Česká spořitelna - Q consolidated results (unaudited, IFRS)

Transcription

1 Česká spořitelna - Q consolidated results (unaudited, IFRS) 4 May 2016 ČS net profit reached CZK 3.4 bn, strong loan growth continues with further improvement in credit quality

2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Executive summary Positive household sentiment but bond yields pressures Labour market strengthening and positive sentiment of households favourably influence household consumption and retail sales Although Czech CPI inflation slightly increased at the beginning of 2016, it remains low due to a last year s decline in fuel prices and subdued economic activity in the Eurozone. However, core inflation still above 1% y/y The EUR/CZK is still close to the 27 cap at the beginning of 2016 forcing the ČNB to intervene, although the volume of interventions has decreased Despite the high inflow of speculative capital and monetary easing in the Eurozone, the yield on Czech 5Y T-bonds oscillated around zero during Q Since 3/2016, Czech 5Y yields have been steadily increasing, mainly due to the slight recovery in inflation In 2016 GDP growth is estimated to slow down to 2.5%, from 4.3% reached in 2015, mainly due to lower public investments associated with EU funds. The cyclical position will remain solid 8% 6% 4% 2% 0% -2% -4% 2% 1% 1% 0% -1% Households consumption and retail sales Household consumption growth Growth of sales in retail trade Consumer confidence (r.a.) Y T-Bond Yields CZGB5YR Index GDBR5 Index GTATS5Y Govt 2

3 Executive summary Financial results reflect competitive and regulatory pressures Česká spořitelna generated net profit of CZK 3.4 bn in Q which was 7.9% below Q Operating result declined by 14.4% y/y due to lower operating income (excluding one-off in Q operating result would decrease by 2.9% y/y) Decline mainly driven by net trading and FV result which dropped by 46.8% y/y (change in valuation of derivatives in Q with one-off income of CZK 0.7 bn) Net fee income fell by 9.5% y/y impacted by growing customer preferences of advantageous products and EU regulation in payment cards business. On the other hand, net fee income from securities business and asset management continuously grow Net interest income remained almost flat despite still challenging historically low market interest rates Operating expenses declined by 1.2% y/y despite growing expenses for IT projects connected to new digital applications and regulatory compliance Net profit was supported by significantly lower credit risk provision creation (-46.8%) reflecting ongoing improvement in loan portfolio quality At the Annual general meeting held on 22 April, ČS shareholders approved the distribution of the 2015 profit and payment of a gross dividend of CZK 84.2 per share; overall, CZK 12.8 bn will be paid out in dividends as of 1st June

4 Executive summary Strong loan growth with risk costs at 32 bps Growth dynamics in customer loans accelerated, gross loans added 6.5% y/y Driven by continuing strong growth of private mortgages (gross outstanding volume grew by 11.9% y/y) Volume of new mortgages granted in Q expanded by almost CZK 11 bn (+16%) y/y Risk costs cut in half to 32 bps since Q (from 64 bps) reflecting continuous improvement in credit quality Share of NPLs further reduced to 3.8% (from 4.2% in March 2015) NPL coverage by credit risk provisions declined to 75% due to implementation of EBA NPL* definition in December 2015 Higher demand for alternative investment products lead to growth of assets in the pension funds of ČSPS (up by 11.7% y/y) and in domestic and foreign mutual funds (up by 13.2% y/y) ČS Group is very well capitalized, Tier 1 capital ratio increased to 20.1% (from 19.5% in March 2015), supported by AT1 capital issued in December 2015 *Main impact of EBA NPL is a move from product view of NPL definition to a client view 4

5 Supporting the fulfilment of clients needs 5

6 Q business highlights Na růstu nově poskytnutých hypoték se podílela i naše Our velikonoční campaigns nadílka: contributed hypotéky to the s growth mimořádně in new sníženou mortgages: úrokovou interest rates sazbou were od fixed 1,99 % at p.a. 1.99% s osmiletou p.a. and fixací 1.89% a 1,89 p.a. for % p.a. 8 and s desetiletou 10 years, fixací. Nabídka respectively. byla platná od do We make online payments easier for businesses. With the PLATBA 24 service, over 100,000 MSEs can pay through Internet banking in more than 1,800 e-shops. We are trying to be unique. We launched Internet access for clients in more than 500 branches. The network is secured and clients can use it for an unlimited period of time while at the branch. 800 thousand clients already use benefits from the programme Za důvěru (For Your Trust). New and current ČS clients can have maintenance of the Private Account free of charge subject to simple conditions with this programme. Communication with clients is more efficient. Česká spořitelna penzijní společnost, Stavební spořitelna České spořitelny and Pojišťovna České spořitelny switched to the electronic submission of all documentation in SERVIS 24. ESPA Stock Biotec reached an attractive yield in 2015 (21.59% and 36.44% for one-time and regular investors, respectively). The fund was awarded as the best equity fund by the jury of the competition Finparáda.cz Financial Product of With the Melinda application that lists charitable projects executed by non-profit organisations, ČS intermediates help for the benefit of individuals and society as a whole. The Mysterious Path is another ČS project that should help young people find their bearings in the world of finance. The online game is available to anyone at 6

7 Q business highlights Investment Loan Term and Overdraft Facilities Senior Secured Term and Revolving Facilities ECA Secured Trade Finance Facility CZK 4,049,000,000 EUR 230,000,000 EUR 185,000,000 EUR 17,500,000 Arranger Arranger Original Lender Arranger Acquisition, investment and revolving credit facilities within a complex financing solution CZK 2,500,000,000 Mandated co-lead arranger Long Term Development and Investment Facility CZK 540,000,000 Original Lender Long Term Loan Facility EUR 56,000,000 Agent and Original Lender With the new Smart City package, we assist towns and cities in implementing smart solutions in areas such as municipal waste collection, cashless payments in public transport and intelligent street lighting 7

8 Presentation topics Česká spořitelna Financial performance analysis Macroeconomic developments Economic trends in details Banking market Czech banking market developments Česká spořitelna market shares Appendix 8

9 Financial statements Income statement (CZK m) Change Net interest income 6,429 6, % Net fee and commission income 2,521 2, % Dividend income 1 3 >100% Net trading and fair value result 1, % Rental income from investment properties & other operating leases % General administrative expenses -4,421-4, % Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net % Net impairment loss on financial assets not measured at fair value through profit or loss % Other operating result % Pre-tax result from continuing operations 4,521 4, % Taxes on income % Post-tax result from continuing operations 3,666 3, % Net result for the period Net result attributable to non-controlling interests Net result attributable to owners of the parent 3,666 3, % Operating income 10,332 9, % Operating expenses -4,421-4, % Operating result 5,911 5, % Cost/income ratio 42.8% 46.3% Return on equity 13.3% 11.1% 9

10 Financial statements Balance sheet I (CZK m) Assets Assets Dec 15 Mar 16 Change Cash and cash balances with central banks 111, , % Financial assets - held for trading 14,725 25, % Derivatives 13,995 15, % Other trading assets 730 9,707 >100% Financial assets - designated at fair value through profit or loss % Financial assets - available-for-sale 78,053 78, % Financial assets - held to maturity 160, , % Loans and receivables to credit institutions (net) 34,717 34, % Loans and receivables to customers (net) 532, , % Derivatives - hedge accounting % Property and equipment 12,318 12, % Investment properties 4,949 4, % Intangible assets 3,966 3, % Current tax assets % Deferred tax assets % Other assets 3,861 3, % Total assets 959, , % 10

11 Financial statements Balance sheet II (CZK m) Liabilities Liabilities and equity Dec 15 Mar 16 Change Financial liabilities - held for trading 14,956 29, % Derivatives 14,944 16, % Other trading liabilities 12 12,899 >100% Financial liabilities designated at fair value through profit or loss 4,019 3, % Deposits from customers 4,019 3, % Debt securities issued Financial liabilities measured at amortised cost 811, , % Deposits from banks 83,915 89, % Deposits from customers 709, , % Debt securities issued 15,493 11, % Other financial liabilities 2,454 3, % Derivatives - hedge accounting % Provisions 2,584 3, % Current tax liabilities % Deferred tax liabilities % Other liabilities 5,166 8, % Total equity 119, , % Equity attributable to non-controlling interests % Equity attributable to owners of the parent 119, , % Total liabilities and equity 959, , % 11

12 Financial performance Executive summary Net profit increased by 6.9% in Q compared to Q Q/Q net profit reconciliation (CZK m) Y/Y net profit reconciliation (CZK m) 6.9% -7.9% , ,375 3, ,375 P/L positive P/L negative P/L positive P/L negative Q4 15 Operating income Operating expenses Net provision creation Other result* Taxes on income Minorities Q Operating income Operating expenses Net provision Other result* creation Taxes on income Minorities Growth of net profit q/q attributed to lower operating expenses and lower net provision creation which was partially offset by decline of net fee income and worsened other result Operating expenses down by 11.7% due to seasonally higher costs in Q (digitalisation, marketing), lower contribution to deposit insurance fund (adoption of EU regulation) and continuous cost management Net fee income dropped by CZK 443 m (-16.2%) impacted by seasonally strong Q mainly in securities, asset management and insurance Other result declined due to provision creation for annual contribution to Resolution fund in 2016 (CZK 388 m) * Includes Gains/losses from financial assets and liabilities not measured at fair value and Other operating result Decline of net profit caused mainly by decrease of net trading and FV result and net fee income Net trading and FV result in Q positively impacted by change in derivatives valuation (implementation of OIS discounting) with one-off income CZK 0.7 bn Drop of net fee and commission income attributed to lower income from lending, from card business (EU regulation in interchange fees) and from account maintenance Net provision creation declined by 46.8% reflecting further improvement in credit quality 12

13 Financial performance Executive summary Balance sheet reached almost CZK 1 trillion YTD total asset reconciliation (CZK m) YTD total liability reconciliation (CZK m) 3.9% 3.9% 959,584 16,272 10, , , ,584 14,604 5,619 12,781-3,793 5,085 3, ,222 Positive Negative Increase Decrease Dec 15 Cash and balances with ČNB Trading, financial assets Loans to banks Net customer loans Intangibles Other assets Mar 16 Dec 15 Trading liabilities Bank deposits Customer deposits Debt securities Other liabilities Equity Mar 16 Total balance sheet reached almost CZK 1 trillion Cash and balances with ČNB increased by more than CZK 16 bn since YE 2015 due to placing overliquidity with ČNB Trading assets up 70.5% due to reverse repo operations with ČNB Net customer loans increased by 2.0% Driven by loans to large corporates and by private mortgages Trading liabilities up by 98.0% due to repo operations with financial institutions Group customer deposits rose by 1.8% since YE 2015 Deposits in parent bank up by almost CZK 14 bn, driven by demand deposits (94% of total deposits) Deposits from private individuals rose by CZK 8 bn, public sector deposits up by CZK 6 bn 13

14 Financial performance Executive summary Strong solvency ratio and upward trend in loan/deposit ratio Cost/income ratio Loan/deposit ratio Number of branches 74.6% 74.8% 43.8% 42.8% 46.3% 73.7% Mar 15 Dec 15 Mar 16 Mar 14 Mar 15 Mar 16 ROE Solvency ratio Number of employees (eop) 15.5% 13.3% 11.1% * 19.5% 21.3% 20.1% 10,425 10,545 10, Mar 15 Dec 15 Mar 16 Mar 14 Mar 15 Mar 16 * Development y/y influenced by 10% growth of equity, after dividend pay-out ROE would be 11.7% 14

15 Operating result Below Q level Excluding one-off in Net trading and FV result in 2015 (implementation of OIS discounting) operating result would decrease by 2.9% y/y Reported decline of operating result attributed to drop of operating income whereas operating expenses declined (-1.2%) Contraction in net fee income caused by lower fee income from lending, from account maintenance and from card business due to EU regulation (interchange fees) Net trading and FV result decreased by 46.8% y/y, the key reason was change in the methodology for valuation of derivatives (implementation of OIS discounting) with one-off income CZK 0.7 bn in Q Net interest income still under pressure due to record low market interest rates Operating result (CZK m) -14.4% 5,797 5,911 5, Operating income structure (CZK m) , ,787 2,521 2,282 6,710 6,429 6, Net interest income Net fee and commision Net trading and fair value result Other 15

16 Net interest income Almost flat despite current low interest rate environment Net interest income almost flat although market interest rates are still zero or negative Underpinned by accelerating loan growth and ongoing optimisation of cost of funds Affected by margin pressures across major asset classes Contribution from fixed income securities declined due to declining yields Net interest margin narrowed to 3.19% reflecting above mentioned attributes 6, % 6,429 6, % Net interest income (CZK m) 0.95% Net interest margin 3.32% 3.19% 0.17% -0.05% Net interest margin 5Y CZGB yield; Q1 AVG 16

17 Net fee and commission income Declined by 9.5% y/y Development of net fee income partially mirrors ČS effort to appraise loyal customers by offering product benefits which was reflected in lower fee income from payment transfers and lending Fee income from payment transfers and account maintenance negatively influenced by free current accounts and advantageous product packages and by EU regulation of interchange fees (excluding this last effect total net fee income down by 5%) Fee income from lending reflected fee holidays in retail loans On the other hand, solid growth showed net fee income from securities business (+10%) mainly due to fee income from asset management and from issue of securities Net fee and commission income (CZK m) -9.5% 2,787 2,521 2, Net fee and commission income structure (CZK m) ,480 1,423 1, Lending Payment transfers* Securities transactions Other * Including fees from account maintenance and payment cards fees 17

18 Operating expenses Below Q level Operating expenses reduced by 1.2% despite investments in IT related to digitalisation and regulation Other administrative expenses down by 3.3% driven by lower contribution to deposit insurance fund and savings in business costs Partially offset by growing expenses for IT projects connected to new digital applications and regulatory compliance Personnel expenses slightly increased by 1.7% Depreciation down by 5.8% y/y Major decline in depreciation of IT hardware and office equipment Operating expenses (CZK m) -1.2% 4,519 4,421 4, Operating expenses structure (CZK m) ,819 1,735 1,677 2,130 2,151 2, Personnel expenses Other administrative expenses Depreciation and amortisation 18

19 Group capital adequacy Solvency ratio at strong 20.1% ČS Group is very well capitalized, Tier 1 capital adequacy increased by 0.6 pp y/y to 20.1% reflecting higher Tier 1 capital Tier 1 capital increased by 9.2% y/y due to issuance of additional Tier 1 capital in the amount of EUR 300 m in December 2015 Group solvency ratio (Tier 1+Tier 2) nearly equal to Tier 1 ratio due to negligible amount of Tier 2 capital Basel III Basel III Basel III ČS Group, CZK m 31/03/ /12/ /03/2016 Tier I capital thereof: 89,286 99,405 97,483 CET 1 capital 91,298 89,376 Additional Tier I 8,107 8,107 Tier 1+2 capital 89,286 99,859 97,742 Risk exposure to credit risk 391, , ,808 Risk exposure to market risks 10,192 5,475 7,640 Risk exposure to operational risk 57,021 56,919 62,541 Total risk exposure 459, , ,989 Capital Adequacy Tier 1 ratio 19.5% 21.2% 20.1% Capital Adequacy Tier 1+2 ratio 19.5% 21.3% 20.1% Risk weighted assets grew by 5.9% y/y 19

20 Balance sheet development Loans still show higher growth rate than deposits Net customer loans (CZK m) Group customer deposits (CZK m) 7.4% 686, , , , , , , , , , % Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Net customer loans increased by 7.4% since March 2015, driven by loans to large corporates and retail mortgages /details in the lending part of the presentation/ Customer deposits base grew by 5.9% y/y mainly due to continuous inflow of deposits from individuals (by almost CZK 30 bn) and also from corporate clients 20

21 ČS Group deposits Low interest rates environment providing tailwind for alternative deposit products Customer deposits in parent bank grew by 8.5% y/y Increase underpinned by further inflow of deposits from individuals and corporate clients; public sector deposits recorded slight decrease over the year Pension company maintained its previous momentum; added 11.6% y/y to total volumes Organic growth split between transformed and participants funds Domestic and foreign mutual funds added 13.2% y/y Supported by persisting clients interest in investment products coming from low interest rates environment Assets under discretionary management added 7.2% in y/y comparison SSČS (building society) recorded further outflow of deposits following the continuous cost-of-funds optimization ČS Group deposits (CZK bn) 7.5% /3/ /12/ /3/2016 IFRS, in CZK bn 31/3/ /12/ /3/2016 Asset management Dom. and foreign mutual funds ČSPS SSČS ČS Change (y/y) ČS - customer deposits % SSČS - building society % ČSPS - pension company % Dom. and foreign mutual funds % Asset management % Total % 21

22 Group loan portfolio Summary Accelerated growth continued in large corporate and private mortgages Gross loans to customers in ČS Group increased by 6.5% y/y to CZK bn* Robust growth of loans to large corporates Ongoing strong demand for private mortgages and reviving cash loans in retail Risk costs reduced by 50% from 64 bps to 32 bps y/y Significant recoveries in corporate real estate Retail risk costs reduction driven by gradually decreasing default rates in both private individuals and MSE and releases caused by higher recoveries Portfolio quality and NPL ratio further improved to 3.8% NPL share declined from 4.2% to 3.8% y/y thanks to both retail and corporate Implementation of EBA NPL definition in Dec 2015 led to one-off decline of NPL coverage from 80% to 73% y/y and Total NPL coverage (including collateral) from 119.4% to 105.1% y/y *ČS changed customer segmentation in 2016, main impact of resegmentation was in corporate - reshuffle between SME, Local Large Corporate and Group Large Corporate, addition of corporate bonds, derivatives and money-market exposures to respective corporate segments and exclusion of loans to own subsidiaries from SME to Group Market. All figures from previous periods were restated. 22

23 Group loan portfolio Group loans increased by 6.5% y/y driven by Parent Bank ČS Group loan portfolio (gross) Loan book by Group members as of March 2016 in CZK m, IFRS 31/03/ /03/2016 Y/Y Change I. ČS Bank 502, , % II.1. Stavební spořitelna ČS 35,842 35, % II.2. Leasing (sal, EL) 13,562 14, % II.3. Factoring ČS 1,827 4,436 >100% III. Other subs and Consolidation items -14,780-15, % Total Loans (consolidated) 539, , % Stavební spořitelna 6.0% Leasing subs. 2.5% Factoring 0.8% Bank 90.7% ČS Bank dominates the ČS Group Strong economic growth in corporate and continuing positive sentiment in the housing market accelerated growth in ČS bank and Leasing. Jump in Factoring driven by reporting methodology change Loan portfolio in Stavební spořitelna ČS declined on y/y basis but already grew by 0.1% since December

24 in CZK bn Bank loan portfolio Total growth balanced by both retail as well as corporate business Loan portfolio development - ČS Bank Loan portfolio by customer segments as of March % 20% Others 6.9% Large corporates 14.4% % 6.4% 4.5% 5.7% 2.7% Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Retail loans Corporate loans Total loan growth (y/y) 10% 0% Mortgage & real est. 42.8% SME 23.7% Consumer, private credit cards, overdrafts and home equity 12.2% Loans to retail rose by 6.9% y/y Growth driven by mortgages (+11.9%), other main segments remained flat Loans to corporates added 5.8% y/y Growth supported by large corporates in energy and construction sectors. Detailed figures affected by resegmentation 24

25 in CZK bn in CZK bn Bank loan portfolio Growing mortgages with excellent quality Private mortgages development Consumer lending development* % % % 11.8% 11.9% 25% 20% 15% 10% % -4.6% -4.5% -3.7% -2.5% 60% 40% 20% 0% 150 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 5% 0 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16-20% Private Mortgages Private Mortgages growth (y/y) Consumer Lending Consumer Lending growth (y/y) Private mortgages rose to CZK bn (+11.9% y/y) Positive development with decreasing risk costs and stable debt burden ratio (DBR) profile Whole portfolio LTV ratio at safe 63.8% Consumer lending* at CZK 63.5 bn (-2.5% y/y) New sales of cash loans accelerated already in Q and continued also in Q Repayments in overdrafts, credit cards and home equity loans nevertheless kept overall consumer portfolio development in negative territory *Consumer lending here includes Cash loans, home equity loans, private credit cards and private overdrafts. Social loans are excluded. 25

26 in bps 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Group asset quality Improving risk profile led to lower NPL share and sharp decline of risk costs NPL ratio and NPL coverage 80% 81% 82% 73% 73% 4.2% 4.1% 3.8% 4.0% 3.8% Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Group NPLs Risk Provisions / NPLs Group NPL share further declined to 3.8% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Driven by recoveries and write offs across segments Provision coverage at sufficient 73%, total coverage (provisions+collateral to NPL) improved to 105.1% Jumps in Dec 15 due to implementation of EBA NPL definition without provision stock increase (leading to higher NPL share and decline of NPL coverage) Risk costs development Annualized group risk costs declined to 32bps Reflecting positive trend of recoveries and low NPL inflow Driven by corporate (SME, real estate) and also by retail (private mortgages, commercial loans) % -30.4% -39.3% -32.9% -50.1% Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Group Y/Y change 300% 200% 100% 0% -100% 26

27 Presentation topics Česká spořitelna Segment financial performance analysis Macroeconomic developments Economic trends in details Banking market Czech banking market developments Česká spořitelna market shares Appendix 27

28 Macroeconomic developments GDP growth in 2015 very strong Real GDP growth y/y Components of GDP 2.0% 4.3% 2.5% 3.2% Private consumption growth Fixed capital formation growth 7.5% 2.9% 2.9% 2.6% 2.0% 2.5% 1.5% 0.7% -0.2% -0.5% e 2017e Czech GDP growth accelerated in 2015 due to positive contributions of both, domestic and foreign demand Extraordinary volume of public investments became one of key factors behind GDP growth in 2015; their volume will be lower in 2016 implying GDP growth slowdown Domestic demand was also influenced by labour market strengthening and positive sentiment of households; foreign demand affected by economic recovery in the Eurozone and low oil prices -2.7% e 2016e 2017e The growth of household consumption doubled in 2015 compared with 2014 and is expected to continue in 2016 and 2017 The last year s extraordinary contribution of fixed investment supported by EU funds fades in 2016 Manufacturing sector, supported to a large extent by continuing expansion in the automotive industry, remained the most significant positive contributor to the GDP growth on the supply side (adding 1.9pp in 2015) 28

29 Macroeconomic developments CPI close to zero level at the end of 2015 with slight uptick in March 2016 Unemployment and inflation General government debt and government balance Unemployment rate (eop) Public debt (share of GDP) 6.7% 5.8% Consumer price inflation (avg) General government balance (share of GDP) 45.1% 42.7% 41.0% 40.0% 39.1% 4.5% 4.5% 4.4% 2.2% 1.4% 1.0% 0.4% 0.3% e 2017e -1.3% -1.9% -0.4% -0.4% -0.3% e 2016e 2017e Average CPI inflation close to zero in 2015 due to sharp decline in fuel prices and low inflation in the Eurozone March inflation came in at 0.3% y/y Expected gradual increase in CPI inflation in 2016 influenced by spill-over of domestic demand and higher wages into prices Substantial decline in general unemployment rate (ILO) in 2015 helping to boost the growth of private consumption Strong growth of the Czech economy in 2015 influenced positively the central government s cash-flow-based budget deficit, which arrived at approx. CZK 63 bn. General government deficit reached only CZK 19bn due to accrual effects, higher drawing of EU subsidies and surplus balance of municipalities. The share of public debt to nominal GDP has been decreasing due to favourable development of the Czech economy 29

30 Macroeconomic developments Downward pressure on yields of the Czech T-bonds expected to persist at least until the end of 2016 Core inflation arrived at 1.3% y/y in March contributing approx. 0.7pp to the overall inflation. The positive contribution of domestic demand is offset by prices of fuel and food Czech National Bank prolonged the FX commitment; it will not exit from the cap before Bank Board sees the likely timing of the exit close to half-way point of 2017 ČNB analyses the possibility of decreasing its interest rates into the negative territory As the pressure on CZK decreased at the beginning of 2016, the probability of negative rates is relatively low in coming months Worsening in external CPI negatively affects yields in Europe. Czech 10Y T-bond yields reached 0.4% in March In line with low inflationary-pressures in the Eurozone and FX cap in the Czech Republic, the yields of T-bonds will stay low in 2016 and CPI (y/y, in %) 2014 Regulated prices 2015 Indirect taxes 2016 Food, beverages and tobacco Core inflation Fuel CPI Yields of 10Y T-bonds comparison 3/ % -0.20% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% Sweden Slovakia Denmark Czech Republic Finland Austria Netherlands Germany Switzerland 30

31 Presentation topics Česká spořitelna Segment financial performance analysis Macroeconomic developments Economic trends in details Banking market Czech banking market developments Česká spořitelna market shares Appendix 31

32 Czech banking market Sufficiently capitalized and resilient Capital ratios of Czech banks* (%) Non-performing loans ratios (%) Q Q Q Q Q Q Large banks Medium-sized banks banks Small banks Total Non-financial corporations Households T1 Capital ratio * Compliant with ČNB segmentation of banks Total capital ratio The Czech banking sector is resilient to potential adverse shocks, thanks to its high capital adequacy ratio (T1 capital ratio at 17.9% in 12/2015) and robust profitability This is confirmed by ČNB stress tests (11/2015) Countercyclical capital buffer rate for exposures located in the Czech Republic at 0.5% applicable as of January 2017 Residents 31/03/ /03/2016 Non-residents The shares of non-performing loans (NPL) in residential sectors have further declined with improving economic situation High NPL in non-residential loans due to non-commercial financing (Česká exportní banka) and continues to grow 32

33 Czech banking market Continuing growth in loans and deposits Retail and corporate loans (y/y growth) Retail and corporate deposits (y/y growth) Retail loans 10.8% Corporate loans Retail deposits Corporate deposits 6.7% 7.0% 4.8% 8.5% 7.6% 7.6% 5.3% 13.4% 10.6% 9.9% 5.3% 5.8% 5.8% 6.3% 6.5% 30/6/15 30/9/15 31/12/15 31/3/16 Total loans grew by nearly 7% in March 2016 on the back of retail loans for housing and corporate loans. Retail loans for consumption grew due to the accounting effect of including Cetelem in the banking sector as of June 2015 In 2016, ČS expects client loans to continue growth of around 6%. Retail loans will keep their 2015 dynamics, with housing loans growing 6%. Corporate loans are expected to grow around 7% 30/6/15 30/9/15 31/12/15 31/3/16 Total deposits grew by over 8% y/y in March Growth continues to be strong in both retail and corporate deposits, influenced by good economic conditions and low interest rate environment In 2016, ČS expects growth rate of total deposits of 6% 33

34 Czech banking market Around 90% of loans and deposits denominated in local currency Customer loans (March 2016) Customer deposits (March 2016) 10.3% 0.1% 3.0% 7.7% 31.6% 58.0% 22.0% 67.4% LC retail loans FX retail loans LC corporate loans FX corporate loans LC Retail deposits FX Retail deposits LC Corporate deposits FX Corporate deposits 34

35 Banking market Market shares of ČS (March 2016) Asset side Liability side 23% 23% 23% 23% 23% 26% 26% 25% 25% 25% 18% 19% 18% 19% 19% 18% 19% 19% 19% 18% 12% 12% 12% 12% 11% Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Total assets Retail loans Corporate loans Market leadership in: Total loans (market share of 19%) Number of customers (4.8 m) Total mortgages (market share of 28%) Consumer loans incl. credit cards (market share of 30%) No. 2 in: Total assets (market share 18%) Private mortgages (market share 25%) * As of 31/12/2015 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Retail deposits Corporate deposits Market leadership in: Total deposits (market share of 20%) 25% in retail deposits, 11% in corporate deposits No. 2 in mutual funds with market share of 26%* 35

36 Presentation topics Česká spořitelna Segment financial performance analysis Macroeconomic developments Economic trends in details Banking market Czech banking market developments Česká spořitelna market shares Appendix 36

37 Structure of ČS Group loan portfolio (gross) Group customer loans in CZK mil, IFRS 31/12/ /03/2016 YTD change Outstand. Share Outstand. Share Outstand. Rate Retail 302, % 304, % 2, % Overdrafts 5, % 5, % % of which non-private (MSE, Muni) 1, % 1, % % Credit cards 3, % 3, % % of which non-private (MSE, Muni) % % 0-1.6% Cash loans 51, % 52, % % Private social % % % Home equity mortgages 4, % 3, % % Private mortgages 186, % 190, % 3, % Commercial loans 49, % 48, % % Corporate 205, % 212, % 7, % Group Large corporates 32, % 37, % 4, % Local Large corporates 37, % 39, % 2, % SME 79, % 78, % -1, % Real estate 38, % 38, % % Public sector 17, % 18, % % Group Markets 14, % 14, % % Other % 2, % 1, % BANK: LOANS TO CUSTOMERS 523, % 534, % 11, % SUBSIDIARIES 55, % 54, % % CONSOLIDATION ITEMS -16, % -15, % % GROUP: LOANS TO CUSTOMERS 562, % 574, % 11, % 37

38 Ratings of Česká spořitelna Status as of 29 April 2016 Rating Agency Long-term Short-term Viability Support Outlook Latest actions Fitch A- F2 a- 2 stable 20/05/2015 Moody's A2 Prime - 1 stable 17/03/2015 Standard & Poor's A- A-2 negative 09/06/2015 Latest rating actions Rating agency Standard & Poor s confirmed all ČS ratings on 3 March 2016 Fitch downgraded LT and ST ratings of ČS on 20 May 2015 after downgrade of parent company Erste Group Bank as government support has been taken out Moody s revised the outlook for LT rating of ČS from negative to stable on 17 March

39 Macroeconomic figures Historical and forecasted macroeconomic data e 2017e Population (ave, m) GDP/capita (EUR thsd) Real GDP growth Consumer price inflation (ave) 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)

40 Financial statements Quarterly development (CZK m) Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q/Q % Net interest income 6,429 6,504 6,496 6,435 6, % Net fee and commission income 2,521 2,595 2,414 2,724 2, % Dividend income % Net trading and fair value result 1, % Rental income from investment properties & other operating leases % General administrative expenses -4,421-4,663-4,551-4,950-4, % Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net % 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 4,521 4,512 4,736 4,171 4, % Taxes on income , % Post-tax result from continuing operations 3,666 3,654 3,814 3,160 3, % Net result for the period Net result attributable to non-controlling interests Net result attributable to owners of the parent 3,666 3,655 3,814 3,158 3, % Operating income 10,332 9,610 9,903 9,898 9, % Operating expenses -4,421-4,663-4,551-4,950-4, % Operating result 5,911 4,946 5,353 4,947 5, % 40

41 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 % 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 not measured at fair value through profit or loss % Other operating result % Pre-tax result from continuing operations % Taxes on income % Post-tax result from continuing 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 43.8% 47.6% Return on allocated capital 30.9% 26.8% 41

42 Segment financial statements Quarterly development Segment Czech Republic - income statement (EUR m) Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Net interest income Net fee and commission income Dividend income Net trading and fair value result 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 not measured at fair value through profit or loss Other operating result Pre-tax result from continuing operations Taxes on income Post-tax result from continuing 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 43.8% 49.6% 46.7% 50.2% 47.6% Return on allocated capital 30.9% 30.6% 30.7% 26.0% 26.8% 42

43 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: