Post on 13-Oct-2020
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Strong Q1 2017 supported by loan growth and improving loan
portfolio quality
5 May 2017
Česká spořitelna -
Q1 2017 consolidated results
(unaudited, IFRS)
Page
Executive summary –
Czech economy development remains favourable
2
• The GDP growth is expected to accelerate in 2017 as
cyclical position improved in the 2016/2017 turn, ČS
expects 2.8% growth of GDP in 2017
• Headline inflation arrived at 2.6% in March driven
by growing prices of food, fuel, solid domestic demand
and the wage growth. Core inflation (2.2% y/y in March)
reflects improving domestic demand pressures
• ČNB abandoned its FX commitment at the beginning of
April. The EUR/CZK appreciated only slightly and
remained relatively stable thereafter. In 2017, we expect
only a very moderate appreciation of the EUR/CZK
• Yields on Czech government bonds increased
recently (from negative territory) due to the inflation
development and an increase in German yields.
Moreover, the termination of the FX cap raised yields at
the short end of the yield curve. For the rest of this year,
yields will increase only slightly
• We expect the first ČNB interest rates increase in H2
2018. However, the risk is tilted towards the 2017/18 turn.
The foreign inflation pressures and ECB policy will be
crucial
Growth of GDP, household consumption and investments
-6%
-2%
2%
6%
10%
2011 2012 2013 2014 2015 2016
GDP (y/y, %)
Household consumption (y/y, in %)
Fixed investment (y/y, in %)
-1%
-1%
0%
1%
5Y T-Bond YieldsCZGB5YR IndexGDBR5 IndexGTATS5Y Govt
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Executive summary –Financial results reflect growing loans and continuing improvement of loan quality
3
Net profit of Česká spořitelna increased by 4.5% y/y to CZK 3.5 bn
supported by continuing improvement of loan portfolio quality and by income
from sale of financial assets from AFS portfolio given favourable market
conditions
Operating result decreased by 6.7% y/y due to drop of net interest income
and growth of operating expenses • Net interest income suffered from persisting low interest rate environment
• On the other hand, net fee income maintained flat y/y
• Operating expenses increased by 5.6% mainly due to uneven booking of expected
contribution to Deposit Insurance Fund (in 2016 booked also in Q2)
Capitalisation of ČS Group is very strong, total capital ratio stands at 19.1%,
Tier 1 ratio at 18.5%
At the Annual General Meeting held on 25 April ČS shareholders approved
the distribution of the 2016 profit and payment of a gross dividend of
CZK 76 per share; overall CZK 11.6 bn will be paid in dividends
Net profit
Operating result
AGM
Capital ratio
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Executive summary –
Strong loan growth with significantly improved risk costs
4
Group customer loans (gross) increased by 8.0% y/y, driven by private
mortgages and loans to largest corporate customers
• Newly granted private mortgages increased by 61% y/y and exceeded
CZK 17.5 bn which is the historically highest volume for Q1 and the highest
on the market. Mortgage loan outstanding increased by 13.7% y/y
• Consumer loans declined by 0.8% y/y reflecting extraordinary write-offs of NPLs,
excluding this impact we would see 2.2% growth in consumer lending
• Wholesale loans* (outstanding) boosted by 12.5% y/y driven by the largest corporate
clients
Risk costs significantly reduced by 63% from 33 bps to 12 bps y/y reflecting
decreasing default rates, recoveries and low inflow of NPLs
• Share of NPLs reduced to 2.7% y/y (from 3.9% in March 2016), driven by write-offs
of old NPLs
• NPL coverage by credit risk provisions at strong 84%, total coverage grew to 123%
Increasing demand for more advantageous investment products evidenced
in growing assets in pension funds of ČSPS (up by 9.0% y/y) and in domestic
and foreign mutual funds (up by 15.2% y/y) * Wholesale defined as Corporate and Group Markets customer segments
Lending
Risk costs
Investments
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Q1 2017 Business highlights – Retail
MHF
Mortgages
Real Estate
Loans
More than 320,000 clients are saving
money with the “My Healthy Finance”
service. Through this service we help
our clients to reduce their regular
expenditure and advise them how to
save and appreciate the savings
My Healthy Finance application is
used by more than 70,000 clients.
They can monitor their expenses,
which are automatically sorted into
categories. Clients can thus easily see
on what they spend the most and on
what they can save
The application also allows them
to compare their costs with
demographically similar people, set
up budgets or display how much money
is left till the next salary
Low interest rates and convenient
process of applying for mortgage are
still attractive. In Q1 2017 we provided
our clients with almost 8,700
mortgages worth above CZK 17.5 bn,
which is the highest ever volume for
Q1
Our cash loans are affordable and
convenient. In Q1 2017 we lent our
clients almost CZK 9 bn in more than
40.000 consumer loans. More than
43.000 clients have already used our
product "Peníze na klik" and borrowed
from us CZK 400 m
ČS Real Estate Fund managed by
REICO investiční společnost České
spořitelny acquired office building
Park One in Bratislava with the
headquarters of Amazon and L‘Oréal. ČS
Real Estate fund celebrated 10 year
anniversary and plans to expand to
Poland and Hungary
Friends 24
With Friends 24 application our clients
can transfer small payments without
knowing account numbers. So far over
11,000 people downloaded and
installed the app. and made around
38,000 transfers sending approx.
CZK 14 m to their friends and
acquaintances
5
BranchesWe are changing the service model
of our branch network to increase the
advisory role. All branches under the
new concept include self-service zones.
There are three types of branches –
small, medium with extended product
and service offer, and big with full
offer of products and services
InvestmentsClients of Erste Private Banking
and institutional clients of Česká
spořitelna asset management have
thanks to the new fund ČS PRIVATE
EQUITY 1 a chance to participate on
private equity yields
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Q1 2017 Business highlights – Corporates
A bundle of easy products and a
fast-track approval process for SME
clients
Easy Loan is an alternative to the
standard lending process.
Its benefits are primarily: acceleration
and cost reduction of the lending
process, guaranteed period for
approval and preparation of
contractual documentation
In Q1 2017 we provided Easy Loan to
84 clients with the total volume of
almost CZK 1 bn
EASY LOAN
We are participating in introducing contactless payment in the
public transport of our towns.
In Děčín we have helped develop a new smart payment card
making it possible to pay a fare in contactless way. It is the
first project of its kind in the Czech Republic where it is possible
to use a prepaid bank card like a conventional payment card and
also assign fares to it - one-off fares and in the form of a time
coupon
TOP EU+New bundle of services where we
offer investment loans along with
requests for EU fund grants.
Top EU+ enables more effective
cooperation with the EIB during the
providing process of low-cost loans to
innovative firms
EIBČeská spořitelna signed a new
guarantee contract with the European
Investment Bank (EIB) ensuring
EUR 100 m for domestic firms and
covering 50 percent of credit risks for
new investment contracts with
enterprises up to 3,000 employees.
Česká spořitelna has loaned in
cooperation with EIB a total of EUR
1.15 bn
E-invoiceThanks to the E-Invoice service our clients can now receive
electronic calls to settle local charges for dog licences or
refuse collection in their SERVIS 24 internet banking. We are
presenting the new service in cooperation with the city of
Tábor
Smart townhallIn cooperation with the Office of the Government
and the company O2, we have declared the competition
Smart Townhall to recognise cities and towns for
introducing modern technology simplifying their running.
As part of our "Smart City" package of services we help cities
make investments in so-called "smart" solutions
Transport cards
6
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Presentation topics
7
• Česká spořitelna
• Financial performance analysis
• Macroeconomic developments
• Economic trends in details
• Banking market
• Czech banking market developments
• Česká spořitelna market shares
• ČS digital
• Appendix
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Financial statements – Income statement (CZK m)
8
1-3 16 1-3 17 Change
Net interest income 6,379 6,169 -3.3%
Net fee and commission income 2,282 2,293 0.5%
Dividend income 3 5 66.7%
Net trading and fair value result 633 792 25.1%
Net result from equity method investments 0 -10 -
Rental income from investment properties & other operating leases 131 82 -37.4%
General administrative expenses -4,369 -4,613 5.6%
Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 2 230 >100%
Net impairment loss on financial assets not measured at fair value through profit or loss -460 -184 -60.0%
Other operating result -395 -369 -6.6%
Pre-tax result from continuing operations 4,206 4,395 4.5%
Taxes on income -831 -869 4.6%
Post-tax result from continuing operations 3,375 3,526 4.5%
Net result for the period
Net result attributable to non-controlling interests 0 -2 -
Net result attributable to owners of the parent 3,375 3,528 4.5%
Operating income 9,428 9,331 -1.0%
Operating expenses -4,369 -4,613 5.6%
Operating result 5,059 4,718 -6.7%
Cost/income ratio 46.3% 49.4%
Return on equity 11.1% 11.5%
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Financial statements – Balance sheet I (CZK m)
Assets
9
Assets Dec 16 Mar 17 Change
Cash and cash balances with central banks 173,100 231,235 33.6%
Financial assets - held for trading 20,944 112,434 >100%
Derivatives 13,357 12,403 -7.1%
Other trading assets 7,587 100,031 >100%
Financial assets - designated at fair value through profit or loss 423 405 -4.3%
Financial assets - available-for-sale 81,274 69,165 -14.9%
Financial assets - held to maturity 167,899 168,988 0.6%
Loans and receivables to credit institutions (net) 22,328 115,563 >100%
Loans and receivables to customers (net) 577,453 590,288 2.2%
Derivatives - hedge accounting 519 483 -6.9%
Property and equipment 10,456 10,205 -2.4%
Investment properties 2,390 2,390 0.0%
Intangible assets 4,284 4,100 -4.3%
Investments in associates and joint ventures 753 744 -1.2%
Current tax assets 611 745 21.9%
Deferred tax assets 136 246 80.9%
Assets held for sale 320 241 -24.7%
Other assets 3,636 3,609 -0.7%
Total assets 1,066,526 1,310,841 22.9%
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Financial statements – Balance sheet II (CZK m)
Liabilities
10
Liabilities and equity Dec 16 Mar 17 Change
Financial liabilities - held for trading 17,982 136,363 >100%
Derivatives 13,877 13,057 -5.9%
Other trading liabilities 4,105 123,306 >100%
Financial liabilities designated at fair value through profit or loss 1,997 1,721 -13.8%
Deposits from customers 1,997 1,721 -13.8%
Financial liabilities measured at amortised cost 911,350 1,033,602 13.4%
Deposits from banks 114,282 198,330 73.5%
Deposits from customers 786,876 824,453 4.8%
Debt securities issued 9,173 9,146 -0.3%
Other financial liabilities 1,019 1,673 64.2%
Derivatives - hedge accounting 452 501 10.8%
Provisions 2,909 3,412 17.3%
Current tax liabilities 109 210 92.7%
Deferred tax liabilities 188 137 -27.1%
Liabilities associated with assets held for sale 125 124 -0.8%
Other liabilities 9,684 10,229 5.6%
Total equity 121,730 124,542 2.3%
Equity attributable to non-controlling interests 166 164 -1.2%
Equity attributable to owners of the parent 121,564 124,378 2.3%
Total liabilities and equity 1,066,526 1,310,841 22.9%
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3,534
3,528
-443301
658 -65 -456
0
Q4 16 Operatingincome
Operatingexpenses
Netprovision
creation
Other result* Taxes onincome
Minorities Q1 17
-0.2%
3,375
3,528
-97-244
275
254-38 3
1-3 16 Operatingincome
Operatingexpenses
Net provisioncreation
Other result* Taxes onincome
Minorities 1-3 17
4.5%
Financial performance – Executive summary
Net profit increased by 4.5% y/y in Q1 2017
Q/Q net profit reconciliation (CZK m) Y/Y net profit reconciliation (CZK m)
11
• Operating income decreased by 5% q/q driven by lower net interest
income (-2%), net trading and FV result (-14%) and net fee and
commission income (-5%)
• Operating expenses reduced by 6% q/q mainly due to seasonality
• In Q4 2016 higher costs for marketing and property management
and creation of restructuring provision
• Net provision creation dropped by 78% q/q due to higher creation
in Q4 2016 covering several individual defaults
• Income tax development impacted by deferred tax asset from
impairment of buildings created in Q4 2016
• Important contributor to growth of net profit was sale of financial
assets from AFS portfolio with positive impact CZK 230 m (visible
in Other result)
• Decline of operating income attributed mainly to net interest
income (CZK -0.2 bn), on the other hand net fee income kept
flat and net trading and FV result grew by 25%
• Growth of operating expenses caused mainly by uneven booking
of expected contribution to Deposit Insurance Fund (in 2016
booked also in Q2)
• Low default rates, higher recoveries and significant releases
in individual creation led to further reduction of net provision
creation (-60.0%)
P/L positive
P/L negative
* Includes Gains/losses from financial assets and liabilities not measured at fair value and Other operating result
P/L positive
P/L negative
Page
Positive
Negative
1,066.5
1,310.8
11884
37 0 2 3
Dec 16 Trading
liabilities
Bank
deposits
Customer
deposits
Debt
securities
Other
liabilities
Equity Mar 17
22.9%
1,066.5
1,310.8
5880
93 13 0 0
Dec 16 Cash andbalances
with ČNB
Trading,financial
assets
Loans tobanks
Netcustomer
loans
Intangibles Other assets Mar 17
22.9%
Financial performance – Executive summary
Balance sheet influenced by huge inflow of liquidity in connection with FX interventions
YTD total asset reconciliation (CZK bn) YTD total liability reconciliation (CZK bn)
12
• Asset side of the B/S reflects placing of liquidity inflow to ČNB
• Cash and balances with ČNB increased by CZK 58 bn
in Q1 2017 driven by overnight deposits with ČNB
• Trading assets grew by more than 100% due to reverse repo
operations with ČNB
• Loans to banks increased by CZK 93 bn due to placing
of overliquidity (including funds from institutional investors)
to ČNB
• Net customer loans added 2.2% in Q1 2017
• Liability side influenced by huge inflow of liquidity into CR as
a consequence of expectations regarding FX interventions
• Trading liabilities boosted by more than 100% due to repo operations
with non-banking financial institutions
• Bank deposits rose by 73.5% since YE 2016
• Group customer deposit base increased by 4.7% since YE 2016
• Deposits in parent bank up by 6.4%, driven by deposits from public
sector (+28.4%) and corporate deposits (+10.3%); deposits from private
individuals grew by 2.8% since YE 2016
Increase
Decrease
Page
20.1% 20.1% 19.1%
Mar 16 Dec 16 Mar 17
Financial performance – Executive summary
Sound capitalisation and stable ROE
Cost/income ratio
13
Loan/deposit ratio Number of branches
ROE Total capital ratio Number of employees (eop)
42.8%
46.3%49.4%
1-3 15 1-3 16 1-3 17
634608
546
Mar 15 Mar 16 Mar 17
10,545 10,487
10,213
Mar 15 Mar 16 Mar 17
13.3%
11.1% 11.5%
1-3 15 1-3 16 1-3 17
* Uneven booking of expected contribution to Deposit Insurance Fund added 1pp
* 74.7%73.2%
71.4%
Mar 16 Dec 16 Mar 17
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Operating result –
6.7 % below Q1 2016
• Shrinking operating income (-1.0% y/y)
and higher operating expenses
caused decline of operating result
• Net interest income and rental income went
down but net fee income maintained at Q1
2016 level
• Rental income down by 37.4% due to reduction
of investment in real estate SPV
• Net trading and FV result increased by
25.1% y/y
• Driven by growing profit from foreign currency
derivatives (customers´ hedging connected
to expected exit from ČNB interventions)
• Operating expenses rose by 5.6% driven
mainly by uneven booking of expected
contribution to Deposit Insurance Fund /details on slide 17/
Operating result (CZK m)
14
5,911
5,0594,718
1-3 15 1-3 16 1-3 17
-6.7%
Operating income structure (CZK m)
6,429 6,379 6,169
2,521 2,282 2,293
1,190633 792
192134 77
1-3 15 1-3 16 1-3 17
Net interest income Net fee and commision Net trading and fair value result Other
Page
6,429 6,379 6,169
1-3 15 1-3 16 1-3 17
-3.3%
Net interest income –
Decreased by 3.3% y/y
• Increase in loan volumes did not offset
effect of prevailing pressure on interest
margins• Lower interest income from bonds reflecting
declining yields partly mitigated by lower cost
of funds
• Net interest margin decreased
to 2.71%
• Reflected a pressure on interest margins
and extraordinary increase of interest
bearing assets, mainly interbank assets
with almost no margin which rose by CZK
81 bn y/y (+233%) due to placing of funds
from institutional investors to ČNB.
Excluding this extraordinary effect
interest margin would reach 3.0%
15
Net interest margin
Net interest income (CZK m)
3.32% 3.19%2.71%
0.17% -0.05% -0.04%
1-3 15 1-3 16 1-3 17
Net interest margin 5Y CZGB yield; Q1 AVG
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2,5212,282 2,293
1-3 15 1-3 16 1-3 17
0.5%
529 457 350
1,4231,233
1,182
346382 495
222211 267
1-3 15 1-3 16 1-3 17
Lending Payment transfers Securities transactions Other
Net fee and commission income –
Kept at Q1 2016 level
• Net fee income maintained flat in y/y
comparison as declining fee income
from lending was offset by growing
income from securities and asset
management• Income from securities and asset management
rose by 30% y/y, supported also by higher fees
from pension funds in connection with legislative
change in 2016
• Higher income from sale of insurance
products served as another contributor
to net fee income
• Net fee income from payment transfers
declined by 4% y/y
16
Net fee and commission income structure (CZK m)
Net fee and commission income (CZK m)
*
* Including fees from account maintenance and payment cards fees
Page
2,151 2,188 2,235
1,735 1,677 1,833
535 504545
1-3 15 1-3 16 1-3 17
Personnel expenses Other administrative expenses
Depreciation and amortisation
4,421 4,369 4,613
1-3 15 1-3 16 1-3 17
5.6%
Operating expenses –
Increased by 5.6% y/y
• Development of operating expenses
influenced by uneven booking of expected
contribution to Deposit Insurance Fund
(in 2016 booked also in Q2), excluding this
effect operating expenses rose by 2.8%
• Personnel expenses rose by 2.1%
reflecting higher wages and employee
benefits
• Other administrative expenses excluding
impact of Deposit insurance fund
increased by 2.0% mainly due to IT
investments in digitalisation and regulatory
requirements
• Depreciation went up by 8.1% y/y affected
by higher depreciation of software
Operating expenses (CZK m)
17
Operating expenses structure (CZK m)
Page
Group capital position–
Total capital ratio at sound 19.1%
Regulatory capital (CZK bn) Risk exposures (CZK bn)
18
Capital ratios
• Total capital grew by 2.2% y/y thanks to
higher retained profit and lower dividends;
slight decline since YE 2016 reflected
credit risk provisions that were not audited
yet
• Tier II capital increased following inclusion
of preference shares from CET 1
• Growing risk exposures driven mainly
by credit risk area reflecting growth
of corporate and retail loans
• Total capital ratio decreased mostly due
to the business growth (reflected in
growing risk exposures) which is in line with
ČS business strategy; total capital increased
89.4 90.7 88.9
8.1 8.1 8.10.3 3.1 2.9
97.7 101.9 99.9
31/03/2016 31/12/2016 31/03/2017
CET 1 capital Additional Tier 1
Tier 2 Total capital
415.8 424.9 434.2
7.6 8.4 6.762.5 73.9 82.9486.0 507.1 523.9
31/03/2016 31/12/2016 31/03/2017
Credit risk Market risk
Operational risk Total
20.1% 19.5% 18.5%20.1% 20.1% 19.1%
31/03/2016 31/12/2016 31/03/2017
Tier 1 ratio Total capital ratio
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Balance sheet development –
High growth in loans and even faster growth in deposits
Group net customer loans (CZK bn) Group customer deposits (CZK bn)
19
• Group net customer loans increased by 8.7% compared
to March 2016 driven by retail mortgages and loans to
the largest corporate customers
/details to loans in the lending part of the presentation/
• FX loans represent 14% of net loans, concentrated solely
in corporate area almost only in EUR
• Double digit growth of customer deposits attributed
mainly to growing deposit base from private individuals
and corporate clients
540.7 553.0 560.9 579.9 593.3
125.5 138.3 138.4 151.7 159.160.571.7 73.0 57.4 73.7726.6 763.1 772.3 788.9 826.2
Mar 16 Jun 16 Sep 16 Dec 16 Mar 17
Households Corporates General governments
13.7%
478.7 485.0 498.4 498.3 505.7
60.3 63.4 67.3 74.9 80.34.2 4.8 4.7 4.2 4.3543.2 553.2 570.3 577.5 590.3
Mar 16 Jun 16 Sep 16 Dec 16 Mar 17
CZK EUR Other
8.7%
Page
IFRS, in CZK bn Mar-16 Dec-16 Mar-17Change
(y/y)
ČS - customer deposits 654.3 713.4 758.9 16.0%
SSČS - building society 73.9 77.1 69.0 -6.5%
ČSPS - pension company 66.0 70.4 72.0 9.0%
Dom. and foreign mutual funds 98.4 109.5 113.4 15.2%
thereof Reico - investment company 9.3 13.1 14.2 51.4%
Asset management 71.3 75.2 76.3 7.0%
Total 963.9 1,045.6 1,089.6 13.0%
963.91,045.6 1,089.6
Mar-16 Dec-16 Mar-17
CS asset
management
Domestic and
foreign mutual
fundsČSPS
SSČS
ČS
Total
ČS Group deposits –Persisting growth of alternative and standard deposit products
• Customer deposits in parent bank
accelerated and grew by 16.0% y/y
• Private individuals and corporate clients were
the major contributors to the overall growth
of customer deposits
• Assets in pension company increased
by 9.0%
• Organic increase of volumes split between
transformed and participant funds
• Domestic and foreign mutual funds* added
15.2% in 2016
• Prevailing low interest rates support higher
clients´ demand for alternative higher-yielding
products
• In Reico investment company customer assets
increased by more than 50% in y/y comparison
• Assets under discretionary management
grew by 7.0% in y/y comparison
ČS Group deposits (CZK bn)
20
13.0%
*
*Mutual funds are now reported in line with AKAT methodology. History has been restated.
Page
Group loan portfolio – Summary
Portfolio growth accompanied with low risk costs and better quality
21
• Gross loans to customers in ČS Group increased by 8.0% y/y to CZK 604 bn
• Outstanding demand for private mortgages in previous months materialized in a rapid growth of on balance.
Consumer lending affected by nonrecurring large write offs. Growth of wholesale was driven by the largest
clients and non-banking financial institutions
• Detail segment figures are affected by internal resegmentation of public and non profit sector
(CZK 9.1 bn moved from retail to wholesale in Q4 2016) and further reshuffle in wholesale itself (transfers
among sub-segments following an implementation of a new corporate strategy)*
• Risk costs reduced significantly by 63% from 33 bps to 12 bps y/y
• Declining default rates and recoveries in private individuals
• Recoveries and low NPL inflow in wholesale
• When including provisions for guarantees, risk costs would decrease from 31 bps to 11 bps y/y
• Portfolio quality further improved and NPL ratio dropped from 3.9% to 2.7% y/y
• Quality improvement driven by nonrecurring write off of retail loans (CZK 2.0 bn, of which consumer lending
CZK 1.9 bn), recoveries and low inflow of new NPLs combined with loan portfolio growth
• Provision coverage remained at strong 84%, total coverage (provisions+collateral to NPL) improved
to 123% (from 106% in Q1 2016)
* Historic data has not been reclassified
Page
Group loan portfolio –
Group loans increased by 8.0% y/y driven by all CS Group members
ČS Group loan portfolio (gross) Industry split of loan portfolio as of March 2017
22
• ČS Bank dominates the ČS Group
• Interest rates at bottom for housing markets and continuing economic growth led to further growth in ČS
bank and all of its major subsidiaries
• Private households remains behind more than half of the loan portfolio
in CZK m, IFRS 31/03/2016 % share 31/03/2017 % shareY/Y
Change
I. ČS Bank 520,028 93.0% 563,534 93.3% 8.4%
II.1. Stavební spořitelna ČS 35,437 6.3% 35,967 6.0% 1.5%
II.2. Leasing (sAL, EL) 14,837 2.7% 15,979 2.6% 7.7%
II.3. Factoring ČS 4,436 0.8% 5,064 0.8% 14.2%
III. Other subs and Consolidation items -15,368 -2.7% -16,664 -2.8% 8.4%
Total Loans (consolidated) 559,370 100.0% 603,880 100.0% 8.0%
Private Households
51%
Real Estate12%
Manufacturing10%
Wholesale and retail
trade6%
Energy3%
Other <3%18%
Page
Bank loan portfolio –
Portfolio growth fuelled proportionally by both retail and wholesale*
Loan portfolio development - ČS BankLoan portfolio by customer segments
as of March 2017
23
• Loans to retail rose by 6.2% y/y (excluding
resegmentation of CZK 9.1 bn in Q4 2016
by 9.2%)
• Driven primarily by private mortgages (+13.7%)
• Commercial loans when excluding
resegmentation of public sector grew by 5.4%
• Loans to wholesale* added 12.5% y/y
(excluding resegmentation in Q4 2016
of CZK 9.1 bn by 8.2%)
• Growth driven mainly by real estate, public sector
and SMEs
* Wholesale defined as Corporate and Group Markets.
304.7 310.9 319.5 318.0 323.6
212.5 217.4 226.6 233.1 239.1
6.6% 7.4%8.8%
8.3% 8.4%
0%
10%
20%
30%
0
50
100
150
200
250
300
350
Mar 16 Jun 16 Sep 16 Dec 16 Mar 17
in C
ZK
bn
Retail loans Wholesale loans Total loan growth (y/y)
Large corporates
13.2%
SME23.6%
Consumer, private credit cards,
overdrafts and home equity
11.2%
Mortgage & real est.46.0%
Others 6.0%
Page
Bank loan portfolio –
Mortgages further accelerated, consumer lending affected by write offs
Private mortgages development Consumer lending development*
24
• Private mortgages accelerated
to CZK 216.1 bn (+13.7% y/y)
• Strong sales in Q4 2016 and Q1 2017 started to be
utilized now
• LTV ratio for the whole portfolio declined from 64.3%
to 62.0%, following regular collateral repricing
• Consumer lending* at CZK 63.0 bn (-0.8% y/y)
after nonrecurring write offs (CZK 1.9 bn)
• Outstanding sale of cash loans was offset by
extraordinary write offs in March 2017. Underlying
growth of the portfolio would reach +2.2%
*Consumer lending here includes Cash loans, home equity loans,
private credit cards and private overdrafts. Social loans are excluded.
190.1196.0
203.0209.6
216.1
11.9% 11.5%11.9% 12.2%
13.7%
10%
15%
20%
25%
160
170
180
190
200
210
220
230
Mar 16 Jun 16 Sep 16 Dec 16 Mar 17
in C
ZK
bn
Private Mortgages Private Mortgages growth (y/y)
63.5 63.5 64.2 64.5 63.0
-2.5% -1.8% -0.3% 1.1% -0.8%
-20%
0%
20%
40%
60%
0
20
40
60
80
100
Mar 16 Jun 16 Sep 16 Dec 16 Mar 17
in C
ZK
bn
Consumer Lending Consumer Lending growth (y/y)
Page
Group asset quality
Improving risk profile and coverage, significant decline of risk costs
NPL ratio and NPL coverage Risk costs development
25
• Group NPL share dropped to 2.7%
• Driven by write offs in retail, low NPL inflow
and recoveries
• Provision coverage at strong 84%, total coverage
(provisions+collateral to NPL) improved to 123%
• Annualized group risk costs declined to 12 bps
• Ongoing positive macroeconomic development with
limited number of small defaults, no larger defaults
or additional provision creations on already defaulted
wholesale clients
3.9% 3.6% 3.3% 3.2% 2.7%
73%76%
80%83% 84%
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%
90%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Mar 16 Jun 16 Sep 16 Dec 16 Mar 17
Group NPLs Risk Provisions / NPLs
33
24 24
32
12
-50.2% -53.6% -47.8%-33.4%
-62.9%
-100%
0%
100%
200%
300%
0
5
10
15
20
25
30
35
Mar 16 Jun 16 Sep 16 Dec 16 Mar 17
in b
p
Group risk costs Y/Y change
Page
Presentation topics
26
• Česká spořitelna
• Segment financial performance analysis
• Macroeconomic developments
• Economic trends in details
• Banking market
• Czech banking market developments
• Česká spořitelna market shares
• ČS digital
• Appendix
Page
Macroeconomic developments –
GDP growth will accelerate in 2017
Real GDP growth y/y Components of GDP
27
• The GDP growth slowed down to 2.3% in 2016, was driven mainly by
a temporary decrease in investments
• However, real economic activity remained solid, favourably
influenced by both domestic and foreign demand. Also, the weak
EUR/CZK exchange rate positively affected the GDP growth
• In 2016/17 turn, the cyclical position further improved mainly due to
economic recovery in the Eurozone. We expect GDP growth will reach
almost 3% in 2017 and 2018 as the favourable development in both
domestic and foreign demand will continue
• Relatively stable growth of household consumption is the most important
GDP growth contributor. It is being supported by a strong labour market and
positive sentiment of households
• Decrease in fixed investment in 2016 was affected by significant public
investments financed by EU funds in 2015. In 2017, investment
expenditures will contribute positively to the GDP growth due to the improved
economic development in Eurozone and higher public investments
• The manufacturing sector, supported to a large extent by continuing
expansion in the automotive industry, remained the most significant contributor
to GDP growth on the supply side (adding 1.2pp in Q4 2016)
Note: Source for historic figures is Czech statistical office. Figures for forthcoming years are ČS forecasts
-0.5%
2.7%
4.6%
2.3%2.8% 2.9%
2013 2014 2015 2016 2017e 2018e
0.5%1.8%
3.1% 2.9% 2.7% 2.8%
-2.5%
3.9%
9.1%
-3.6%
1.9% 2.5%
2013 2014 2015 2016 2017e 2018e
Private consumption growth
Fixed capital formation growth
Page
Macroeconomic developments –
The lowest unemployment rate in the EU
Unemployment and inflation General government debt and government balance
28
• Average CPI arrived at 2.6% in March as it was supported by prices of food,
fuel and also by domestic demand pressures
• We expect a slight increase in CPI inflation during 2017 due to solid
domestic demand, increase in wage costs of firms and also lower
anti-inflationary pressures from the Eurozone
• The general unemployment rate (ILO) reached 3.4% in February
and is still the lowest in the EU
• The strong growth of the Czech economy and high inflow of EU funds
positively affected the central government’s cash flow-based budget, which
reached a surplus in 2016
• In 2017 and 2018, we expect a slight deficit in general government balance
due to higher public consumption and investment expenditures
• The share of public debt to nominal GDP is anticipated to further
decrease, mainly thanks to the favourable development of the Czech economy
Note: Source for historic figures is Czech statistical office. Figures for forthcoming years are ČS forecasts
6.8%
5.9%
4.6%
3.7% 3.6% 3.5%
1.4%
0.3% 0.3%0.7%
2.7%2.0%
2013 2014 2015 2016 2017e 2018e
Unemployment rate (eop)
Consumer price inflation (avg)
44.9% 42.2% 40.3% 37.2% 35.7% 35.9%
-1.2% -1.9% -0.6%
0.6%
-0.6% -0.4%
2013 2014 2015 2016e 2017e 2018e
General government debt (share of GDP)
General government balance (share of GDP)
Page
Macroeconomic developments –
Yields of Czech T-bonds increased
• Domestic demand pressures are important
factors behind the inflation development as
the core inflation contributed approx. 1.2pp
to the overall inflation in March
• The ČNB abandoned the FX commitment
at the beginning of April 2017. The EUR/CZK
appreciated only slightly and remained
relatively stable thereafter
• We expect only a moderate appreciation
in coming quarters as foreign investors
will gradually sell CZK and thus mitigate the
appreciation tendencies
• We expect a first increase in ČNB rates
in H2 2018. However, the risk is tilted towards
the 2017/18 turn. The inflation pressures in
the Eurozone and ECB policy will be crucial
• Yields of government bonds increased
reflecting higher pro-inflationary
pressures and exit from the FX cap
29
-2
-1
0
1
2
3
2015 2016 2017
Break-down of CPI
Regulated prices Indirect taxes
Food, beverages and tobacco Core
Fuel CPI
-0.5%
0%
0.5%
1%
1.5%
1-1
5
2-1
5
3-1
5
4-1
5
5-1
5
6-1
5
7-1
5
9-1
5
10-1
5
11-1
5
12-1
5
1-1
6
2-1
6
4-1
6
5-1
6
6-1
6
7-1
6
8-1
6
9-1
6
10-1
6
12-1
6
1-1
7
2-1
7
3-1
7
10Y T-Bond YieldsCZGB10YR IndexGDBR10 IndexGTATS10Y Govt
CPI Inflation y/y
Page
Presentation topics
30
• Česká spořitelna
• Segment financial performance analysis
• Macroeconomic developments
• Economic trends in details
• Banking market
• Czech banking market developments
• Česká spořitelna market shares
• ČS digital
• Appendix
Page
18.0 17.919.8 20.5
16.118.9
0
5
10
15
20
25
Q4 2016 Q4 2016 Q4 2016 Q4 2016 Q4 2016 Q4 2016
Large banks Medium-sized banksbanks
Small banks
T1 Capital ratio Total capital ratio
• According to latest ČNB stress tests the Czech banking sector has
a strong capital adequacy, liquidity and robust profitability
• The counter-cyclical capital buffer rate for exposures of Czech banks
is set at 0.5%; this rate is applicable from January 2017. In March 2017
the ČNB decided to keep the buffer rate at this level also following April
2018
• Impact of the ČNB‘s exit from its FX floor will be small since
movements of the exchange rate are unlikely to be sizeable and
banks are largely hedged against them
Czech banking market –
Sufficiently capitalized and resilient, with low and falling NPL share
Capital ratios of Czech banks* (%) Non-performing loan ratios (%)
• The share of non-performing loans (NPL ratio) in the retail
sector has been falling since 2013 in line with the improving
economic situation
• The NPL ratio in the corporate sector has been hovering
around 5% since the Spring of 2016
31
* Compliant with ČNB segmentation of banks, data for March not available yet
4.0%
5.2%
3.8%3.4%
5.0%
2.9%
0%
1%
2%
3%
4%
5%
6%
Total Non-financialcorporations
Households
Mar 16 Mar 17
Page
Czech banking market –
Vivid growth of loans and deposits in retail as well as corporate sector
Retail and corporate loans (y/y growth) Retail and corporate deposits (y/y growth)
32
• In March 2017, total loans grew by 7.3% y/y. The main source was
growth of loans to households. In the first quarter of 2017 this growth
accelerated to values above 8% (average for the previous year
was by a percentage point lower)
• In 2017, ČS expects client loans to grow by some 5.7%. Growth of
loans to households will ease, relative to current tempos, to 7%.
Housing loans will grow at a similar pace. For corporate loans, ČS
expects growth slightly above 5%
• Y/y growth in household deposits has been increasing in recent
quarters; in first quarter of 2017 it rose above 9%
• After very low figures in H2 2016, during the first quarter of the
current year y/y growth of corporate deposits reached a level
above 10%. Deposits of financial institutions keep their fast y/y
growth observable already since the Autumn of 2015
• For 2017 ČS expects total deposits to grow slightly less than 6% y/y
6.4%6.9% 7.3%
8.2%
6.7%5.9% 6.0%
4.7%
Jun 16 Sep 16 Dec 16 Mar 17
Retail loans Corporate loans
7.3% 7.7%8.4%
9.6%
6.5%5.9%
0.0%
11.6%
Jun 16 Sep 16 Dec 16 Mar 17
Retail deposits Corporate deposits
Page
Czech banking market –
Limited exposure of clients to FX risk
Customer loans (March 2017) Customer deposits (March 2017)
33
58.7%28.6%
0.1%
12.5%
LC retail loans LC corporate loans
FX retail loans FX corporate loans
67.7%
24.9%
2.3%5.1%
LC retail deposits LC corporate deposits
FX retail deposits FX corporate deposits
Page
Banking market –
Market shares of ČS (March 2017)
Asset side Liability side
34
• Market leadership in:
• Number of customers (4.7 m)
• Total mortgages (market share of 27%)
• Consumer loans incl. credit cards (market share of 28%)
• Total loans (market share of 21%)
• No. 2 in:
• Total assets (market share 19%)
• Private mortgages (market share 25%)
• Market leadership in:
• Total deposits (market share of 22%)
• 25% in retail deposits, 12% in corporate deposits
• Mutual funds with market share of 25%*
18% 19% 19% 19% 19%
23% 23% 23% 23% 23%
19% 19% 19% 20% 20%
Mar 16 Jun 16 Sep 16 Dec 16 Mar 17
Total assets Retail loans Corporate loans
25% 25% 25% 25% 25%
11% 12% 12% 12% 12%
Mar 16 Jun 16 Sep 16 Dec 16 Mar 17
Retail deposits Corporate deposits
*Data as of Dec 2016
Page
Presentation topics
35
• Česká spořitelna
• Segment financial performance analysis
• Macroeconomic developments
• Economic trends in details
• Banking market
• Czech banking market developments
• Česká spořitelna market shares
• ČS digital
• Appendix
Page
ČS digital
Česká spořitelna is a traditional bank
with almost 200 years of history. At
the same time it is modern institution,
which introduces unique digital and
mobile products and services on
the banking market.
Here are some of them:
SERVIS 24 Mobile bank
Allows clients to transfer money,
make QR code payments and
manage payment cards wherever
they are
My status
Application for clients who do not
need to make payments, but want to
continually monitor their finances
Ticket dispenser
This application allows clients to set
up a meeting in the branch
BUSINESS 24 Mobile bank
Makes the management of company
finances easy even during traveling
Friends 24
New way of making small payments
without knowing the account number
Melinda
Offers easy way to contribute to
various charitable projects
Investment centre
Easy way to monitor stock-exchange,
market analyses, exchange rates and
commodity prices
36
Page
Presentation topics
37
• Česká spořitelna
• Segment financial performance analysis
• Macroeconomic developments
• Economic trends in details
• Banking market
• Czech banking market developments
• Česká spořitelna market shares
• ČS digital
• Appendix
Page
Outstand. Share Outstand. Share Outstand. Share Outstand. Rate Outstand. Rate
RETAIL 304,701 54.5% 318,003 53.6% 323,615 53.6% 5,612 1.8% 18,913 6.2%
Overdrafts 5,996 1.1% 5,725 1.0% 5,740 1.0% 16 0.3% -256 -4.3%
of which non-private (MSE, Muni) 1,746 0.3% 1,697 0.3% 1,882 0.3% 185 10.9% 136 7.8%
Credit cards 3,325 0.6% 3,054 0.5% 2,723 0.5% -331 -10.8% -602 -18.1%
of which non-private (MSE, Muni) 15 0.0% 15 0.0% 14 0.0% -1 -4.3% -1 -8.9%
Cash loans 52,016 9.3% 53,968 9.1% 53,067 8.8% -900 -1.7% 1,051 2.0%
Private social 901 0.2% 776 0.1% 734 0.1% -42 -5.5% -167 -18.6%
Home equity mortgages 3,910 0.7% 3,453 0.6% 3,321 0.5% -132 -3.8% -589 -15.1%
Private mortgages 190,078 34.0% 209,568 35.3% 216,053 35.8% 6,486 3.1% 25,976 13.7%
Commercial loans 48,474 8.7% 41,459 7.0% 41,975 7.0% 517 1.2% -6,499 -13.4%
WHOLESALE 212,487 38.0% 233,138 39.3% 239,082 39.6% 5,944 2.5% 26,595 12.5%
Corporate 211,493 37.8% 226,803 38.2% 232,785 38.5% 5,983 2.6% 21,293 10.1%
Group Large corporates 31,962 5.7% 36,206 6.1% 39,973 6.6% 3,768 10.4% 8,011 25.1%
Local Large corporates 38,073 6.8% 39,006 6.6% 34,196 5.7% -4,810 -12.3% -3,877 -10.2%
SME 89,551 16.0% 89,244 15.0% 91,019 15.1% 1,775 2.0% 1,468 1.6%
Real estate 38,489 6.9% 40,523 6.8% 43,136 7.1% 2,613 6.4% 4,646 12.1%
Public sector 13,417 2.4% 21,824 3.7% 24,461 4.1% 2,637 12.1% 11,045 82.3%
Group Markets 994 0.2% 6,336 1.1% 6,297 1.0% -39 -0.6% 5,302 533.3%
OTHER 2,840 0.5% 806 0.1% 838 0.1% 32 3.9% -2,002 -70.5%
BANK: LOANS TO CUSTOMERS 520,028 93.0% 551,947 93.1% 563,534 93.3% 11,588 2.1% 43,507 8.4%
SUBSIDIARIES 54,710 9.8% 56,877 9.6% 57,010 9.4% 134 0.2% 2,301 4.2%
CONSOLIDATION ITEMS -15,368 -2.7% -15,831 -2.7% -16,664 -2.8% -833 5.3% -1,297 8.4%
GROUP: LOANS TO CUSTOMERS 559,370 100.0% 592,992 100.0% 603,880 100.0% 10,888 1.8% 44,510 8.0%
YTD change YTY changein CZK m, IFRS
31/03/2016 31/12/2016 31/03/2017
38
Structure of ČS Group loan portfolio (gross) –
Group customer loans
* Wholesale defined as Corporate and Group Markets.
*
Page
Ratings of Česká spořitelna
Status as of 5th May 2017
39
• Latest rating actions
• Fitch upgraded short-term rating to F1 (from F2) and confirmed all other ČS ratings on 26th April 2017
• Rating agency Standard & Poor´s upgraded all ČS ratings on 16th March 2017, outlook remained
negative
• Moody´s revised the outlook for LT rating of ČS from negative to stable on 17th March 2015
Fitch A- F1 a- 2 stable 26/04/2017
Moody's A2 Prime - 1 stable 17/03/2015
Standard & Poor's A A-1 negative 16/03/2017
OutlookLatest
actionsRating Agency Long-term Short-term Viability Support
Page
Macroeconomic figures –
Historical and forecasted macroeconomic data
40
2011 2012 2013 2014 2015 2016 2017e 2018e
Population (avg, m) 10.5 10.5 10.5 10.5 10.5 10.5 10.5 10.5
GDP/capita (EUR thsd) 15.6 15.1 14.6 14.1 14.9 15.4 16.1 16.9
Real GDP growth 2.0 -0.7 -0.5 2.7 4.6 2.3 2.8 2.9
Consumer price inflation (avg) 1.9 3.3 1.4 0.3 0.3 0.7 2.7 2.0
Unemployment rate (eop) 6.5 7.3 6.8 5.9 4.6 3.7 3.6 3.5
Current account balance (share of GDP) -2.1 -1.6 -0.5 0.2 0.2 1.1 0.8 0.6
General government balance (share of GDP) -2.7 -3.9 -1.2 -1.9 -0.6 0.6 -0.6 -0.4
Public debt (share of GDP) 39.9 44.5 44.9 42.2 40.3 37.2 35.7 35.9
Short term interest rate (3 months, eop) 1.2 1.0 0.5 0.4 0.3 0.3 0.3 0.3
EUR FX rate (eop) 25.8 25.1 27.4 27.7 27.0 27.0 26.4 25.7
Page
Financial statements – Quarterly development (CZK m)
41
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q/Q %
Net interest income 6,379 6,396 6,412 6,326 6,169 -2.5%
Net fee and commission income 2,282 2,364 2,252 2,410 2,293 -4.9%
Dividend income 3 51 6 26 5 -80.8%
Net trading and fair value result 633 604 692 924 792 -14.3%
Net result from equity method investments 0 3 -4 -9 -10 11.1%
Rental income from investment properties & other operating leases 131 127 123 97 82 -15.5%
General administrative expenses -4,369 -4,413 -4,450 -4,915 -4,613 -6.1%
Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 2 1,421 -1 -2 230 -
Net impairment loss on financial assets not measured at fair value through profit or loss -460 -235 -369 -842 -184 -78.15%
Other operating result -395 -149 -57 -71 -369 >100%
Pre-tax result from continuing operations 4,206 6,170 4,607 3,941 4,395 11.5%
Taxes on income -831 -1,305 -921 -413 -869 >100%
Post-tax result from continuing operations 3,375 4,864 3,685 3,530 3,526 -0.1%
Net result for the period
Net result attributable to non-controlling interests 0 1 0 -3 -2 -33.3%
Net result attributable to owners of the parent 3,375 4,863 3,686 3,534 3,528 -0.2%
Operating income 9,427 9,546 9,480 9,774 9,331 -4.5%
Operating expenses -4,369 -4,413 -4,450 -4,915 -4,613 -6.1%
Operating result 5,059 5,131 5,031 4,860 4,718 -2.9%
Cost/income ratio 46.3% 46.2% 46.9% 50.3% 49.4%
Page
1-3 16 1-3 17 Change
Net interest income 226.9 222.9 -1.7%
Net fee and commission income 84.4 84.9 0.6%
Dividend income 0.1 0.2 na
Net trading and fair value result 23.4 29.3 25.2%
Net result from equity method investments 0.0 -0.4 na
Rental income from investment properties & other operating leases 4.8 3.0 -36.9%
General administrative expenses -161.6 -170.7 5.7%
Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 0.1 8.5 9568.7%
Net impairment loss on financial assets -17.0 -6.8 -59.9%
Other operating result -14.6 -13.7 -6.7%
Levies on banking activities 0.0 0.0 na
Pre-tax result from continuing operations 146.5 157.3 7.4%
Taxes on income -29.5 -31.2 5.6%
Post-tax result from continuing operations 117.0 126.1 7.8%
Post-tax result from discontinued operations 0.0 0.0 na
Net result for the period 117.0 126.1 7.8%
Net result attributable to non-controlling interests 1.3 1.3 5.2%
Net result attributable to owners of the parent 115.7 124.8 7.8%
Operating income 339.6 339.9 0.1%
Operating expenses -161.6 -170.7 5.7%
Operating result 178.0 169.2 -5.0%
Cost/income ratio 47.6% 50.2%
Return on allocated capital 26.8% 26.6%
Segment financial statements –
Segment Czech Republic - income statement (EUR m)
42
Page
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
Net interest income 226.9 228.7 230.9 227.9 222.9
Net fee and commission income 84.4 87.4 83.3 89.2 84.9
Dividend income 0.1 1.8 0.2 1.0 0.2
Net trading and fair value result 23.4 22.3 25.6 34.2 29.3
Net result from equity method investments 0.0 0.1 -0.2 -0.3 -0.4
Rental income from investment properties & other operating leases 4.8 4.7 4.6 3.6 3.0
General administrative expenses -162 -163.2 -164.6 -181.8 -170.7
Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 0.1 52.6 0.0 -0.1 8.5
Net impairment loss on financial assets -17.0 -8.7 -13.6 -31.1 -6.8
Other operating result -14.6 -5.5 -2.0 -2.7 -13.7
Levies on banking activities 0.0 0.0 0.0 0.0 0.0
Pre-tax result from continuing operations 146.5 220.2 164.1 139.8 157.3
Taxes on income -29.5 -46.7 -32.9 -13.7 -31.2
Post-tax result from continuing operations 117.0 173.5 131.2 126.0 126.1
Post-tax result from discontinued operations 0.0 0.0 0.0 0.0 0.0
Net result for the period 117.0 173.5 131.2 126.0 126.1
Net result attributable to non-controlling interests 1.3 2.0 1.3 1.2 1.3
Net result attributable to owners of the parent 115.7 171.6 129.9 124.8 124.8
Operating income 339.6 345.0 344.4 355.5 339.9
Operating expenses -162 -163.2 -164.6 -181.8 -170.7
Operating result 178.0 181.8 179.8 173.7 169.2
Cost/income ratio 47.6% 47.3% 47.8% 51.1% 50.2%
Return on allocated capital 26.8% 41.5% 29.3% 27.5% 26.6%
Segment financial statements – Quarterly development
Segment Czech Republic - income statement (EUR m)
43
Page
Investor Relations contacts
44
Česká spořitelnaMiloš Novák
Tel: +420 956 712 410
E-Mail: mnovak@csas.cz
Eva Čulíková
Tel: +420 956 712 011
E-mail: eculikova@csas.cz
Josef Boček
Tel: +420 956 712 461
E-mail: jbocek@csas.cz
Erste GroupThomas Sommerauer, Head of Group Investor Relations
Tel: +43 50100 17326
E-Mail: thomas.sommerauer@erstegroup.com
Peter Makray, Investor Relations Manager
Tel: +43 50100 16878
E-Mail: peter.makray@erstegroup.com