A profitable, development-oriented commercial banking group for SMEs with a focus on Eastern Europe German Equity Forum 2017 Presentation
ProCredit A unique approach to banking Hausbank for SMEs Digital private client offer Headquartered in Frankfurt and supervised by BaFin and Bundesbank Track record of high-quality loan portfolio Profitable every year since creation as a banking group in 2003 Listed on Frankfurt Stock Exchange 3.8bn Customer loans 13.3% 12.9% Q3 17 YTD loan growth in core loan category (4) 13 CET 1 ratio (3) ProCredit banks South Eastern Europe and Eastern Europe (ca. 91% of gross loan portfolio) Shareholder structure (2) Germany (ca. 2% of gross loan portfolio) 33.8% 17.5% 9.4% 14.5% South America (1) (ca. 6% of gross loan portfolio) 11.0% 13.8% Notes: Footnotes on page 18 of this presentation 1
We deliver on our guidance Outlook for ProCredit group 2017 Guidance 2017 Actuals 9M 2017 Commentary Growth of the gross loan portfolio in the target loan categories (>EUR 30,000) (1) > 10% +13% Continued strong growth in the SME segment Growth of the total gross loan portfolio (1) > 8% +6% Decrease of non-core loan categories largely completed by end of 2017 Return on average equity (RoAE) 7 9% 7.1% (annualised) Profitable third quarter with ROE of 7.4% CET1 ratio (fully loaded) > 13% 13.3% Positive impact from disposal of El Salvador expected in Q4 Dividend payout ratio 1/3 of profits n.a. Confirmation of dividend policy In the mid-term, and taking into consideration a stabilising political, economic and operating environment, we see potential for approx. 10% p.a. growth of the gross loan portfolio, a cost-income ratio (CIR) < 60%, and a return on average equity (RoAE) of approx. 10%. Notes: Footnotes on page 18 of this presentation 2
How ProCredit does business True customer focus as Hausbank for SMEs Continuous training of employees Prudent risk management Development orientation 3
True customer focus as Hausbank for SMEs Simple loan and deposit facilities >90% business loans I always feel that ProCredit Bank is there to support me. Construction materials producer - Georgia Comprehensive service as Hausbank for SMEs Producer of tool systems for CNC machines - Bulgaria Trustful long-term relationships and true understanding of clients needs and risks Business Client Advisers focus: clients and risk Windows and doors producer - Romania Dairy farm - Albania 4
Continuous training of employees ProCredit Entry Programme Continuous training International management development Mandatory for all new recruits 6-month training programme before final hiring Salary linked to training level Up-or-out in first two years, long-term prospects thereafter ProCredit Management Academy ProCredit Banker Academy Enables rapid diffusion of best practices Results in a closely-knit management network Integrates employees into a unique corporate culture 5
Prudent risk management Diversified loan portfolio (1) Consistently low net write-offs (2) Eastern Europe: 21% Georgia 8% Ecuador 5% Moldova 3% Colombia 1% South America: 6% Mexico Germany 2% Bulgaria 19% South Eastern Europe: 70% 5% 4% 3% 2% Ukraine 10% Bosnia 4% Albania 5% Romania 6% Macedonia 7% Kosovo 13% Serbia 17% 1% 0.8% 0% 2007 2010 2013 2016 Average net write-offs Notes: Footnotes on page 18 of this presentation 6
Development orientation Fostering entrepreneurs and SMEs Social responsibility Environmental responsibility Focus on SMEs as drivers of economic growth and employment in emerging countries Strong leverage in terms of job generation and prosperity No focus on consumer lending No complex products Promotion of price and banking sector transparency Rigorous approach regarding AML and informal clients State-of-the-art standards to minimise the environmental impact of ProCredit s lending operations Focus on promotion of green investments Strict exclusion lists Non-performing loans in Eastern Europe 2016 (1) Green loan portfolio in % total loans 9.8% 9.1% 7.8% 6.3% 6.4% 9.1% 11.3% 4.3% 3.0% 4.0% Bank 1 Bank 2 Bank 3 Bank 4 ProCredit ISO 14 001 Dec-13 Dec-14 Dec-15 Dec-16 Sep-17 Notes: Footnotes on page 18 of this presentation 7
Excellent positioning for profitable growth Focused group profile Strong growth dynamics Modern network and platform built for scale Above-sector profitability and stability 8
(in EUR k) Key facts: Focused group profile on SMEs Focused growth in SME loan categories (1) 81% 87% Decrease in overall branch network 645 Decrease in number of total group staff 11,514 58% 328 291 317 224 156 67 102 54 4,078 3,522 Dec-13 Dec-16 Sep-17 Loan portfolio > EUR 30k in % total loan portfolio Dec-13 Dec-16 Sep-17 Number of service points Number of branches Dec-13 Dec-16 Sep-17 Number of total group staff Regional focus on South Eastern Europe and Eastern Europe Decrease in number of cash desk transactions Increase in loan portfolio per total group staff 71% 89% 91% 28% 890 1,088 363 5% 2% Dec-13 Dec-16 Sep-17 SEE and EE as % of gross loan portfolio Dec-13 Dec-16 Sep-17 YTD Cash desk transactions in % total transactions Dec-13 Dec-16 Sep-17 Gross loan portfolio per total group staff Notes: Footnotes on page 18 of this presentation 9
Strong volume growth in core loan categories 9M- 2017 Sep 2017 YTD -25% (EUR -169m) 13% (EUR +377m) +6% Initial loan size (in EUR) EUR 133m EUR 369m FY 2016 FY 2016-28% (EUR -256m) 13% (EUR +336m) +2% Initial loan size (in EUR) EUR 185m Notes: Footnotes on page 18 of this presentation EUR 486m 10
Modern network and platform built for scale Modern network and customer experience Simple, unified offer for target private clients 54 Branches in selected strategic locations State-of-the-art IT systems developed by own IT subsidiary 102 Service points, all equipped with 24/7 self-service areas www.procreditbank-direct.com 11
Above-sector profitability and stability SEE segment RoAE vs sector Group net income and RoAE 15% 5% -5% 2013 2014 2015 2016 SEE banking sector RoAE (2) (3) ProCredit SEE segment RoAE 9M-2017 Net income (1) Group RoAE annualised (1) Significantly higher RoAE level and stability compared to the sector Strong track record of profitability > 9% average RoAE since 2005 (4) Profitable every year since creation as a banking group in 2003 Notes: Footnotes on page 18 of this presentation 12
Q&A 13
Appendix 14
Q3 2017 results at a glance In EUR m Q2-2017 Q3-2017 9M-2016 9M-2017 y-o-y Income statement Key performance indicators Net interest income 51.3 50.4 175.6 153.0-13% Provision expenses 0.5 1.1 16.8 4.5-73% Net fee and commission income 10.9 11.7 32.1 33.3 4% Net result of other operating income 0.5 2.8 1.5 5.3 n.m. Operating income 62.2 63.8 192.3 187.1-3% Operating expenses 47.9 44.9 144.5 140.1-3% Operating results 14.3 18.9 47.9 47.0-2% Tax expenses 3.0 3.2 11.2 10.5-6% Profit from continuing operations 11.3 15.7 36.6 36.4-1% Profit from discontinued operations 0.4-3.4-1.1-0.7-41% Profit of the period 11.7 12.2 35.5 35.8 1% Change in loan portfolio > EUR 30,000 4.7% 2.7% 7.7% 12.9% 5.1pp Return on average equity (1) 6.9% 7.4% 7.6% 7.1% -0.5pp CET1 ratio (fully loaded) 13.0% 13.3% 10.6% 13.3% 2.7pp Additional indicators Net interest margin (1) 4.0% 3.9% 4.8% 3.9% -0.9pp Net write-off ratio (1)(2) 0.1% 0.2% 0.6% 0.3% -0.3pp Loans in PAR30 3.7% 3.5% 4.7% 3.5% -1.2pp Impaired loans 5.8% 5.4% 7.7% 5.4% -2.3pp Cost-income ratio 76.4% 69.3% 69.1% 73.1% 4.1pp Book value per share 12.01 12.14 11.86 12.14 2% Notes: Footnotes on page 18 of this presentation 15
Long-standing and well-interconnected management teams at group and local level Experienced management collaborating at Holding and local level Borislav Kostadinov Dr. Anja Lepp Sandrine Massiani Dr. Gabriel Schor Credit risk management Investor relations Communications Environmental management and impact reporting 16 Risk control Financial risk Operational risk AML 32 (1) Human resources IT Business support Compliance & legal Internal audit 10 Finance and controlling Treasury and funding 34 (1) Local ProCredit banks (2) 33 key management members On average 14 years of experience within ProCredit 18 female/15 male Collective training as catalyst for a shared vision and teamwork supported by clear framework Central training in Fürth English as lingua franca (> 50 courses p.a.) Regular specialist events and regional meetings Common set of values Closely-knit network Rapid diffusion of best practices Strict common operating standards and policy guidelines Strong, standardised MIS reporting Holding management with supervisory board seats at local banks involved in strategic business processes Years of experience within ProCredit; Notes: Footnotes on page 18 of this presentation Seat at supervisory board of local bank; 16
Key management Key management of the ProCredit banks in South Eastern / Eastern Europe and South America Albania Albania BiH BiH BiH Bulgaria Bulgaria Bulgaria Bulgaria Colombia Ecuador Ecuador Georgia Georgia Georgia Georgia Kosovo Kosovo Macedonia Macedonia Macedonia Moldova Moldova Romania Romania Serbia Serbia Serbia Serbia Ukraine Ukraine Ukraine Ukraine Average age: 39 Average years with ProCredit: 14 29 ProCredit Management Academy graduates 18 female/15 male South Eastern Europe Eastern Europe South America 17
Notes Slide 1 (1) The South America segment also includes the institution Administración y Recuperación de Cartera Michoacán S. A (ARDEC) in Mexico, 0.2% of Group assets (2) Shareholder structure according to the voting right notifications as published on our website www.procredit-holding.com (3) fully loaded (4) Growth in loans > EUR 30,000 Slide 2: (1) Adjusted guidance as of ad-hoc notification on 7 July 2017 Slide 6 (1) Loan portfolio by geographical segments in % of total loan portfolio (EUR 3,832m as per 30-Sep-17); Excluding assets held for sale, as per 30- Sep-17, Thessaloniki branch's loan portfolio part of ProCredit Bank Bulgaria loan portfolio (2) Net write-offs to gross loan portfolio ratio Slide 7 (1) In % of total loans; Western banks NPL ratio as per RBI CEE Research Report June 2017 based on aggregated data of CEE subsidiaries and comprising individual banks CEE segment (Bank 1: Poland, Hungary, Czech Republic, Slovakia, Bulgaria, Romania, Croatia, Albania, Serbia, Bosnia and Herzegovina, Kosovo, Belarus, Russia, Ukraine. Bank 2: Hungary, Czech Republic, Slovakia, Romania, Croatia, Serbia. Bank 3: Poland, Hungary, Czech Republic, Slovakia, Slovenia, Bulgaria, Romania, Croatia, Serbia, Bosnia and Herzegovina, Russia. Bank 4: Poland, Czech Republic, Slovenia, Bulgaria, Romania, Croatia, Serbia, Russia); Data of ProCredit includes SEE and EE segment, NPL ratio based on local definition of ProCredit banks; Source: RBI CEE Research Report June 2017 Slide 10 Note: All related figures and ratios for Dec-13 relate to the subsidiaries as shown in the consolidated financial statement as of 2013 (1) Loan portfolio > EUR 30k initial loan size in % of customer loan portfolio by outstanding principal Slide 9 Note: Loan volume growth split by initial loan size in all segments Slide 12 (1) Excl. non-controlling interest (2) Includes Romania, Bulgaria, Croatia, Serbia, Bosnia and Herzegovina and Albania. Source: RBI CEE Research Report June 2017 (3) Includes Albania, Bosnia and Herzegovina, Bulgaria, Kosovo, Macedonia, Romania and Serbia (4) RoAE since 2005 and publicly available in Bundesanzeiger Slide 15 Note: P&L-related figures and ratios, unless indicated otherwise, are based on continuing operations; i.e. excluding Banco PyME Los Andes ProCredit Bolivia, ProConfianza Mexico, Banco ProCredit El Salvador and Banco ProCredit Nicaragua for 2017 and 2016; Return on average equity, CET1 ratio, and dividend payout ratio also include discontinued operations (1) Annualised (2) Net write-off ratio always presented YTD Slide 16 (1) Including experience with Internationale Projekt Consult GmbH (2) Data as at October 2017; Not including ProCredit Bank Germany 18
Disclaimer The material in this presentation and further supporting documents have been prepared by ProCredit Holding AG & Co. KGaA, Frankfurt am Main, Federal Republic of Germany ( ProCredit Holding ) and are general background information about the ProCredit group s activities current as at the date of this presentation. This information is given in summary form and does not purport to be complete. Information in this presentation and further supporting documents, including forecast financial information, should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments and does not take into account your particular investment objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information having regard to these matters, any relevant offer document and in particular, you should seek independent financial advice. All securities and financial product or instrument transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk. This presentation and further supporting documents may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to the ProCredit group s businesses and operations, market conditions, results of operation and financial condition, capital adequacy, specific provisions and risk management practices. Readers are cautioned not to place undue reliance on these forward-looking statements. ProCredit Holding does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside ProCredit Holding s control. Past performance is not a reliable indication of future performance. 19