> Erste Bank
- Strategy and execution
> Morgan Stanley - Pan European Banks Conference
London, 21–24 March 2006
> Andreas Treichl, CEO
> Presentation topics
1. Consistent strategy
2. Strong execution track record
3. Growth drivers
4. Financial targets
5. Appendix
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
2
> 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
Value creation for shareholders
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
3
Efficiency focus:
New Group
Architecture
» Developing group-wide
initiatives to gain from
synergies
> Presentation topics
1. Consistent strategy
2. Strong execution track record
3. Growth drivers
4. Financial targets
5. Appendix
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
4
> Business focus - Exploiting core business potentials
Turning around the Austrian Retail & Mortgage business
Commission
income (EUR m)
:
GR
A
C
264.1
1%
+9.
Administrative
expenses (EUR m)
653.0
314.5
2003
CA
GR
: -2
.2%
634.8
624.1
280.4
2004
2005
ROE
2.7%
5.0%
10.1%
CIR
78.8%
76.0%
72.2%
» Focusing on….
2003
2004
2005
Operating result
(EUR m)
C
%
17.1
+
:
AGR
240.5
200.6
175.4
2003
2004
2005
2005
…. profitability
Net profit
(EUR m)
…. strict cost management
.… growth opportunities
(wealth management,
mortgage lending etc)
00%
>1
+
:
GR
93.2
CA
19.8
2003
2004
2003
41.1
2004
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
2005
5
> We managed transformational acquisitions…
….through stringent execution of our transition model
» Complete restructuring within 18 months
» Instant upgrade of key functions to Erste Bank Group standards
» Keep local character to maximize market potential
2000
2005
2001
2005
1.2
306.0
26.5
92.5
0.2%
22.3%
10.1%
20.7%
70.7%
56.9%
78.5%
55.4%
12.5
22.5
4.6
6.8
Clients (m)
3.5
5.3
1.8
2.5
Branches
804
646
542
302
15,742
10,755
6,275
4,836
Net profit (m EUR)
ROE
Cost/income ratio
Total assets (EUR bn)
Employees
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
6
> Our group has developed rapidly
Net profit (in EUR m)
Customers (m)
712
15.2
521
10.6
11.9
11.9
9.1
353
133
FY 98
165
FY 99
192
223
6.1
255
2.6
FY 00
FY 01
FY 02
FY 03
FY 04
FY 05
FY 98
Cost/income ratio
2.7
FY 99
FY 00
FY 01
FY 02
FY 03
FY 04
*incl. BCR
ROE
71.8%
19.0%
70.1%
67.9%
67.1%
16.6%
67.9%
64.2%
FY 98
FY 99
FY 05*
FY 00
FY 01
FY 02
FY 03
64.1%
FY 04
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
14.3%
14.5%
FY 00
FY 01
17.0%
15.3%
13.0%
61.8%
11.2%
FY 05
FY 98
7
FY 99
FY 02
FY 03
FY 04
FY 05
> Geographic focus – Central and Eastern Europe
Customers
Customers
Customers
5.3m; #1
2.5m; #1
Retail deposits 33%; #1
Retail deposits 32%; #1
Branches
Branches
646
+48%
302
68
46
0.8m
Customers
Retail deposits 24%; #2
Branches
Population in extended
home market (million)
Branches
Customers
2.0m
Branches
711
0.9m; #2
Retail deposits 6%; #4
276(2)
160
Erste Bank
Group
With BCR
Erste Bank customers (million)
12.5
+22%
Erste Bank
Group
Customers
0.6m; #3
Customers
2.8m(1); #1
Retail deposits 10%; #3
Retail deposits
30%; #1
Branches
Branches
390
122
Customers
With BCR
Erste Bank branches
2,283
0.3m
15.2
+14%
2,673
Retail deposits 2%
Branches
66
Note: Market share based on number of clients and retail deposits as per end of 2005
1) Approximately 5 million account holders, translating into an estimated 2.8 million customers
2) Including branches of majority owned regional savings banks
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
8
Erste Bank
Group
With BCR
> BCR - expanding our future growth potential
Integration procedures started with signing of SPA
After closing of the acquisition
in Q2 2006
Pre closing
Dec. 2005 & Q1 2006
» Transition Consultancy
Committee (“TCC”)
consisting of 10 EB senior
managers has full access
to BCR since January 2006
» Two TCC team members
attend meetings of the
Executive Board
» TCC team is assisted by 14
Romanian professionals
who have been trained at
Erste Bank since summer
2004
» Transition programme consisting of more than 20 teams
covering all business functions of BCR will be 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 transition programme will be given in
Q3 2006
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
9
> EB has defined clear financial targets for BCR
Cost/income ratio
Return on equity after tax
54%
<48%
>35%
17%
2004
2004
2009
2009
Erste Bank targets a return on investment (RoI)
of around 10% for BCR by 2009(2)
(1) Based on a Tier 1 ratio of 9%
(2) RoI defined as 62% of BCR net income divided by purchase price for the 62% stake in BCR; RoI calculation excludes funding costs
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
10
(1)
> Efficiency focus - New Group Architecture (NGA)
NGA initiatives create synergies across the group
» Group Performance Model is the strategic backbone of the NGA programme
» Almost equal contribution to profit growth from revenue enhancement and efficiency improvement
New revenues
NGA projects
2005
Group Large Corporates
EUR +25m
Group Cards Synergy Project
EUR +45m
Retail 2008
EUR +45m
Sale of structured investment products
Cost reduction
2008E
EUR +14m
EUR +40m
Information Technology
Group Procurement
Procurement cost savings
EUR +39m
~ EUR +53m
Positive pretax P&L effect:
Targets announced at Erste Bank CMD in September 2005
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
11
EUR +55m
~ EUR +210m
> Presentation topics
1. Consistent strategy
2. Strong execution track record
3. Growth drivers
4. Financial targets
5. Appendix
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
12
> Growth drivers – Loan growth
Quality growth in Central Europe
Retail loan growth in EB CEE subsidiaries (EUR bn)
» Attractive margins
» Good repayment record
» Benign risk environment
9.8
49%
6.9
41%
42%
4.9
Strong product demand
3.3
2.0
» Mortgages and home improvement loans
» Consumer finance
» Car leasing
2001
2002
2003
2004
2005
Product penetration still very low
Customer loans/capita in CEE (EUR 1,000)
» Loan stock/capita shows significant
potential
» Developed CEE: gathering momentum
» Early stage CEE: just starting
30.6
Developing
transformation
economies
Long growth path ahead
» In early stage CEE markets, eg Romania,
Serbia and Ukraine as well as in developed
CEE economies
4.7
Austria
Croatia
4.6
4.1
Emerging
transformation
economies
2.7
Hungary Czech R Slovakia
0.5
Serbia
0.8
Romania
As per end of 2005 - Source: Local central banks. Austria: domestic loans only.
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
13
> Growth drivers – Wealth management
Fund management
FUM/Capita in Central Europe (in EUR) *
18,921
» FUM/capita indicates huge opportunity
» Strong growth in CE, but from low base
» Markets will reach scale in the medium
term
11,709
Life insurance
757
» Same scenario as with fund management
» Premiums/capita show gap to EU levels
» Growth is steadier, tied to state regulations
743
606
380
4
Czech R Hungary Slovakia
1998
Croatia
2001
Romania Austria Germany
2005
Leading market positions
EB fund management market shares
» 24.3% FUM share in Central Europe
» 18.0% FUM share in Austria
» Life shares range from 2% - 15%
37.3%
35.8%
28.8%
27.9%
Beneficiary from catch-up process
25.0%
24.5% 24.3%
17.3%18.0%
» Leveraging existing client base
» Launch of new, more sophisticated
products
» Increased fee contribution
10.2%
9.5%
6.6%
Czech R Slovakia
Croatia
Hungary
2004
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
14
2005
CEE Total
Austria
> Presentation topics
1. Consistent strategy
2. Strong execution track record
3. Growth drivers
4. Financial targets
5. Appendix
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
15
> Erste Bank Group’s new targets
Old Target
New Target
Net profit 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(1)
20% in 2008
18-20% in 2009
The acquisition of BCR significantly increases Erste Bank’s
long-term earnings growth potential
(1)
Based on a Tier 1 ratio of at least 7%
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
16
> Presentation topics
1. Consistent strategy
2. Strong execution track record
3. Growth drivers
4. Financial targets
5. Appendix
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
17
> Group income statement (IFRS)
Strong operating performance continues to drive net profit growth
Net interest income
Risk provisions for loans and advances
Net commission income
Net trading result
General administrative expenses
Result from insurance business
Other operating result
Pre-tax profit
Taxes on income
Minority interests
Net profit after minority interests
FY 2005
2,794.2
(421.6)
1,256.8
241.7
(2,676.9)
36.7
(16.1)
1,214.8
(300.0)
(203.1)
711.7
FY 2004
2,660.3
(406.2)
1,135.4
216.5
(2,594.9)
36.8
(51.3)
996.6
(277.9)
(197.9)
520.8
% Change
5.0
3.8
10.7
11.6
3.2
(0.3)
(68.6)
21.9
8.0
2.6
36.7
Operating income
Operating expenses
Operating result
4,329.4
(2,676.9)
1,652.5
4,049.0
(2,594.9)
1,454.1
6.9
3.2
13.6
61.8%
19.0%
64.1%
17.0%
EUR m
Cost/Income ratio
ROE
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
18
> Group balance sheet (IFRS)
Assets – CE loan business drives asset growth
EUR m
Cash and balances with central banks
Loans and advances to credit institutions
Loans and advances to customers
Risk provisions for loans and advances
Trading assets
AfS and assets through profit and loss
Financial investments
Intangible assets
Tangible assets
Other assets
Total assets
Risk weighted assets
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
19
31-Dec-05
2,728
16,858
80,419
(2,817)
5,426
18,644
23,611
1,911
1,688
4,192
152,660
31-Dec-04
2,723
15,684
72,843
(2,804)
4,628
15,967
21,926
1,823
1,723
5,299
139,812
% Change
0.2
7.5
10.4
0.5
17.2
16.8
7.7
4.8
(2.0)
(20.9)
9.2
75,078
65,384
14.8
> Group balance sheet (IFRS)
Liabilities – moderate growth in retail funding
EUR m
Amounts owed to credit institutions
Amounts owed to customers
Debts evidenced by certificates
Provisions
Other liabilities
Subordinated capital
Total equity
thereof: shareholders' equity
thereof: minority interests
Total Liabilities
Tier 1 ratio
Solvency ratio
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
20
31-Dec-05
33,911
72,793
21,291
8,635
5,279
4,290
6,461
4,129
2,332
152,660
31-Dec-04
28,551
68,213
19,710
7,500
6,179
3,706
5,953
3,424
2,529
139,812
6.8%
11.0%
6.7%
10.7%
% Change
18.8
6.7
8.0
15.1
(14.6)
15.8
8.5
20.6
(7.8)
9.2
> Current shareholder structure
Total numbers of shares: 308,032,560*
By Investor Type
By Region
Others
Continental Europe 0.9%
6.4%
Austria Verein
5.0%
Capital Research
& Management
5.1%
30.5%
UK & Ireland
17.2%
Employees
1.5%
Other institutional
investors
43.8%
Savings banks
6.9%
Free Float
64.5%
Private investors
7.2%
North America
17.6%
Austria
57.9%
* February 2006
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
21
>
Disclaimer
Cautionary note regarding forward-looking statements
THE INFORMATION CONTAINED IN THIS DOCUMENT HAS NOT BEEN INDEPENDENTLY VERIFIED
AND NO REPRESENTATION OR WARRANTY EXPRESSED OR IMPLIED IS MADE AS TO, AND NO
RELIANCE SHOULD BE PLACED ON, THE FAIRNESS, ACCURACY, COMPLETENESS OR
CORRECTNESS OF THS INFORMATION OR OPINIONS CONTAINED HEREIN.
CERTAIN OF THE STATEMENTS CONTAINED IN THIS DOCUMENT MY BE STATEMENTS OF FUTURE
EXPECTATIONS AND OTHER FORWARD-LOOKING STATEMENTS THAT ARE BASED ON
MANAGEMENT’S CURRENT VIEWS AND ASSUMPTIONS AND INVOLVE KNOWN AND UNKNOWN
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS, PERFORMANCE OR EVENTS
TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN SUCH STATEMENTS.
NONE OF ERSTE BANK OR ANY OF ITS AFFILIATES, ADVISORS OR REPRESENTATIVES SHALL HAVE
ANY LIABILITY WHATSOEVER (IN NEGLIGENCE OR OTHERWISE) FOR ANY LOSS HOWSOEVER
ARISING FROM ANY USE OF THIS DOCUMENT OR ITS CONTENT OR OTHERWISE ARISING IN
CONNECTION WITH THIS DOCUMENT.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR INVITATION TO PURCHASE OR
SUBSCRIBE FOR ANY SHARES AND NEITHER IT NOR ANY PART OF IT SHALL FORM THE BASIS OF
OR BE RELIED UPON IN CONNECTION WITH ANY CONTRACT OR COMMITMENT WHATSOEVER.
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
22
> Investor relations contacts
Erste Bank, Graben 21, 1010 Vienna
Fax
E-mail:
Internet:
+43 (0)5 0100-13112
[email protected]
www.erstebank.com
Reuters:
Datastream:
ERST.VI
O:ERS
Bloomberg:
ISIN:
EBS AV
AT0000652011
* The new EB shares out of the capital increase in January 2006 are listed on the Vienna and Prague Stock
Exchange - ISIN AT0000506217, Security Symbol EBSN.
Investor relations
Gabriele Werzer
Tel: +43 (0)5 0100-11286
E-Mail: [email protected]
Thomas Sommerauer
Tel: 43 (0)5 0100-17326
E-Mail: [email protected]
Josef Kerekes
Tel: +43 (0)5 0100-16878
E-Mail: [email protected]
Morgan Stanley Pan European Banks Conference
London, 21-24 March 2006
23