ahead» In early stage CEE markets, eg Romania, Serbia and Ukraine as well as in developed CEE economies Retail loan growth in EB CEE subsidiaries (EUR bn) % % 42% Customer loans/capita in CEE (EUR 1,000) Developing transformation economies Emerging transformation economies Austria Croatia Hungary Czech R Slovakia Serbia Romania 13 As per end of Source: Local central banks. Austria: domestic loans only.

14 > Growth drivers Wealth management Fund management» FUM/capita indicates huge opportunity» Strong growth in CE, but from low base» Markets will reach scale in the medium term Life insurance» Same scenario as with fund management» Premiums/capita show gap to EU levels» Growth is steadier, tied to state regulations Leading market positions» 24.3% FUM share in Central Europe» 18.0% FUM share in Austria» Life shares range from 2% - 15% Beneficiary from catch-up process» Leveraging existing client base» Launch of new, more sophisticated products» Increased fee contribution FUM/Capita in Central Europe (in EUR) * 18,921 11, Czech R Hungary Slovakia Croatia Romania Austria Germany EB fund management market shares 37.3% 35.8% 27.9% 28.8% 25.0% 24.5% 24.3% 17.3% 18.0% 9.5% 10.2% 6.6% Czech R Slovakia Croatia Hungary CEE Total Austria

15 > Presentation topics 1. Consistent strategy 2. Strong execution track record 3. Growth drivers 4. Financial targets 5. Appendix 15

16 > Erste Bank Group s new targets Old Target New Target Net profit growth 15% p.a. average for More than 20% p.a. average for Cost/income ratio 57% in 2008 Below 55% in 2009 Return on equity (1) 20% in % in 2009 The acquisition of BCR significantly increases Erste Bank s long-term earnings growth potential (1) Based on a Tier 1 ratio of at least 7% 16

17 > Presentation topics 1. Consistent strategy 2. Strong execution track record 3. Growth drivers 4. Financial targets 5. Appendix 17

18 > Group income statement (IFRS) Strong operating performance continues to drive net profit growth EUR m FY 2005 FY 2004 % Change Net interest income 2, , Risk provisions for loans and advances (421.6) (406.2) 3.8 Net commission income 1, , Net trading result General administrative expenses (2,676.9) (2,594.9) 3.2 Result from insurance business (0.3) Other operating result (16.1) (51.3) (68.6) Pre-tax profit 1, Taxes on income (300.0) (277.9) 8.0 Minority interests (203.1) (197.9) 2.6 Net profit after minority interests Operating income 4, , Operating expenses (2,676.9) (2,594.9) 3.2 Operating result 1, , Cost/Income ratio 61.8% 64.1% ROE 19.0% 17.0% 18

19 > Group balance sheet (IFRS) Assets CE loan business drives asset growth EUR m 31-Dec Dec-04 % Change Cash and balances with central banks 2,728 2, Loans and advances to credit institutions 16,858 15, Loans and advances to customers 80,419 72, Risk provisions for loans and advances (2,817) (2,804) 0.5 Trading assets 5,426 4, AfS and assets through profit and loss 18,644 15, Financial investments 23,611 21, Intangible assets 1,911 1, Tangible assets 1,688 1,723 (2.0) Other assets 4,192 5,299 (20.9) Total assets 152, , Risk weighted assets 75,078 65,

20 > Group balance sheet (IFRS) Liabilities moderate growth in retail funding EUR m 31-Dec Dec-04 % Change Amounts owed to credit institutions 33,911 28, Amounts owed to customers 72,793 68, Debts evidenced by certificates 21,291 19, Provisions 8,635 7, Other liabilities 5,279 6,179 (14.6) Subordinated capital 4,290 3, Total equity 6,461 5, thereof: shareholders' equity 4,129 3, thereof: minority interests 2,332 2,529 (7.8) Total Liabilities 152, , Tier 1 ratio 6.8% 6.7% Solvency ratio 11.0% 10.7% 20

21 > Current shareholder structure Total numbers of shares: 308,032,560* By Investor Type By Region Capital Research & Management 5.1% Austria Verein 5.0% 30.5% Continental Europe 6.4% UK & Ireland 17.2% Others 0.9% Employees 1.5% Other institutional investors 43.8% Free Float 64.5% Savings banks 6.9% Private investors 7.2% North America 17.6% Austria 57.9% * February

22 > 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 CORRECTNESS OF THS INFORMATION OR OPINIONS CONTAINED HEREIN. CERTAIN OF THE STATEMENTS CONTAINED IN THIS DOCUMENT MY BE STATEMENTS OF FUTURE EXPECTATIONS AND OTHER FORWARD-LOOKING STATEMENTS THAT ARE BASED ON MANAGEMENT S CURRENT VIEWS AND ASSUMPTIONS AND INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS, PERFORMANCE OR EVENTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN SUCH STATEMENTS. NONE OF ERSTE BANK OR ANY OF ITS AFFILIATES, ADVISORS OR REPRESENTATIVES SHALL HAVE ANY LIABILITY WHATSOEVER (IN NEGLIGENCE OR OTHERWISE) FOR ANY LOSS HOWSOEVER ARISING FROM ANY USE OF THIS DOCUMENT OR ITS CONTENT OR OTHERWISE ARISING IN CONNECTION WITH THIS DOCUMENT. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR INVITATION TO PURCHASE OR SUBSCRIBE FOR ANY SHARES AND NEITHER IT NOR ANY PART OF IT SHALL FORM THE BASIS OF OR BE RELIED UPON IN CONNECTION WITH ANY CONTRACT OR COMMITMENT WHATSOEVER. 22

23 > Investor relations contacts Erste Bank, Graben 21, 1010 Vienna Fax +43 (0) Internet: Reuters: ERST.VI Bloomberg: EBS AV Datastream: O:ERS ISIN: AT * The new EB shares out of the capital increase in January 2006 are listed on the Vienna and Prague Stock Exchange - ISIN AT , Security Symbol EBSN. Investor relations Gabriele Werzer Tel: +43 (0) Thomas Sommerauer Tel: 43 (0) Josef Kerekes Tel: +43 (0) gabriele.werzer@erstebank.at thomas.sommerauer@erstebank.at josef.kerekes@erstebank.at 23