Erste Bank der oesterreichischen Sparkassen AG 19 May 2006 Austria Center, Vienna
Heinz Kessler President of the Supervisory Board
First Item on the Agenda Presentation of the audited and approved financial statements, the status report of the Management Board and the report of the Supervisory Board for the financial year 2005, as well as the presentation of the consolidated financial statements and the Group status report for the financial year 2005 3
Report on the Fiscal Year 2005 of Erste Bank der oesterreichischen Sparkassen AG Andreas Treichl Chairman of the Management Board
Highlights 2005 - Erste Bank Group Operating Result + 13.6% to EUR 1,652.5 m Net Profit + 36.7% to EUR 711.7 m Return on Equity 19.0% (2004: 17.0%) Net Interest Margin 2.08% (2004: 2.18%) Cost/Income Ratio 61.8% (2004: 64,1%) Group Tier 1 Ratio 6.8% (2004: 6.7%) Earnings per share (in EUR)* 2.96 2.18 1.83 0.82 1.01 1.23 1.31 1.45 1998 1999 2000 2001 2002 2003 2004 2005 * Until 2003 adapted for goodwill amortisation, 2004 restated according to IAS 32 and IAS 39 5
Erste Bank surpasses all 2005 Targets 2005 target FY 2005 result Net profit: > EUR 660m EUR 711.7m ROE: > 18% 19.0% CIR: < 62% 61.8% Cost/Income ratio ROE 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 FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 6
Balance Sheet 2005 - Assets In EUR m (IFRS) 31/12/2005 31/12/2004 % Change Cash and balances with central banks 2,728 2,723 0.2 Loans and advances to credit institutions 16,858 15,685 10.4 Loans and advances to customers 80,419 72,843 10.4 - Risk provisions for loans and advances (2,817) (2,804) 0.5 Trading assets 5,426 4,628 17.2 Investments available for sale 18,644 15,967 16.8 Financial investments 23,611 21,926 7.7 Intangible assets 1,911 1,823 4.8 Tangible assets 1,688 1,723 (2.0) Other assets 4,192 5,298 (-20.9) Total assets 152,660 139,812 9.2 7
Balance Sheet 2005 - Liabilities In EUR m (IFRS) 31/12/2005 31/12/2004 % Change Amounts owed to credit institutions 33,912 28,551 18.8 Amounts owed to customers 72,793 68,213 6.7 Debts evidenced by certificates 21,291 19,710 8.0 Provisions 8,635 7,500 15.1 Other liabilities 5,279 6,179 (14.6) Subordinated capital 4,290 3,706 (15.8) Shareholders equity 4,129 3,424 20.6 Minority interests 2,332 2,529 (7.8) Total Liabilities 152,660 139,812 9.2 Tier 1 ratio (%) 6.8 6.7 Solvency ratio (%) 11.0 10.7 8
Group Income Statement 2005 EUR m 4,329.4* (+6.9%) 2,794.2 (+5.0%) 1,256.8 (+10.7%) 241.7 (+11.6%) Net Interest Income Net Commission Income Net Trading Result Operating Income 2004 2005 * includes EUR 36.7 m Income from Insurance Business 9
Group Income Statement 2005 EUR m 4,329.4 (+6.9%) (2,676.9) (+3.2%) Group Net Profit (16.1) (-68.6%) (421.6) (+3.8%) (300.0) (+8.0%) 711.1 (+36.7%) Operating Profit General Administrative Expenses Other Operating Income Risk Provisions Taxes and Minority Interests 2004 2005 2005 10
Key Performance Indicators in 2005 vs. 1997 19.0% 73.5% 61.8% 2.96 9.7% 0.23 Return on Equity Cost/Income Ratio EPS (EUR) 712 153 15.2 17 Net Profit (EUR m) 50 Total Assets (EUR bn) 0,6 Number of Customers (m) 11
More than 15 Million Clients in Central and Eastern Europe Nr. 1 Clients: 2.5m Filialen: 302 Nr. 1 Clients: 5.3m Branches: 646 Czech Republic Slovakia Nr. 2 Clients: 2.8m Branches: 987 Nr. 2 Clients: 0.9m Branches: 160 Austria Hungary Slovenia Branches of Romania Croatia Serbia Nr. 1 Clients: 2.8m Branches: 372 Nr. 3 Clients: 0.6m Branches: 122 Clients: 0.3m Branches: 66 12
FY 2005 Results in Central Europe EB share* 97.97% 100.00% 99.90% 61.95% 95.60% 2005 2004 +/-% 2005 2004 +/-% 2005 2004 +/-% 2005 2004 +/-% 2005 2004 +/-% Net profit 306.0 272.6 12% 92.5 81.0 14% 75.8 27.7 >100% 46.9 39.8 18% (7.6) (25.4) 70% (EUR m) ROE (%) 22.3 21.8 20.7 19.4 26.2 11.8 20.2 18.0 n.a. n.a. Cost/Income Ratio 56.9 58.4 55.4 56.6 57.4 62.9 50.1 53.4 85.6 93.8 Total Assets 22,554 20,061 12% 6,837 6,300 9% 5,745 4,631 24% 4,113 3,497 18% 142 123 15% (EUR m) * as of 31 December 2005 13
Emerging Market Importance 15,4% 2004 34,5% Group Net Profit 2005 14,3% 30,6% 50,1% 55,1% 13,5% 28,7% 2004 57,8% Shareholders Equity 33,7% 13,3% 2005 53,0% International Central Europe Austria 14
Investments in Central and Eastern Europe Since 1997 we have invested EUR 6.1 bn in Central and Eastern Europe Czech Republic: EUR 1,221m Slovakia: EUR 426m Hungary: EUR 474m Croatia: EUR 152m Serbia: EUR 88m Romania EUR 3,752m --------------------------------------------------- Total: EUR 6,113m 15
Key Developments (2005) January 2005: January 2005: February 2005: March 2005: Sale of 8.8% of Erste und Steiermärkische Bank, Croatia to Steiermärkische Sparkasse. Erste Bank share reduced to 51% Erste Bank becomes 100% owner of Slovenská sporitel Ea with EUR 122m purchase of remaining 20% of SLSP from EBRD Sale of 11.8% stake in Investkredit to ÖVAG. Disposal gain (post-tax): approx. EUR 50 m Employer/Employee Negotiation Committee agrees on new, forward looking salary system 16
Key Developments (2005/6) July 2005: December 2005: January 2006: Erste Bank acquires majority stake in Novosadska banka for EUR 73 m (renamed to Erste Bank Serbia in December 2005) Erste Bank wins bid for acquisition of 61.9% share in the Romanian Banca Comerciala Romana for EUR 3.75 bn Capital increase of Erste Bank is the largest capital markets transaction ever conducted on the Vienna Stock Exchange, total volume of EUR 2.918,2m - offering was 1.7 times subscribed (excluding the over-allotment option), offer price per share EUR 45 17
Akquisition of Banca Comerciala Romana (BCR) BCR holds unique position in the Romanian banking market Top 4 Romanian banks market share by total assets (6/2005) ( 1)» Leading market shares across all areas (1) 26.9%» No. 1 by total assets» No. 1 by retail and corporate loans» No. 1 by retail and corporate deposits» Leading retail franchise» Rapid expansion created an excellent, nationwide retail infrastructure of 372 branches as of 31 December 2005» Leading retail customer base (2)» 2.5 million retail customers» 300,000 corporate customers 12.9% 8.6% 7.1% BCR BRD/SG Raiffeisen HVB (3) (1) Source: Company reports and National Bank of Romania (2) Approximately 5 million account holders, translating into an estimated 2.8 million customers (3) HVB incl. Tiriac Bank and excluding UCI subsidiaries 18
FY 2005 Key Financials of BCR (IFRS) BCR is already a strong and profitable bank Total assets: Loans to customers: Customer deposits: Equity: EUR 9.3 bn EUR 4.4 bn EUR 6.0 bn EUR 1.1 bn Net interest income: Net commission income: Net annual profit: EUR 379 m EUR 172 m EUR 178 m 19
The Importance of BCR within the Erste Bank Group BCR will be a significant part of Erste Bank Group and a major focus for development BCR 9bn + 25% BCR 2.8m + 23% Romania 22.2m + 46% Erste Bank 35bn Erste Bank 12.4m Austria Czech Rep. Slovakia Hungary Croatia Serbia 48.4m Assets in CEE Clients Population coverage Romania completes Erste Bank s regional mix of the mature market Austria, the developing markets in central Europe and the emerging markets in South East Europe 20
Acquisition of Banca Comerciala Romana (BCR) Acquisition & funding Dec. 05 & Jan. 06» 61.88% stake acquired as of Dec. 21, 2005 (Purchase price: EUR 3.75 bn)» Funding via successful capital increase (64.8m new shares priced at EUR 45)» Erste Bank shareholders equity increased by EUR 2.92 bn (+ 70.7%)» Consultancy team consisting of 10 EB senior managers has full access to BCR since January 2006 Integration progress After closing of the acquisition in June 2006» Transition programme 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 business plan, transition programme and future milestones will be given in Q3 2006 21
Q1 2006 Highlights* Net Interest Income +7.6 % to EUR 724.0 m (EUR 672.7 m) Net Commission Income +10.0 % to EUR 342.2 m (EUR 311.1 m) Operating Income +11.3 % to EUR 1,165.1 m (EUR 1,046.6 m) Operating Profit +21.5 % to EUR 471.2 m (EUR 387.7 m) Pre-Tax Profit +33.8 % to EUR 380.4 m (EUR 284.4 m) Net Profit +49.5% to EUR 239.6 m (EUR 160.3 m) * NB figures in brackets refer to Q1 2005 results 22
Q1 2006 Highlights Cost/Income Ratio 59.6% (61.8% in Q1 2005) RoE 15.6% (19.0% in FY 2005) Total Assets +4.0 % to EUR 158.8 bn (EUR 152.7 bn at YE 2005) Tier 1 Capital 10.2% (6.8% at YE 2005) Quarterly EPS EUR 0.83 (EUR 0.67 in Q1 2005) 23
Erste Bank Share Price Development Performance in 2005: Erste Bank + 20%, ATX + 51%, DJ Euro Stoxx Banks + 27% 450 400 Erste Bank 350 300 250 ATX 200 150 100 50 0 DJ Euro Stoxx Banks Jan. 01 Jul. 01 Jan. 02 Jul. 02 Jan. 03 Jul. 03 Jan. 04 Jul. 04 Jan. 05 Jul. 05 Jan. 06 as of 18 May 2006 24
Market Value Development Comparison with selected retail banks (in bn EUR) 12/00 05/06 +/- Price/book* Societe Generale 30.0 53.4 +78% 2.4 KBC 14.4 33.7 +134% 2.1 Unicredito 35.6 65.6 +84% 2.0 Commerzbank 17.9 21.3-16% 1.7 HVB Group 32.4 21.7-33% 1.6 Erste Bank 2.1 15.0 +740% 2.7 * Based on book value as at 31.12.2005 25
Market Value of European Football Clubs Today Erste Bank is worth twice as much as the top-25 European football clubs together! in EUR m 1) Manchester United 1,135 2) Real Madrid 837 3) AC Milan 761 4) Arsenal 695 5) Bayern München 636 6) Juventus 568 7) Chelsea 420 8) Inter 417 9) Barcelona 364 10) Liverpool 306 11) Schalke 04 268 12) Newcastle United 250 13) AS Roma 217 Source: Forbes, 30 March 2006 26 14) Manchester City 184 15) Tottenham Hotspur 177 16) Olympique Lyonnais 172 17) Celtic Glasgow 162 18) Valencia 161 19) Bayer Leverkusen 156 20) Glasgow Rangers 155 21) Ajax Amsterdam 141 22) Borussia Dortmund 117 23) Everton 114 24) Aston Villa 99 25) FC Porto 88 Market value of these clubs: EUR 7.7b
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 groupwide initiatives to gain from synergies Value creation for shareholders 27
Banking Transformation in the CEE Region Emerging Developing Mature 200% 5-20 years 15-20 years Austria* Banking assets as % of GDP 150% 100% 50% Ukraine Serbia Romania 2000 2000 Croatia Czech Rep. today Slovakia today Hungary Poland Slovenia = Population of 5 million 0% Product focus / earnings drivers 0 2,500 Savings, payment transfers 5,000 10,000 20,000 GDP per capita (EUR) Current accounts, debit cards, mortgages Credit cards, consumer finance Asset and wealth management, insurance and pensions Source: Illustration based on local Central Bank statistics and Eurostat (log scale); *Austria: domestic assets only 28
Growth Drivers Wealth Management Fund management FUM/Capita in Central Europe (in EUR) * 18,921» FUM/capita indicates huge opportunity 11,709» Strong growth in CE, but from a low base» markets will reach scale in the medium term Life insurance 757 743 606 380 4» 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% Czech R Hungary Slovakia Croatia Romania Austria Germany 1998 2001 2005 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 2004 2005 29
New Group Architecture (NGA) Update NGA projects proceeding according to plan Retail 2008 Structured investment products Successful rollout throughout the group Sales management techniques implementation of Group toolkit started Consumer finance Development of suitable business models started after completion of market analysis Cards Group-wide card unit Introduced to coordinate market approach and harmonize group-wide card processing Revolving Credit Cards Successfully introduced in HU in Q3 05; to be launched in AT and SK mid-2006 Group Large Corporates New Group Large Corporates unit fully operational since 2H 2005 Group Procurement Established a new Group procurement company to drive further cost reductions Information Technology Software development New group-wide unit launched Group IT Operations Business model for a joint unit completed Decentralised computing New company started operations in Austria, rollout planned in CEE Group Performance Model Standardised Group-wide key performance indicators and reporting tools available at YE 2006 30
Erste Bank Group s New Targets Outlook 2006 Net profit (1) growth More than 20% in 2006 Mid-term targets Old target New target Net profit (1) growth 15% p.a. average for 2005-2008 More than 20% p.a. average for 2005-2009 Cost-income ratio 57% in 2008 Below 55% in 2009 Return on equity (2) 20% in 2008 18-20% in 2009 (1) Net profit after tax and minorities (2) Based on a Tier 1 ratio of at least 7% The acquisition of BCR significantly increases Erste Bank s long-term earnings growth potential 31
Second Item on the Agenda Resolution on the distribution of profits Proposed distribution of earnings: Dividend of Euro 0.55 per share 32
Third Item on the Agenda Grant of discharge to the members of (a) the Management Board (b) the Supervisory Board with regard to the financial year 2005 33
Request to Speak On Agenda Items 1, 2 and 3: Report on the financial year 2005 Resolution on the distribution of profits Grant of discharge to the members of the Management and Supervisory Boards 34
Fourth Item on the Agenda Approval of the remuneration of the Supervisory Board Proposal: EUR 350.000,- for the Supervisory Board 35
Fifth Item on the Agenda Elections to the Supervisory Board Proposed Candidate Dr. Gabriele Zuna-Kratky 36
Sixth Item on the Agenda Appointment of an additional auditor and group auditor for the financial year 2007 in addition to the Savings Bank Auditors Association (Sparkassen- Prüfungsverband) as the statutory auditor Proposal: Ernst & Young Wirtschaftsprüfungsgesellschaft mbh 37
Seventh Item on the Agenda Approval of the acquisition by Erste Bank of own shares for the purpose of securities trading 38
Eighth Item on the Agenda Authorisation of the acquisition by Erste Bank of own shares for no designated purpose, excluding the acquisition of such shares for trading purposes, ( share buy-back ) as well as the authorisation to use these shares as consideration for the acquisition of enterprises, businesses or parts thereof or shares in one or more companies in Austria or abroad, and thus to dispose of these shares in a manner other than via the stock exchange or in public offering 39
Ninth Item on the Agenda Authorisation of the Management Board for a period of five years to increase the registered capital with the consent of the Supervisory Board by an amount of up to EUR 180,000,000 by issuing up to 90,000,000 shares as follows: a) by issuing shares against cash contribution without excluding the subscription rights of the shareholders b) by issuing share against contribution in kind, excluding the subscription rights of shareholders 40
Tenth Item on the Agenda Authorisation of the Management Board for a period of five years to effect a conditional increase of the registered capital by a nominal amount of up to EUR 20,000,000 by issuing up to 10,000,000 bearer or registered ordinary shares by excluding the subscription rights of the current shareholders The authorised conditional capital serves to grant share options to employees, senior employees and members of the Management Board of the company or a group company; the articles of association will be amended in item 4.4.3 accordingly 41
Eleventh Item on the Agenda Approval of amendments of the articles of association in items 2.5.3.4., 10.4, 13.3.14, 17 and 18 42
Erste Bank der oesterreichischen Sparkassen AG 19 May 2006 Austria Center, Vienna