Erste Group Bank AG
Online Annual Report 2021

Extensive presence in Central and Eastern Europe

Most of the global stock markets covered registered double-digit growth in the year ended and were hovering near all-time highs for months. This development was driven by the faster-thanexpected recovery of the economy after the crisis year of 2020 and better-than-expected growth of corporate results. Both companies and economists upgraded their revenues and earnings outlooks and economic growth forecasts. Later in the year, as the economy gathered steam, a significant rise in energy prices caused by strong demand and supply chain disruptions, particularly in semi-conductors and raw materials, significantly pushed up inflation. In the euro zone, inflation was running at 4.9%, more than twice the 2% target set by the European Central Bank (ECB) and the highest rate since records started in 1997. US inflation likewise surged to the highest level seen in decades to 6.8%. Expectations of interest rate increases and an early end to the central banks’ ultra-loose monetary policies rose due to strong inflation. At year-end, the focus of market participants was again on the continuing Covid-19 pandemic fuelled by a new virus variant and potential containment measures as well as on geopolitical issues, including most prominently the conflict between Russia and the Ukraine.

* A comparison after the IPO would not be applicable as Erste Group has been included in this index only since 16 January 1998. ​​​​​​​​​​​​​​​​
IPO … initial public offering, SPO … secondary public offering

Interactive Chart of Erste Group Share 

Shareholder Structure
 

Free float: 77.75%

1  Syndicated Savings Banks Foundations, own holdings of Savings Banks, Erste Employees Private Foundation
*  Institutional and Retail Investors international
** Including Market Makers, Prime Brokerage, Proprietary Trading, Collateral and Stock Lending positions which are visible through custodian banklists

The shareholder structure may contain rounding differences. The information presented on this website is based on sources that we consider to be reliable. Erste Group does not guarantee the accuracy or completeness of the text and graphs.

Erste Group’s goal for 2022 is to again achieve a double-digit return on tangible equity (ROTE). Among the factors that will support achievement of this goal is the continued strong economic performance of all core markets – Austria, Czech Republic, Slovakia, Hungary, Romania, Croatia and Serbia – and, on this basis, an improvement in the operating result and a continued benign risk environment. As yet unquantifiable (geo-)political, regulatory or economic risks, or a continuation or further escalation of Covid-19 measures by governments may render meeting these goals more challenging.

Erste Group’s core markets are expected to post real GDP growth in the order of 3-5% in 2022. Inflation is set to remain a key theme throughout the year but at the same time is expected to remain broadly stable at elevated 2021 levels. In line with the strong economic outlook unemployment rates are expected to decline from already low levels in all markets. In most countries, sustained competitiveness should again result in sustainable current account balances. The fiscal situation should likewise improve again after significant budget deficits in 2021. Public debt to GDP is projected to improve across the board, albeit from elevated levels.

Against this backdrop, Erste Group expects net loan growth in the mid-single digits. This performance as well as interest rate tailwinds should lead to an at least mid-single-digit increase in net interest income despite negative policy rates in the euro zone. The second most important income component – net fee and commission income is expected to rise in the low to mid-single digits, following the exceptional performance in 2021. As in 2021, positive momentum should again come from asset management and securities business, assuming a continued constructive capital markets environment. Insurance brokerage as well as payment services fees are also expected to contribute. The net trading and fair value result is expected to come in at a similar level as in the previous year. This, however, will depend substantially on the financial market environment. The remaining income components are forecast to remain, by and large, stable. Overall, operating income should increase in 2022. Operating expenses are expected to rise at a lower level than operating income, thus resulting in a cost income ratio of below 55% in 2022, significantly earlier than planned (2024). In addition, Erste Group will continue to invest in IT in 2022 and thus strengthen its competitive position, with a focus on progressive IT modernisation, back office digitalisation and further development of the digital platform George.
 

Based on the robust macro outlook described above, risk costs should remain at a low level in 2022. While precise forecasting is hard at current low risk cost levels, Erste Group believes that in 2022 risk costs will be below 20 basis points of average gross customer loans. The NPL ratio is expected below 3.0%.

Other operating result is expected to remain unchanged in the absence of significant one-off effects. Assuming a low effective group tax rate of about 19% and similar minority charges as in 2021, Erste Group aims to achieve a double-digit ROTE. Erste Group’s CET1 ratio is expected to remain strong. Consequently, Erste Group will propose a dividend of EUR 1.6 per share for the 2021 fiscal year to the 2022 AGM.

Potential risks to the guidance include (geo)political and economic (including monetary and fiscal policy impacts) developments, regulatory measures as well as global health risks and changes to the competitive environment. In addition, given the Covid-19 governmental measures and their impact on the economic development, financial forecasts are still subject to an elevated level of uncertainty. The evolving Russia-Ukraine situation does not impact Erste Group directly, as it has no operating presence in those countries; exposures to both countries are negligible and no meaningful additional risk provisioning is currently anticipated in this context. Indirect effects, such as financial market volatility, sanctions-related knock-on effects on some of our customers or the emergence of deposit insurance or resolution cases cannot be ruled out, though. Erste Group is moreover exposed to non-financial and legal risks that may materialise regardless of the economic environment. Worse than expected economic development may put goodwill at risk.