Česká spořitelna - Q consolidated results (unaudited, IFRS)

Transcription

1 Česká spořitelna - Q consolidated results (unaudited, IFRS) 5 May 2017 Strong Q supported by loan growth and improving loan portfolio quality

2 Executive summary Czech economy development remains favourable The GDP growth is expected to accelerate in 2017 as cyclical position improved in the 2016/2017 turn, ČS expects 2.8% growth of GDP in 2017 Headline inflation arrived at 2.6% in March driven by growing prices of food, fuel, solid domestic demand and the wage growth. Core inflation (2.2% y/y in March) reflects improving domestic demand pressures ČNB abandoned its FX commitment at the beginning of April. The EUR/CZK appreciated only slightly and remained relatively stable thereafter. In 2017, we expect only a very moderate appreciation of the EUR/CZK Yields on Czech government bonds increased recently (from negative territory) due to the inflation development and an increase in German yields. Moreover, the termination of the FX cap raised yields at the short end of the yield curve. For the rest of this year, yields will increase only slightly We expect the first ČNB interest rates increase in H However, the risk is tilted towards the 2017/18 turn. The foreign inflation pressures and ECB policy will be crucial 10% 6% 2% -2% -6% 1% 0% -1% -1% Growth of GDP, household consumption and investments GDP (y/y, %) Household consumption (y/y, in %) Fixed investment (y/y, in %) Y T-Bond Yields CZGB5YR Index GDBR5 Index GTATS5Y Govt 2

3 Executive summary Financial results reflect growing loans and continuing improvement of loan quality Net profit Operating result Capital ratio AGM Net profit of Česká spořitelna increased by 4.5% y/y to CZK 3.5 bn supported by continuing improvement of loan portfolio quality and by income from sale of financial assets from AFS portfolio given favourable market conditions Operating result decreased by 6.7% y/y due to drop of net interest income and growth of operating expenses Net interest income suffered from persisting low interest rate environment On the other hand, net fee income maintained flat y/y Operating expenses increased by 5.6% mainly due to uneven booking of expected contribution to Deposit Insurance Fund (in 2016 booked also in Q2) Capitalisation of ČS Group is very strong, total capital ratio stands at 19.1%, Tier 1 ratio at 18.5% At the Annual General Meeting held on 25 April ČS shareholders approved the distribution of the 2016 profit and payment of a gross dividend of CZK 76 per share; overall CZK 11.6 bn will be paid in dividends 3

4 Executive summary Strong loan growth with significantly improved risk costs Lending Group customer loans (gross) increased by 8.0% y/y, driven by private mortgages and loans to largest corporate customers Newly granted private mortgages increased by 61% y/y and exceeded CZK 17.5 bn which is the historically highest volume for Q1 and the highest on the market. Mortgage loan outstanding increased by 13.7% y/y Consumer loans declined by 0.8% y/y reflecting extraordinary write-offs of NPLs, excluding this impact we would see 2.2% growth in consumer lending Wholesale loans* (outstanding) boosted by 12.5% y/y driven by the largest corporate clients Risk costs Investments Risk costs significantly reduced by 63% from 33 bps to 12 bps y/y reflecting decreasing default rates, recoveries and low inflow of NPLs Share of NPLs reduced to 2.7% y/y (from 3.9% in March 2016), driven by write-offs of old NPLs NPL coverage by credit risk provisions at strong 84%, total coverage grew to 123% Increasing demand for more advantageous investment products evidenced in growing assets in pension funds of ČSPS (up by 9.0% y/y) and in domestic and foreign mutual funds (up by 15.2% y/y) * Wholesale defined as Corporate and Group Markets customer segments 4

5 Q Business highlights Retail Mortgages Loans Branches MHF More than 320,000 clients are saving money with the My Healthy Finance service. Through this service we help our clients to reduce their regular expenditure and advise them how to save and appreciate the savings Low interest rates and convenient process of applying for mortgage are still attractive. In Q we provided our clients with almost 8,700 mortgages worth above CZK 17.5 bn, which is the highest ever volume for Q1 Our cash loans are affordable and convenient. In Q we lent our clients almost CZK 9 bn in more than consumer loans. More than clients have already used our product "Peníze na klik" and borrowed from us CZK 400 m We are changing the service model of our branch network to increase the advisory role. All branches under the new concept include self-service zones. There are three types of branches small, medium with extended product and service offer, and big with full offer of products and services My Healthy Finance application is used by more than 70,000 clients. They can monitor their expenses, which are automatically sorted into categories. Clients can thus easily see on what they spend the most and on what they can save The application also allows them to compare their costs with demographically similar people, set up budgets or display how much money is left till the next salary Friends 24 With Friends 24 application our clients can transfer small payments without knowing account numbers. So far over 11,000 people downloaded and installed the app. and made around 38,000 transfers sending approx. CZK 14 m to their friends and acquaintances Real Estate ČS Real Estate Fund managed by REICO investiční společnost České spořitelny acquired office building Park One in Bratislava with the headquarters of Amazon and L Oréal. ČS Real Estate fund celebrated 10 year anniversary and plans to expand to Poland and Hungary Investments Clients of Erste Private Banking and institutional clients of Česká spořitelna asset management have thanks to the new fund ČS PRIVATE EQUITY 1 a chance to participate on private equity yields 5

6 Q Business highlights Corporates EASY LOAN A bundle of easy products and a fast-track approval process for SME clients Easy Loan is an alternative to the standard lending process. Its benefits are primarily: acceleration and cost reduction of the lending process, guaranteed period for approval and preparation of contractual documentation In Q we provided Easy Loan to 84 clients with the total volume of almost CZK 1 bn Transport cards We are participating in introducing contactless payment in the public transport of our towns. In Děčín we have helped develop a new smart payment card making it possible to pay a fare in contactless way. It is the first project of its kind in the Czech Republic where it is possible to use a prepaid bank card like a conventional payment card and also assign fares to it - one-off fares and in the form of a time coupon Smart townhall In cooperation with the Office of the Government and the company O2, we have declared the competition Smart Townhall to recognise cities and towns for introducing modern technology simplifying their running. As part of our "Smart City" package of services we help cities make investments in so-called "smart" solutions E-invoice Thanks to the E-Invoice service our clients can now receive electronic calls to settle local charges for dog licences or refuse collection in their SERVIS 24 internet banking. We are presenting the new service in cooperation with the city of Tábor EIB Česká spořitelna signed a new guarantee contract with the European Investment Bank (EIB) ensuring EUR 100 m for domestic firms and covering 50 percent of credit risks for new investment contracts with enterprises up to 3,000 employees. Česká spořitelna has loaned in cooperation with EIB a total of EUR 1.15 bn TOP EU+ New bundle of services where we offer investment loans along with requests for EU fund grants. Top EU+ enables more effective cooperation with the EIB during the providing process of low-cost loans to innovative firms 6

7 Presentation topics Česká spořitelna Financial performance analysis Macroeconomic developments Economic trends in details Banking market Czech banking market developments Česká spořitelna market shares ČS digital Appendix 7

8 Financial statements Income statement (CZK m) Change Net interest income 6,379 6, % Net fee and commission income 2,282 2, % Dividend income % Net trading and fair value result % Net result from equity method investments Rental income from investment properties & other operating leases % General administrative expenses -4,369-4, % Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net >100% Net impairment loss on financial assets not measured at fair value through profit or loss % Other operating result % Pre-tax result from continuing operations 4,206 4, % Taxes on income % Post-tax result from continuing operations 3,375 3, % Net result for the period Net result attributable to non-controlling interests Net result attributable to owners of the parent 3,375 3, % Operating income 9,428 9, % Operating expenses -4,369-4, % Operating result 5,059 4, % Cost/income ratio 46.3% 49.4% Return on equity 11.1% 11.5% 8

9 Financial statements Balance sheet I (CZK m) Assets Assets Dec 16 Mar 17 Change Cash and cash balances with central banks 173, , % Financial assets - held for trading 20, ,434 >100% Derivatives 13,357 12, % Other trading assets 7, ,031 >100% Financial assets - designated at fair value through profit or loss % Financial assets - available-for-sale 81,274 69, % Financial assets - held to maturity 167, , % Loans and receivables to credit institutions (net) 22, ,563 >100% Loans and receivables to customers (net) 577, , % Derivatives - hedge accounting % Property and equipment 10,456 10, % Investment properties 2,390 2, % Intangible assets 4,284 4, % Investments in associates and joint ventures % Current tax assets % Deferred tax assets % Assets held for sale % Other assets 3,636 3, % Total assets 1,066,526 1,310, % 9

10 Financial statements Balance sheet II (CZK m) Liabilities Liabilities and equity Dec 16 Mar 17 Change Financial liabilities - held for trading 17, ,363 >100% Derivatives 13,877 13, % Other trading liabilities 4, ,306 >100% Financial liabilities designated at fair value through profit or loss 1,997 1, % Deposits from customers 1,997 1, % Financial liabilities measured at amortised cost 911,350 1,033, % Deposits from banks 114, , % Deposits from customers 786, , % Debt securities issued 9,173 9, % Other financial liabilities 1,019 1, % Derivatives - hedge accounting % Provisions 2,909 3, % Current tax liabilities % Deferred tax liabilities % Liabilities associated with assets held for sale % Other liabilities 9,684 10, % Total equity 121, , % Equity attributable to non-controlling interests % Equity attributable to owners of the parent 121, , % Total liabilities and equity 1,066,526 1,310, % 10

11 Financial performance Executive summary Net profit increased by 4.5% y/y in Q Q/Q net profit reconciliation (CZK m) Y/Y net profit reconciliation (CZK m) -0.2% 4.5% 3, ,528 3, ,528 P/L positive P/L negative P/L positive P/L negative Q4 16 Operating income Operating expenses Net provision creation Other result* Taxes on income Minorities Q1 17 Operating income decreased by 5% q/q driven by lower net interest income (-2%), net trading and FV result (-14%) and net fee and commission income (-5%) Operating expenses reduced by 6% q/q mainly due to seasonality In Q higher costs for marketing and property management and creation of restructuring provision Net provision creation dropped by 78% q/q due to higher creation in Q covering several individual defaults Income tax development impacted by deferred tax asset from impairment of buildings created in Q Operating income * Includes Gains/losses from financial assets and liabilities not measured at fair value and Other operating result Operating expenses Net provision Other result* creation Taxes on income Minorities Important contributor to growth of net profit was sale of financial assets from AFS portfolio with positive impact CZK 230 m (visible in Other result) Decline of operating income attributed mainly to net interest income (CZK -0.2 bn), on the other hand net fee income kept flat and net trading and FV result grew by 25% Growth of operating expenses caused mainly by uneven booking of expected contribution to Deposit Insurance Fund (in 2016 booked also in Q2) Low default rates, higher recoveries and significant releases in individual creation led to further reduction of net provision creation (-60.0%) 11

12 Financial performance Executive summary Balance sheet influenced by huge inflow of liquidity in connection with FX interventions YTD total asset reconciliation (CZK bn) 22.9% YTD total liability reconciliation (CZK bn) 22.9% 1, , , ,310.8 Positive Negative Increase Decrease Dec 16 Cash and balances with ČNB Trading, financial assets Loans to banks Net customer loans Intangibles Other assets Mar 17 Dec 16 Trading liabilities Bank deposits Customer deposits Debt securities Other liabilities Equity Mar 17 Asset side of the B/S reflects placing of liquidity inflow to ČNB Cash and balances with ČNB increased by CZK 58 bn in Q driven by overnight deposits with ČNB Trading assets grew by more than 100% due to reverse repo operations with ČNB Loans to banks increased by CZK 93 bn due to placing of overliquidity (including funds from institutional investors) to ČNB Net customer loans added 2.2% in Q Liability side influenced by huge inflow of liquidity into CR as a consequence of expectations regarding FX interventions Trading liabilities boosted by more than 100% due to repo operations with non-banking financial institutions Bank deposits rose by 73.5% since YE 2016 Group customer deposit base increased by 4.7% since YE 2016 Deposits in parent bank up by 6.4%, driven by deposits from public sector (+28.4%) and corporate deposits (+10.3%); deposits from private individuals grew by 2.8% since YE

13 Financial performance Executive summary Sound capitalisation and stable ROE Cost/income ratio Loan/deposit ratio Number of branches 42.8% 46.3% 49.4% * 74.7% 73.2% 71.4% Mar 16 Dec 16 Mar 17 Mar 15 Mar 16 Mar 17 ROE Total capital ratio Number of employees (eop) 13.3% 11.1% 11.5% 20.1% 20.1% 19.1% 10,545 10,487 10, Mar 16 Dec 16 Mar 17 Mar 15 Mar 16 Mar 17 * Uneven booking of expected contribution to Deposit Insurance Fund added 1pp 13

14 Operating result 6.7 % below Q Shrinking operating income (-1.0% y/y) and higher operating expenses caused decline of operating result Net interest income and rental income went down but net fee income maintained at Q level Rental income down by 37.4% due to reduction of investment in real estate SPV Net trading and FV result increased by 25.1% y/y Driven by growing profit from foreign currency derivatives (customers hedging connected to expected exit from ČNB interventions) Operating expenses rose by 5.6% driven mainly by uneven booking of expected contribution to Deposit Insurance Fund /details on slide 17/ Operating result (CZK m) -6.7% 5,911 5,059 4, Operating income structure (CZK m) 192 1, ,521 2,282 2,293 6,429 6,379 6, Net interest income Net fee and commision Net trading and fair value result Other 14

15 Net interest income Decreased by 3.3% y/y Increase in loan volumes did not offset effect of prevailing pressure on interest margins Lower interest income from bonds reflecting declining yields partly mitigated by lower cost of funds Net interest margin decreased to 2.71% Reflected a pressure on interest margins and extraordinary increase of interest bearing assets, mainly interbank assets with almost no margin which rose by CZK 81 bn y/y (+233%) due to placing of funds from institutional investors to ČNB. Excluding this extraordinary effect interest margin would reach 3.0% Net interest income (CZK m) -3.3% 6,429 6,379 6, Net interest margin 3.32% 3.19% 2.71% 0.17% -0.05% -0.04% Net interest margin 5Y CZGB yield; Q1 AVG 15

16 Net fee and commission income Kept at Q level Net fee income maintained flat in y/y comparison as declining fee income from lending was offset by growing income from securities and asset management Income from securities and asset management rose by 30% y/y, supported also by higher fees from pension funds in connection with legislative change in 2016 Higher income from sale of insurance products served as another contributor to net fee income Net fee income from payment transfers declined by 4% y/y Net fee and commission income (CZK m) 0.5% 2,521 2,282 2, Net fee and commission income structure (CZK m) ,423 1,233 1, Lending Payment transfers * Securities transactions Other * Including fees from account maintenance and payment cards fees 16

17 Operating expenses Increased by 5.6% y/y Development of operating expenses influenced by uneven booking of expected contribution to Deposit Insurance Fund (in 2016 booked also in Q2), excluding this effect operating expenses rose by 2.8% Personnel expenses rose by 2.1% reflecting higher wages and employee benefits Other administrative expenses excluding impact of Deposit insurance fund increased by 2.0% mainly due to IT investments in digitalisation and regulatory requirements Depreciation went up by 8.1% y/y affected by higher depreciation of software Operating expenses (CZK m) 5.6% 4,421 4,369 4, Operating expenses structure (CZK m) ,735 1,677 1,833 2,151 2,188 2, Personnel expenses Other administrative expenses Depreciation and amortisation 17

18 Group capital position Total capital ratio at sound 19.1% Regulatory capital (CZK bn) Risk exposures (CZK bn) Capital ratios % 20.1% 19.5% 20.1% 18.5% 19.1% /03/ /12/ /03/2017 CET 1 capital Additional Tier 1 Tier 2 Total capital 31/03/ /12/ /03/2017 Credit risk Market risk Operational risk Total 31/03/ /12/ /03/2017 Tier 1 ratio Total capital ratio Total capital grew by 2.2% y/y thanks to higher retained profit and lower dividends; slight decline since YE 2016 reflected credit risk provisions that were not audited yet Tier II capital increased following inclusion of preference shares from CET 1 Growing risk exposures driven mainly by credit risk area reflecting growth of corporate and retail loans Total capital ratio decreased mostly due to the business growth (reflected in growing risk exposures) which is in line with ČS business strategy; total capital increased 18

19 Balance sheet development High growth in loans and even faster growth in deposits Group net customer loans (CZK bn) Group customer deposits (CZK bn) 8.7% % Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 CZK EUR Other Group net customer loans increased by 8.7% compared to March 2016 driven by retail mortgages and loans to the largest corporate customers /details to loans in the lending part of the presentation/ FX loans represent 14% of net loans, concentrated solely in corporate area almost only in EUR Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Households Corporates General governments Double digit growth of customer deposits attributed mainly to growing deposit base from private individuals and corporate clients 19

20 ČS Group deposits Persisting growth of alternative and standard deposit products Customer deposits in parent bank accelerated and grew by 16.0% y/y Private individuals and corporate clients were the major contributors to the overall growth of customer deposits Assets in pension company increased by 9.0% Organic increase of volumes split between transformed and participant funds Domestic and foreign mutual funds* added 15.2% in 2016 Prevailing low interest rates support higher clients demand for alternative higher-yielding products In Reico investment company customer assets increased by more than 50% in y/y comparison Assets under discretionary management grew by 7.0% in y/y comparison ČS Group deposits (CZK bn) 1, ,089.6 Mar-16 Dec-16 Mar-17 IFRS, in CZK bn Mar-16 Dec-16 Mar-17 CS asset management Domestic and foreign mutual funds ČSPS SSČS Change (y/y) ČS - customer deposits % SSČS - building society % ČSPS - pension company % * 13.0% Dom. and foreign mutual funds % thereof Reico - investment company % Asset management % Total , , % *Mutual funds are now reported in line with AKAT methodology. History has been restated. ČS Total 20

21 Group loan portfolio Summary Portfolio growth accompanied with low risk costs and better quality Gross loans to customers in ČS Group increased by 8.0% y/y to CZK 604 bn Outstanding demand for private mortgages in previous months materialized in a rapid growth of on balance. Consumer lending affected by nonrecurring large write offs. Growth of wholesale was driven by the largest clients and non-banking financial institutions Detail segment figures are affected by internal resegmentation of public and non profit sector (CZK 9.1 bn moved from retail to wholesale in Q4 2016) and further reshuffle in wholesale itself (transfers among sub-segments following an implementation of a new corporate strategy)* Risk costs reduced significantly by 63% from 33 bps to 12 bps y/y Declining default rates and recoveries in private individuals Recoveries and low NPL inflow in wholesale When including provisions for guarantees, risk costs would decrease from 31 bps to 11 bps y/y Portfolio quality further improved and NPL ratio dropped from 3.9% to 2.7% y/y Quality improvement driven by nonrecurring write off of retail loans (CZK 2.0 bn, of which consumer lending CZK 1.9 bn), recoveries and low inflow of new NPLs combined with loan portfolio growth Provision coverage remained at strong 84%, total coverage (provisions+collateral to NPL) improved to 123% (from 106% in Q1 2016) * Historic data has not been reclassified 21

22 Group loan portfolio Group loans increased by 8.0% y/y driven by all CS Group members ČS Group loan portfolio (gross) Industry split of loan portfolio as of March 2017 in CZK m, IFRS 31/03/2016 % share 31/03/2017 % share Y/Y Change I. ČS Bank 520, % 563, % 8.4% II.1. Stavební spořitelna ČS 35, % 35, % 1.5% II.2. Leasing (sal, EL) 14, % 15, % 7.7% II.3. Factoring ČS 4, % 5, % 14.2% III. Other subs and Consolidation items -15, % -16, % 8.4% Total Loans (consolidated) 559, % 603, % 8.0% Energy 3% Wholesale and retail trade 6% Other <3% 18% Private Households 51% Manufacturing 10% Real Estate 12% ČS Bank dominates the ČS Group Interest rates at bottom for housing markets and continuing economic growth led to further growth in ČS bank and all of its major subsidiaries Private households remains behind more than half of the loan portfolio 22

23 in CZK bn Bank loan portfolio Portfolio growth fuelled proportionally by both retail and wholesale* Loan portfolio development - ČS Bank Loan portfolio by customer segments as of March % 20% Others 6.0% Large corporates 13.2% % 7.4% 8.8% 8.3% 8.4% Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Retail loans Wholesale loans Total loan growth (y/y) 10% 0% Mortgage & real est. 46.0% SME 23.6% Consumer, private credit cards, overdrafts and home equity 11.2% Loans to retail rose by 6.2% y/y (excluding resegmentation of CZK 9.1 bn in Q by 9.2%) Driven primarily by private mortgages (+13.7%) Commercial loans when excluding resegmentation of public sector grew by 5.4% Loans to wholesale* added 12.5% y/y (excluding resegmentation in Q of CZK 9.1 bn by 8.2%) Growth driven mainly by real estate, public sector and SMEs * Wholesale defined as Corporate and Group Markets. 23

24 in CZK bn in CZK bn Bank loan portfolio Mortgages further accelerated, consumer lending affected by write offs Private mortgages development Consumer lending development* % % % 11.5% 11.9% 12.2% % 20% 15% % -1.8% -0.3% 1.1% -0.8% 40% 20% 0% 160 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 10% 0 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17-20% Private Mortgages Private Mortgages growth (y/y) Private mortgages accelerated to CZK bn (+13.7% y/y) Strong sales in Q and Q started to be utilized now LTV ratio for the whole portfolio declined from 64.3% to 62.0%, following regular collateral repricing Consumer Lending Consumer Lending growth (y/y) Consumer lending* at CZK 63.0 bn (-0.8% y/y) after nonrecurring write offs (CZK 1.9 bn) Outstanding sale of cash loans was offset by extraordinary write offs in March Underlying growth of the portfolio would reach +2.2% *Consumer lending here includes Cash loans, home equity loans, private credit cards and private overdrafts. Social loans are excluded. 24

25 in bp Group asset quality Improving risk profile and coverage, significant decline of risk costs NPL ratio and NPL coverage Risk costs development 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 83% 84% 80% 76% 73% 3.9% 3.6% 3.3% 3.2% 2.7% Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 90% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% % -53.6% -47.8% -33.4% -62.9% Mar 16 Jun 16 Sep 16 Dec 16 Mar % 200% 100% 0% -100% Group NPLs Risk Provisions / NPLs Group risk costs Y/Y change Group NPL share dropped to 2.7% Driven by write offs in retail, low NPL inflow and recoveries Provision coverage at strong 84%, total coverage (provisions+collateral to NPL) improved to 123% Annualized group risk costs declined to 12 bps Ongoing positive macroeconomic development with limited number of small defaults, no larger defaults or additional provision creations on already defaulted wholesale clients 25

26 Presentation topics Česká spořitelna Segment financial performance analysis Macroeconomic developments Economic trends in details Banking market Czech banking market developments Česká spořitelna market shares ČS digital Appendix 26

27 Macroeconomic developments GDP growth will accelerate in 2017 Real GDP growth y/y Components of GDP 2.7% 4.6% 2.3% 2.8% 2.9% 9.1% Private consumption growth Fixed capital formation growth 0.5% 3.9% 1.8% 3.1% 2.9% 2.7% 1.9% 2.8% 2.5% -0.5% e 2018e The GDP growth slowed down to 2.3% in 2016, was driven mainly by a temporary decrease in investments However, real economic activity remained solid, favourably influenced by both domestic and foreign demand. Also, the weak EUR/CZK exchange rate positively affected the GDP growth In 2016/17 turn, the cyclical position further improved mainly due to economic recovery in the Eurozone. We expect GDP growth will reach almost 3% in 2017 and 2018 as the favourable development in both domestic and foreign demand will continue -2.5% Note: Source for historic figures is Czech statistical office. Figures for forthcoming years are ČS forecasts -3.6% e 2018e Relatively stable growth of household consumption is the most important GDP growth contributor. It is being supported by a strong labour market and positive sentiment of households Decrease in fixed investment in 2016 was affected by significant public investments financed by EU funds in In 2017, investment expenditures will contribute positively to the GDP growth due to the improved economic development in Eurozone and higher public investments The manufacturing sector, supported to a large extent by continuing expansion in the automotive industry, remained the most significant contributor to GDP growth on the supply side (adding 1.2pp in Q4 2016) 27

28 Macroeconomic developments The lowest unemployment rate in the EU Unemployment and inflation General government debt and government balance 6.8% 1.4% Unemployment rate (eop) Consumer price inflation (avg) 5.9% 4.6% 3.7% 3.6% 3.5% 2.7% 2.0% 0.3% 0.3% 0.7% General government debt (share of GDP) General government balance (share of GDP) 44.9% 42.2% 40.3% 37.2% 35.7% 35.9% 0.6% e 2018e Average CPI arrived at 2.6% in March as it was supported by prices of food, fuel and also by domestic demand pressures We expect a slight increase in CPI inflation during 2017 due to solid domestic demand, increase in wage costs of firms and also lower anti-inflationary pressures from the Eurozone The general unemployment rate (ILO) reached 3.4% in February and is still the lowest in the EU -1.2% -1.9% -0.6% -0.6% -0.4% e 2017e 2018e The strong growth of the Czech economy and high inflow of EU funds positively affected the central government s cash flow-based budget, which reached a surplus in 2016 In 2017 and 2018, we expect a slight deficit in general government balance due to higher public consumption and investment expenditures The share of public debt to nominal GDP is anticipated to further decrease, mainly thanks to the favourable development of the Czech economy Note: Source for historic figures is Czech statistical office. Figures for forthcoming years are ČS forecasts 28

29 Macroeconomic developments Yields of Czech T-bonds increased Domestic demand pressures are important factors behind the inflation development as the core inflation contributed approx. 1.2pp to the overall inflation in March The ČNB abandoned the FX commitment at the beginning of April The EUR/CZK appreciated only slightly and remained relatively stable thereafter We expect only a moderate appreciation in coming quarters as foreign investors will gradually sell CZK and thus mitigate the appreciation tendencies We expect a first increase in ČNB rates in H However, the risk is tilted towards the 2017/18 turn. The inflation pressures in the Eurozone and ECB policy will be crucial Yields of government bonds increased reflecting higher pro-inflationary pressures and exit from the FX cap % 1% 0.5% 0% -0.5% CPI Break-down Inflation of CPI y/y Regulated prices Food, beverages and tobacco Fuel Indirect taxes Core CPI 10Y T-Bond Yields CZGB10YR Index GDBR10 Index GTATS10Y Govt 29

30 Presentation topics Česká spořitelna Segment financial performance analysis Macroeconomic developments Economic trends in details Banking market Czech banking market developments Česká spořitelna market shares ČS digital Appendix 30

31 Czech banking market Sufficiently capitalized and resilient, with low and falling NPL share Capital ratios of Czech banks* (%) Non-performing loan ratios (%) Q Q Q Q Q Q Large banks Medium-sized banks banks Small banks T1 Capital ratio Total capital ratio * Compliant with ČNB segmentation of banks, data for March not available yet According to latest ČNB stress tests the Czech banking sector has a strong capital adequacy, liquidity and robust profitability The counter-cyclical capital buffer rate for exposures of Czech banks is set at 0.5%; this rate is applicable from January In March 2017 the ČNB decided to keep the buffer rate at this level also following April 2018 Impact of the ČNB s exit from its FX floor will be small since movements of the exchange rate are unlikely to be sizeable and banks are largely hedged against them 6% 5% 4% 3% 2% 1% 0% 4.0% Total 3.4% 5.2% 5.0% Non-financial corporations Mar 16 Mar % 2.9% Households The share of non-performing loans (NPL ratio) in the retail sector has been falling since 2013 in line with the improving economic situation The NPL ratio in the corporate sector has been hovering around 5% since the Spring of

32 Czech banking market Vivid growth of loans and deposits in retail as well as corporate sector Retail and corporate loans (y/y growth) Retail and corporate deposits (y/y growth) 6.4% 6.7% Retail loans Corporate loans 8.2% 6.9% 7.3% 5.9% 6.0% 4.7% Retail deposits 7.3% 7.7% 6.5% 5.9% Corporate deposits 8.4% 9.6% 11.6% 0.0% Jun 16 Sep 16 Dec 16 Mar 17 Jun 16 Sep 16 Dec 16 Mar 17 In March 2017, total loans grew by 7.3% y/y. The main source was growth of loans to households. In the first quarter of 2017 this growth accelerated to values above 8% (average for the previous year was by a percentage point lower) In 2017, ČS expects client loans to grow by some 5.7%. Growth of loans to households will ease, relative to current tempos, to 7%. Housing loans will grow at a similar pace. For corporate loans, ČS expects growth slightly above 5% Y/y growth in household deposits has been increasing in recent quarters; in first quarter of 2017 it rose above 9% After very low figures in H2 2016, during the first quarter of the current year y/y growth of corporate deposits reached a level above 10%. Deposits of financial institutions keep their fast y/y growth observable already since the Autumn of 2015 For 2017 ČS expects total deposits to grow slightly less than 6% y/y 32

33 Czech banking market Limited exposure of clients to FX risk Customer loans (March 2017) Customer deposits (March 2017) 12.5% 0.1% 2.3% 5.1% 24.9% 28.6% 58.7% 67.7% LC retail loans FX retail loans LC corporate loans FX corporate loans LC retail deposits FX retail deposits LC corporate deposits FX corporate deposits 33

34 Banking market Market shares of ČS (March 2017) Asset side Liability side 23% 23% 23% 23% 23% 25% 25% 25% 25% 25% 18% 19% 19% 19% 19% 19% 19% 20% 19% 20% 11% 12% 12% 12% 12% Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Total assets Retail loans Corporate loans Market leadership in: Number of customers (4.7 m) Total mortgages (market share of 27%) Consumer loans incl. credit cards (market share of 28%) Total loans (market share of 21%) No. 2 in: Total assets (market share 19%) Private mortgages (market share 25%) *Data as of Dec 2016 Retail deposits Corporate deposits Market leadership in: Total deposits (market share of 22%) 25% in retail deposits, 12% in corporate deposits Mutual funds with market share of 25%* 34

35 Presentation topics Česká spořitelna Segment financial performance analysis Macroeconomic developments Economic trends in details Banking market Czech banking market developments Česká spořitelna market shares ČS digital Appendix 35

36 ČS digital Česká spořitelna is a traditional bank with almost 200 years of history. At the same time it is modern institution, which introduces unique digital and mobile products and services on the banking market. Here are some of them: Investment centre Easy way to monitor stock-exchange, market analyses, exchange rates and commodity prices Friends 24 New way of making small payments without knowing the account number SERVIS 24 Mobile bank Allows clients to transfer money, make QR code payments and manage payment cards wherever they are My status Application for clients who do not need to make payments, but want to continually monitor their finances Melinda Offers easy way to contribute to various charitable projects Ticket dispenser This application allows clients to set up a meeting in the branch BUSINESS 24 Mobile bank Makes the management of company finances easy even during traveling 36

37 Presentation topics Česká spořitelna Segment financial performance analysis Macroeconomic developments Economic trends in details Banking market Czech banking market developments Česká spořitelna market shares ČS digital Appendix 37

38 Structure of ČS Group loan portfolio (gross) Group customer loans in CZK m, IFRS Outstand. Share Outstand. Share Outstand. Share Outstand. Rate Outstand. Rate RETAIL 304, % 318, % 323, % 5, % 18, % Overdrafts 5, % 5, % 5, % % % of which non-private (MSE, Muni) 1, % 1, % 1, % % % Credit cards 3, % 3, % 2, % % % of which non-private (MSE, Muni) % % % % % Cash loans 52, % 53, % 53, % % 1, % Private social % % % % % Home equity mortgages 3, % 3, % 3, % % % Private mortgages 190, % 209, % 216, % 6, % 25, % Commercial loans 48, % 41, % 41, % % -6, % * 31/03/ /12/ /03/2017 YTD change YTY change WHOLESALE 212, % 233, % 239, % 5, % 26, % Corporate 211, % 226, % 232, % 5, % 21, % Group Large corporates 31, % 36, % 39, % 3, % 8, % Local Large corporates 38, % 39, % 34, % -4, % -3, % SME 89, % 89, % 91, % 1, % 1, % Real estate 38, % 40, % 43, % 2, % 4, % Public sector 13, % 21, % 24, % 2, % 11, % Group Markets % 6, % 6, % % 5, % OTHER 2, % % % % -2, % BANK: LOANS TO CUSTOMERS 520, % 551, % 563, % 11, % 43, % SUBSIDIARIES 54, % 56, % 57, % % 2, % CONSOLIDATION ITEMS -15, % -15, % -16, % % -1, % GROUP: LOANS TO CUSTOMERS 559, % 592, % 603, % 10, % 44, % * Wholesale defined as Corporate and Group Markets. 38

39 Ratings of Česká spořitelna Status as of 5th May 2017 Rating Agency Long-term Short-term Viability Support Outlook Latest actions Fitch A- F1 a- 2 stable 26/04/2017 Moody's A2 Prime - 1 stable 17/03/2015 Standard & Poor's A A-1 negative 16/03/2017 Latest rating actions Fitch upgraded short-term rating to F1 (from F2) and confirmed all other ČS ratings on 26th April 2017 Rating agency Standard & Poor s upgraded all ČS ratings on 16th March 2017, outlook remained negative Moody s revised the outlook for LT rating of ČS from negative to stable on 17th March

40 Macroeconomic figures Historical and forecasted macroeconomic data e 2018e Population (avg, m) GDP/capita (EUR thsd) Real GDP growth Consumer price inflation (avg) Unemployment rate (eop) Current account balance (share of GDP) General government balance (share of GDP) Public debt (share of GDP) Short term interest rate (3 months, eop) EUR FX rate (eop)

41 Financial statements Quarterly development (CZK m) Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q/Q % Net interest income 6,379 6,396 6,412 6,326 6, % Net fee and commission income 2,282 2,364 2,252 2,410 2, % Dividend income % Net trading and fair value result % Net result from equity method investments % Rental income from investment properties & other operating leases % General administrative expenses -4,369-4,413-4,450-4,915-4, % Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 2 1, Net impairment loss on financial assets not measured at fair value through profit or loss % Other operating result >100% Pre-tax result from continuing operations 4,206 6,170 4,607 3,941 4, % Taxes on income , >100% Post-tax result from continuing operations 3,375 4,864 3,685 3,530 3, % Net result for the period Net result attributable to non-controlling interests % Net result attributable to owners of the parent 3,375 4,863 3,686 3,534 3, % Operating income 9,427 9,546 9,480 9,774 9, % Operating expenses -4,369-4,413-4,450-4,915-4, % Operating result 5,059 5,131 5,031 4,860 4, % Cost/income ratio 46.3% 46.2% 46.9% 50.3% 49.4% 41

42 Segment financial statements Segment Czech Republic - income statement (EUR m) Change Net interest income % Net fee and commission income % Dividend income na Net trading and fair value result % Net result from equity method investments na Rental income from investment properties & other operating leases % General administrative expenses % Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net % Net impairment loss on financial assets % Other operating result % Levies on banking activities na Pre-tax result from continuing operations % Taxes on income % Post-tax result from continuing operations % Post-tax result from discontinued operations na Net result for the period % Net result attributable to non-controlling interests % Net result attributable to owners of the parent % Operating income % Operating expenses % Operating result % Cost/income ratio 47.6% 50.2% Return on allocated capital 26.8% 26.6% 42

43 Segment financial statements Quarterly development Segment Czech Republic - income statement (EUR m) Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Net interest income Net fee and commission income Dividend income Net trading and fair value result Net result from equity method investments Rental income from investment properties & other operating leases General administrative expenses Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net Net impairment loss on financial assets Other operating result Levies on banking activities Pre-tax result from continuing operations Taxes on income Post-tax result from continuing operations Post-tax result from discontinued operations Net result for the period Net result attributable to non-controlling interests Net result attributable to owners of the parent Operating income Operating expenses Operating result Cost/income ratio 47.6% 47.3% 47.8% 51.1% 50.2% Return on allocated capital 26.8% 41.5% 29.3% 27.5% 26.6% 43

44 Investor Relations contacts Česká spořitelna Miloš Novák Tel: Eva Čulíková Tel: Josef Boček Tel: Erste Group Thomas Sommerauer, Head of Group Investor Relations Tel: Peter Makray, Investor Relations Manager Tel: