Erste Group Bank AG
Online Annual Report 2019
Editorial deadline: 28 February 2020, unless stated otherwise
Highlights
Bernd Spalt, CEO of Erste Group Bank AG on the YE 2019 results, presentation on 28 February 2020: "Our annual operating result of nearly 3 billion euros, which is a significant increase of 8.7 percent, proves Erste is really fit at its core. This is quite rare in European banking at the moment – and gives us a strong foundation for future growth."
Solid result in 2019
_ Net result of EUR 1,470.1 million
despite significant negative one-offs
_ At 11.2%, fifth consecutive year of double-digit ROTE
Operating revenues rise stronger than costs
_ Operating revenues increase by 4.9%
_ Despite wage inflation costs only up by 2.4%
_ Operating result up by 8.7%
_ Cost/income ratio improves to 59.0%
Healthy loan growth continues
_ Net loans increase by 7.3%
_ NPL ratio improves to 2.5%
_ NPL provision coverage at 77.1%
_ Risk costs at low 7 basis points
(on average gross customer loans)
Favourable capitalisation
_ CET1 ratio (CRR final) increases to 13.7%, exceeding
regulatory requirements and internal target
_ Third successful AT1 issuance
Excellent funding and liquidity position
_ Strong retail deposit base in all core countries is key trust
indicator and competitive advantage
_ Loan-to-deposit ratio at 92.2%
_ First Non-Preferred Senior (NPS) issuances in Austria and
Romania
Extensive presence in Central and Eastern Europe
Management
Management Board
Peter Bosek, Stefan Dörfler, Ingo Bleier, Ara Abrahamyan, Bernhard Spalt, David O’Mahony, Alexandra Habeler-Drabek
Supervisory Board
left: Wilhelm Rasinger, Matthias Bulach, Karin Zeisel, Jordi Gual, Andreas Lachs, Maximilian Hardegg, Elisabeth Krainer Senger-Weiss, John James Stack, Brian D. O’Neill †
right: Friedrich Rödler, Barbara Pichler, Jan Homan, Regina Haberhauer, Michèle F. Sutter-Rüdisser, Markus Haag, Marion Khüny, Henrietta Egerth-Stadlhuber, Gunter Griss, Jozef Pinter, Martin Grießer
200 years Erste Group
For Erste Group, 2019 was marked by events commemorating its200th anniversary. On 4 October 1819, Erste österreichische Spar-Casse opened its doors in the Vienna suburb of Leopoldstadt, Vienna’s poorest neighbourhood at the time. The founding principleof this first savings bank was as simple as it was revolutionary:
“No age, no gender, no social class or nationality” shall beexcluded from the benefits that the Spar-Casse offers every depositor.”
This excerpt from the founding charter expresses the underlying idea in a nutshell. Back then, like today, the bank’sinclusion-driven strategy is critical to the achievement of itspurpose of attaining and securing prosperity.
Performance
Erste Group posts a net profit of EUR 1,470.1 million in 2019 and achieved a return on tangible equity (ROTE) of 11.2%.
Please refer to the links below for detailed information on business performance and segments
Capital markets
In the year ended, international equity markets were again drivenby geopolitical tensions and their impacts on global economic growth. Especially the US-China trade disputes and the risk of the United Kingdom leaving the European Union without a deal increased stock market index volatility throughout the year. Inresponse to the resulting concerns about the economy, both the European Central Bank (ECB) and the US central bank, the FederalReserve (Fed), eased their expansionary monetary policieseven further. This, along with an improved global corporate earnings growth outlook, provided a substantial boost to the stock markets. The covered stock indices finally benefited from aneasing of these risks in the fourth quarter and ended the year with increases of more than 20% after having in some cases posted sometimes substantial losses in the preceding year. In this environment, Erste Group’s share gained 15.5%, and the European banking index advanced by 11.1%.
IPO … initial public offering, SPO … secondary public offering.
Interactive Chart of Erste Group Share
Performance of less than 12 months has little significance due to its short duration. Information about previous performance does not guarantee future performance. Data 15 minutes delayed. Source: FactSet
Performance of less than 12 months has little significance due to its short duration. Information about previous performance does not guarantee future performance. Data 15 minutes delayed. Source: FactSet
Shareholder Structure
Risk management
A core function of a bank is taking risks in a conscious and selective manner and professionally steering those risks. Adequate risk policy and risk strategy is essential to a bank’s fundamental financial health and operational business success.
Erste Group has developed a risk management framework that is forward-looking and tailored to its business and risk profile. This frame work is based on a clear risk strategy that sets out general principles according to which risk taking must be performed across the group.The risk strategy is consistent with the business strategy and incorporates the expected impact of external environment on the plannedbusiness and risk development.
The risk strategy describes the current risk profile, defines risk management principles, strategic goals and initiatives for the main risk typesas well as sets strategic limits for the significant financial and non-financial risk types as defined in the Risk Materiality Assessment. The risk strategy is executed within a clear defined governance structure. This structure also applies to monitoring risk appetite, additionalmetrics, as well as to the escalation of limit breaches.
In 2019, management has continued to steer credit portfolios, including active management of non-performing exposures to further strengthen the risk profile (e.g. enhanced workout measures, monitoring and reporting of long-term operational plans for legacy stock of non-performing loans and inflow of new non-performing loans etc.). This has been demonstrated in particular by the continuous improvementof credit quality and the ongoing decrease of non-performing loans and low risk costs.
Sustainability
The exclusive focus on profit and shareholder value has undergonesome critical re-evaluation. In summer 2019, for example,200 US top managers announced that they would no longer be guided solely by shareholder value in future but would also takeinto account the public’s social and ecological interests. Centralbanks from all over the world have joined together to form the Network for Greening the Financial System (NGFS). The EuropeanCommission published the key documents of its EU ActionPlan on Sustainable Finance. 2019 was also marked by initiative such as Fridays for Future. It is, most prominently, the younger generation that voices its discontent with economic policies that do not aim at the long-term preservation of an intactenvironment.
For Erste Group, considering the impact of its entrepreneurialactivities on society is nothing new. On the contrary, looking beyond financial performance is very much in line with the principles to which Erste österreichische Spar-Casse committed itself when it was founded 200 years ago.
Resolving the conflicting targets of profitability and the ecologicaland social impact of its business is therefore a key element for the management of Erste Group. In this regard, Erste Group’s Statement of Purpose offers valuable guidance by defining thefollowing tasks and principles:
_ Disseminating and securing prosperity
_ Accessibility, independence and innovation
_ Profitability
_ Financial literacy
_ It is about people
_ Serving civil society
_ Transparency, stability, simplicity
Erste Bank Ad I 200 years in 60 seconds
Ready for a time travel with Marie Schwarz, our first customer, through 200 years #believeinyourself? THE FUTURE IS YOURS.
Erste Group | What does Social Banking mean to us?