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29.04.2022

Erste Group starts 2022 with a strong operating performance

  • Q1 2022 net result up 26% year-on-year to 449 mn euros
  • Operating result up 10.4% to 801 mn euros
  • Continued low risk costs as CEE economies remain resilient

Erste Group posted a 10.4% year-on-year rise in its operating result to 801 million euros in the first quarter of 2022. This strong operating performance reflected 18.8% higher net interest income on the back of rate hikes in Czechia, Hungary and Romania, as well as solid loan volume growth particularly for mortgages and in the corporate segment. Net fee and commission income rose by 14.0% in a reflection of the resilience of the CEE region’s economies and markets. Despite the uncertainties introduced by the war in Ukraine, the overall risk environment remained benign in the first quarter, leading to risk costs of 13 basis points and a NPL ratio of 2.3%. Erste Group posted a net profit of 449 million euros for the first three months of 2022 (Q1 2021: 355 million euros).

Stefan Dörfler, CFO of Erste Group: “In times marked by serious geopolitical and macroeconomic challenges, the economies of Central Europe have proven to be resilient so far. The same is true for Erste’s business model, which is focused on the real economy. This resilience provided the basis for our strong operating performance in the first quarter.”

Financial results from January-March 2022 are compared with those from January-March 2021 and balance sheet positions as of 31 March 2022 with those as of 31 December 2021:

Operating income rises 11.4%

Net interest income increased to EUR 1,392.1 million (+18.8%; EUR 1,172.1 million) driven by rate hikes outside the euro zone – mainly in the Czech Republic, Hungary and Romania – as well as significant loan growth across all markets. Net fee and commission income rose to EUR 615.3 million (+14.0%; EUR 540.0 million). Increases were posted across all fee and commission categories and core markets, with significant growth seen in particular in payment services and asset management. Net trading result deteriorated to EUR - 256.6 million (EUR 9.5 million); the line item gains/losses from financial instruments measured at fair value through profit or loss rose to EUR 239.7 million (EUR 56.9 million). The development of these two line items was mostly attributable to valuation effects. Operating income increased to EUR 2,036.2 million (+11.4%; EUR 1,828.6 million).

Operating result up 10.4%, while cost/income ratio nearly unchanged

General administrative expenses rose to EUR 1,235.2 million (+12.0%; EUR 1,103.3 million). Personnel expenses were up moderately at EUR 630.7 million (+1.3%; EUR 622.4 million). The headcount at the end of the first quarter stood at 44,692 (+0.2%; 44,596). The marked rise in other administrative expenses to EUR 468.1 million (+35.3%; EUR 345.8 million) is mainly due to a substantial rise in payments into deposit insurance schemes to EUR 199.2 million (EUR 107.6 mil-lion). Most of the regular contributions expected for 2022 have already been posted upfront. The significant increase in contributions for 2022 is attributable to higher payments in Austria and Hungary as a result of the Sberbank Europe AG deposit insurance case. Depreciation and amortisation rose to EUR 136.4 million (+1.0%; EUR 135.1 million). The operating result increased markedly to EUR 801.0 million (+10.4%; EUR 725.3 million). The cost/income ratio was nearly unchanged at 60.7% (60.3%).

Net profit rises 26% year-on-year, as risk costs remain low

Due to net allocations, the impairment result from financial instruments (“risk costs”) amounted to EUR -59.1 million or 13 basis points of average gross customers loans (EUR -35.7 million or 8 basis points). Net allocations to provisions for loans, as well as for commitments and guarantees, were posted in Austria as well as in Slovakia, the Czech Republic and Romania, but remained generally at a very low level. Positive contributions came from income from the recovery of loans already written off in all segments as well as from releases, most notably in Croatia. The NPL ratio based on gross customer loans improved to a historic low since the IPO at 2.3% (2.4%). The NPL coverage ratio (excluding collateral) increased to 91.9% (90.9%).

Other operating result amounted to EUR -132.7 million (EUR -126.7 million). Expenses for the annual contributions to resolution funds for the full year 2022 included in this line item rose – most strongly in Austria and the Czech Republic – to EUR 123.1 million (EUR 100.3 million). Banking levies were up at EUR 40.2 million (EUR 33.2 million). At present, banking levies are payable in two core markets: in Hungary, banking tax for the full financial year amounted to EUR 18.0 million (EUR 14.7 million) and transaction tax for the first quarter to another EUR 14.1 million (EUR 11.6 million). In Austria, banking tax equaled EUR 8.1 million (EUR 7.0 million). Taxes on income declined to EUR 115.6 million (EUR 124.3 million). The minority charge decreased to EUR 45.7 million (EUR 85.7 mil-lion) due to significantly lower earnings contributions of the savings banks, mostly as a result of increased contributions to the deposit insur-ance system. The net result attributable to owners of the parent rose to EUR 448.8 million (EUR 355.1 million) on the back of the strong operating result and low risk costs.

Loan volume higher by 2.8%

Total equity not including AT1 instruments rose to EUR 21.8 billion (EUR 21.3 billion). After regulatory deductions and filtering in accordance with the CRR, common equity tier 1 capital (CET1, final) declined to EUR 18.6 billion (EUR 18.8 billion), while total own funds (final) slipped to EUR 24.3 billion (EUR 24.8 billion). While both figures do not include the interim profit for the first quarter of the year, risk costs were already deducted. Total risk – risk-weighted assets including credit, market and operational risk (CRR, final) – increased to EUR 135.5 billion (EUR 129.6 billion). The common equity tier 1 ratio (CET1, final) stood at 13.7% (14.5%), the total capital ratio at 17.9% (19.1%).

Total assets increased to EUR 325.6 billion (+5.9%; EUR 307.4 billion). On the asset side, cash and cash balances rose to EUR 46.2 billion (EUR 45.5 billion), loans and advances to banks – primarily in the Czech Republic – to EUR 30.8 billion (EUR 21.0 billion). Loans and advances to customers increased to EUR 185.3 billion (+2.8%; EUR 180.3 billion), most significantly in Austria and in the Czech Republic. On the liability side, deposits from banks grew to EUR 34.8 billion (EUR 31.9 billion). Customer deposits rose in all core markets – most strongly in Austria and the Czech Republic – to EUR 222.4 billion (+5.6%; EUR 210.5 billion). The loan-to-deposit ratio declined significantly to 83.3% (85.6%).