Erste Group posts net profit of EUR 624.7 million in H1 17 Press conference 4 August 2017 Page 1
Business environment Central and Eastern Europe is the fastest growing EU region 2017 2018 Real GDP growth (in %) Inflation (CPI average, in %) 5.1 2% euro zone (2017f) 3.7 3.9 3.7 2.1 1.7 2.9 2.8 3.1 3.0 2.7 2.4 1.9 1.8 2.5 2.0 2.0 1.0 1.0 3.3 3.2 2.2 1.4 1.3 AT AT CEE markets expected to grow by about 3-5% in 2017, well above the average for the euro zone Domestic demand is expected to be the main driver of economic growth in 2017 Consumption is supported by improving labour markets, wage increases and low inflation rates across the region Page 2
Business environment Solid public finances in the markets of Erste Group 2017 2018 Budget deficit (in % of GDP) Public debt ratio (in % of GDP) AT 81 79 60% Maastricht limit 72 71 81 80-1.0-0.8-0.4-0.4-0.8 52 50-1.5-1.5-1.5 36 36 38 38-2.7-2.5-3% Maastricht limit -3.4-3.4 AT Almost all countries in the CEE region appear set to fulfill the Maastricht budget deficit criteria Public debt ratio in most countries below Maastricht s 60% GDP limit, with Austria, Hungary and Croatia being exceptions Page 3
Business environment CEE economies are creating jobs much faster than the euro zone Unemployment (in %) Employment (in % of workforce population aged 15-64) 2017 2018 2013 Q1 2017 Q1 5.7 5.7 3.6 3.6 8.6 7.8 5.4 5.5 4.2 4.1 10.9 10.0 63 66 67 73 60 66 60 63 57 68 52 57 AT EU ZONE Unemployment levels expected to continue to decline Solid economic growth is leading to labor shortages in some markets Page 4
Business environment Czech Rep. increases key policy rate by 20 bp in August 2017 IN % 3M Interbank 10YR GOV Source: Bloomberg Austria Czech Republic Romania 0.58 0.49 0.57 0.56 0.47 0.51-0.18-0.26-0.33-0.33 0.29 0.29 0.71 0.28 0.29 0.65 0.62 0.66 1-6 16 1-6 17 Q1 17 Q2 17 1-6 16 1-6 17 Q1 17 Q2 17 1-6 16 1-6 17 Q1 17 Q2 17 0.58 0.85 3.51 3.46 3.66 3.75 ECB cut discount rate to zero in March 16 Maintains expansionary monetary policy stance Natl bank decided to lift benchmark rate from historic low of 0.05% to 0.25% in August 17 Central bank cut policy rate to historic low of 1.75% in May 15 Slovakia Hungary Croatia 0.60-0.18 0.70-0.26 1.07-0.33 0.98-0.33 3.29 1.25 3.22 0.82 3.46 3.11 0.81 0.63 0.41 0.35 0.25 0.16 1-6 16 1-6 17 Q1 17 Q2 17 1-6 16 1-6 17 Q1 17 Q2 17 1-6 16 1-6 17 Q1 17 Q2 17 As part of euro zone ECB rates are applicable in National bank cut the benchmark interest rate to record low of 0.9% in May 16 Central bank maintains discount rate at 3.0% since 2015 Page 5
Business performance: customer loans and deposits Strong growth in loan volume (6% yoy) and deposits (11.6 % yoy) 30/06/16 31/12/16 30/06/17 Customer loans (net) Customer deposits Loan/ deposit ratio Group 127.4 130.4 130.7 138.0 135.1 145.6 97.7 94.7 92.8 AT/EBOe 30.0 30.6 30.5 30.8 31.8 33.7 97.6 96.1 90.6 AT/SB 38.7 39.5 40.1 37.8 39.9 41.2 102.4 98.8 97.4 20.4 21.4 24.0 28.1 29.2 32.4 72.5 73.2 73.9 7.0 7.1 7.1 9.7 10.6 10.4 72.7 66.8 68.5 9.6 10.2 10.9 10.9 11.4 12.1 87.5 89.7 90.2 3.1 3.2 3.3 4.0 4.6 4.9 70.4 67.7 77.8 5.7 5.8 5.8 5.4 5.7 5.8 105.5 100.8 100.5 RS 0.7 0.8 0.8 0.6 0.7 0.7 119.4 117.9 114.9 IN EUR BN IN EUR BN IN % Page 6
Business performance: retail Clients value Erste s click and mortar offering Customers increasingly rely on digital channels for their everyday banking needs: 1 in 4 clients are active digital users at Erste Highlights in H1 17 MORTGAGES EUR 3.5 bn in nearly 50,000 newly granted mortgages Growing relevance of digital channels also for consumer loans and deposit products: In Slovenska sporitelna, 1 in 3 consumer loans were launched digitally Branches retain their key role for providing advice on big-ticket financial decisions CONSUMER LENDING EUR 2 bn in newly disbursed consumer loans RETAIL DEPOSITS EUR 9 bn in continued inflows across our markets GWTH IN ASSET MANAGEMENT EUR 282 mn retail inflow vs. EUR 62 mn in H1 16 Page 7
Business performance: corporate Real progress in corporate lending: 5% yoy growth 30/06/16 31/03/17 30/06/17 % Gross corporate loans Corporate deposits Highlights AT 5.4 5.7 5.6 11.5 11.3 11.5 13.7 12.9 12.7 14.0 14.6 14.8 19.2 20.0 19.1 19.7 19.7 5.8 6.7 6.5 11.8 11.8 12.2 11.1 12.3 11.2 13.9 15.5 14.2 11.1 13.3 13.8 19.2 19.9 EUR 46.2 bn total corporate loan portfolio of Erste Group EUR 1.2 bn new loans granted in H1 17; Significant growth in AUT, and Destination of new loans Investment loans: ~50 % Overdrafts and working capital: ~30% Trade and Supply Chain Finance: ~10% Acquisition finance: ~5% RS 4.7 5.3 5.3 4.6 4.8 5.3 * Percentages represent market shares; AT market shares for 30/06/17 not yet available Page 8
Business performance: corporate 75% of new corporate loans in H1 17 granted to SMEs Structure of EUR 46.2bn total loan portfolio Highlights 4 % 4% Financial Healthcare 1% Institutions Other 4% TMT 5% Hotel & Leisure 7% Machinery 8% Consumer goods 18% Natural Resources & Energy 18% Real Estate Erste Group services ~100,000 companies, out of which 75% are SMEs representing ~ 15% of the total CEE work force (in the private sector) 1,500 new SME clients added in H1 17; approval process for SME loans reduced to 2-4 days Growth industries in H1 17: automotive & transportation (+16% loan volume vs FY 16) 9% Automotive & Transportation 9% Construction 13% Public Sector consumer goods (+8%) health care (+5%) real estate (+5%) Page 9
Business performance: operating income and expenses Low interest rate environment impacts income, IT investments drive costs Operating Income Operating Expenses IN EUR MN IN EUR MN 0.7% 118 120 3,317 3,293 136 103 1.2% 885 911 1,980 2,004 2,194 2,143 218 610 624 228 1,153 1,151 1-6 2016 1-6 2017 1-6 2016 1-6 2017 Net interest income Net fee and commission income Personnel expenses Other administrative expenses Net trading and fair value result Other income Depreciation and amortisation Page 10
Business performance: operating result and cost/income ratio Increase in fee and commission income could not offset NII pressure 1-6 2016 1-6 2017 Operating result Cost/income ratio Group 1,336 1,289 59.7 60.8 AT/EBOe AT/SB 179 195 202 223 64.7 63.4 71.7 70.0 340 360 47.4 49.7 146 151 167 148 53.9 50.9 44.6 47.8 72 85 107 101 56.5 55.8 47.1 50.4 RS 10 12 66.8 62.6 IN EUR MN IN % Page 11
Business performance: risk costs Risk costs remain at historically low levels (15 bp at Group level) 1-6 2016 1-6 2017 Absolute Relative * Highlights Group AT/EBOe AT/SB 26 0.04 104 0.15 2 0.02-14 -0.09 16 0.08-12 -0.06 26 0.27-10 -0.10 Year-on-year risk performance characterised by a reduced level of net releases and a continuation of historically low risk costs (except ) -15-0.34 14 0.31 Country trends: : increase due to a single 21 20 0.49 0.42 default in Corporates -72-33 -3.34-1.59 : reduced level of net releases in Retail and Corporates 16 0.48 88 2.65 : net releases and improved recoveries RS -1 1-0.15 0.31 IN EUR MN IN % * Relative risk costs are defined as annualised quarterly risk costs over average gross customer loans Page 12
Business performance: asset quality NPL ratio improves for the 14th consecutive quarter to 4.7% 31/12/16 NPL volume NPL ratio NPL coverage ratio (excl. collateral) 30/06/17 Gruppe 6,678 6,496 4.9 4.7 69.1 68.5 AT/EBOe 781 688 2.5 2.2 59.3 60.0 AT/SB 1,980 1,908 4.9 4.6 58.1 57.3 695 553 3.2 2.3 82.8 85.7 928 869 11.8 11.0 85.3 92.1 475 469 4.5 4.2 72.1 75.3 339 253 7.2 9.7 75.0 78.3 704 845 11.2 13.2 72.4 68.6 RS 56 50 6.8 5.8 99.1 105.5 IN EUR MN IN % IN % Page 13
Business performance: net profit Solid result places Erste Group well on track to deliver TE of 10%+ in 2017 QoQ net profit reconciliation (EUR m) YoY net profit reconciliation (EUR m) 58 33 27 30 33 15 24 23 79 124 55 23 262 362 842 625 Q1 17 Operating Operating Risk Other Taxes on Minorities Q2 17 1-6 16 Operating Operating Risk Other Taxes on Minorities 1-6 17 income expenses costs result income income expenses costs result income Erste Group Q2 17 net profit amounted to EUR 362.5m; qoq rise primarily due to improved NII and better other result (despite EUR 45.0m provisions for court rulings related to the passing on of negative interest rates to retail borrowers in AT) Revenues increased on higher NII, supported by seasonally higher dividend income Operating expenses improved primarily due to booking of full-year deposit insurance in Q1 17 25.8% yoy decline in net profit primarily driven by other result and increased, but still benign risk costs Other result declined mainly on non-recurrence of positive one-off (sales of shares in VISA Europe: EUR 138.7 mn) in Q2 16 After net releases in H1 16, risk costs rose to 15 bps of average gross customer loans, remaining well ahead of guidance Page 14
Business performance: regulatory capital CET1 (Basel 3, fully loaded) solid at 12.8%, impacted mainly by RWA inflation Regulatory capital (EUR bn) Risk-weighted assets (EUR bn) Capital ratios (B3, phased-in; in %) 0.0 18.8 5.2 19.9 5.2 0.7 3.6 101.8 15.1 106.8 17.4 3.2 13.4 13.4 18.5 13.2 13.8 18.7 13.6 14.1 83.1 86.2 31/12/16 30/06/17 31/12/16 30/06/17 31/12/16 30/06/17 CET1 AT1 Tier2 Credit RWA Trading risk Op risk CET1 Tier1 Total capital Page 15
Business performance: capital ratios (Basel 3, fully loaded) Excellent capital generation across the years Common equity tier one capital ratio (Basel 3, fully loaded) 8.3% 9.2% 9.4% 11.2% 11.4% 10.6% 12.0% 12.8% 12.8% 5.2% DEC 08 DEC 09 DEC 10 DEC 11 DEC 12 DEC 13 DEC 14 DEC 15 DEC 16 JUN 17 Page 16
Conclusion Outlook 2017 Macro outlook 2017 Real GDP growth of between 2.1-5.1% expected in 2017 in CEE and Austria Real GDP growth to be driven by solid domestic demand, as real wage growth and declining unemployment support economic activity in CEE Solid public finances across CEE Business outlook 2017 TE for 2017 targeted at 10%+ (based on average tangible equity in 2017) Assumptions for 2017: at best flat revenues (assuming 5%+ net loan growth); cost inflation of 1-2% due to regulatory projects and digitalisation; increase in risk costs, remaining at historically low levels; positive swing in other operating result due to lower Austrian banking tax Risk factors for guidance Impact from expansionary monetary central bank policies, inc negative interest rates Political risks, eg various elections in key EU economies Geopolitical risks and global economic risks Consumer protection initiatives Page 17