Erste Group 9th Capital Markets Day · 2019. 11. 20. · EBS has become a significant player in the...
Transcript of Erste Group 9th Capital Markets Day · 2019. 11. 20. · EBS has become a significant player in the...
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Erste Group –
9th Capital Markets Day
21 November 2019, Vienna
Serbia/Erste Bank Serbia: The organic growth champion
Slavko Carić, CEO Erste Bank Serbia
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Disclaimer –
Cautionary note regarding forward-looking statements
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• 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 THIS
INFORMATION OR OPINIONS CONTAINED HEREIN.
• CERTAIN STATEMENTS CONTAINED IN THIS DOCUMENT MAY 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 GROUP 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.
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Presentation topics –
The organic growth champion
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• Executive summary
• The growth story
• Intro
• The macro story
• The micro story
• The digital story
• Conclusion
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The economic upswing –
Serbia has enjoyed political stability & EU-oriented strategy since 2012
Remarkably improved economy… ...driven mainly by investments
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GROWTH
GDP per capita (EUR)
6,500
4,700
3,500
+39%
2006
2012
2019e
20.9
23.9
10.7
Unemployment rate (%)
-55%
3.4
5.05.6
7.4 7.4
2.0
3.5
2012 2013
6.1
2014 20162015 2017 2018 2019e
Foreign direct investmentsSource: Erste Group Research
in % of GDP
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The organic growth champion –
EBS has become a significant player in the Serbian market
EBS continuously outgrows the market Higher market shares in every segment
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GROWTH
1.8 1.6
6.6
5.0
Customer loan
market share
Customer deposit
market share
in %2005
Q3 191,370
265 276361
0
200
400
600
800
1,000
1,200
1,400
2005 2010
683
2015 2019
100100
416
EBS total asset growth (2005=100)
Serbian market total asset growth (2005=100)
Top 10 bank in Serbia
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Progressive
development
Business transformation
Initial transformation
LIFT 1.0
(Activities related to introducing the new system)
The IT quantum leap –
Moving from legacy core banking system to Temenos platform
• Temenos 24 platform - a state-of-the-art, easily adaptable core banking system
• New core IT system by H1 2021
• Aim is to have a leading role in the digital transformation of financial services in Serbia
• EBS seizes the central role in its customers’ financial lives by becoming a truly customer-centric organisation
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DIGITAL
LIFT 2.0
(Activities related to enhancing the
functionalities introduced within LIFT 1.0)
20222021
2020
2019
Key steps
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Presentation topics
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• Executive summary
• The growth story
• Intro
• The macro story
• The micro story
• The digital story
• Conclusion
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Introduction –
Modern approach to branch design
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• Modern approach to branch design: improving customer experience by simplifying design, removing friction, integrating new technologies and trying to introduce more consumers to alternative digital delivery channels
• EBS redesigned three state-of-the-art branch offices in Belgrade, Novi Sad and Subotica to reflect consumer needs while providing the most efficient and rewarding customer experience
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Presentation topics
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• Executive summary
• The growth story
• Intro
• The macro story
• The micro story
• The digital story
• Conclusion
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Economic environment –
Balanced growth with more room for convergence
Key developments
• Robust recovery since the
breakup of Yugoslavia
• Free market- and pre-accession
agreements with EU attracted
more investors and credit
agencies
• Large FDI inflow significantly
contributed to recovery and
industry profile change
• Growth shall continue to be
driven by domestic demand,
investments, business and
tax incentives
• Convergence potential still
very high at 3.5-4% estimated
mid-term growth
GDP
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Labour market
Source: Erste Group Research
3.0
4.45.0
6.5
2015
5.5%
2005
-2.7%
3.3%
1.8%
2009 2019e
20.819.2
17.7
10.7
20102005 2019e2015
GROWTH
GDP capita (in EUR thsd)
Real GDP growth
Unemployment rate
in %
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Economic environment –
Prudential behaviour opens room for investments
Key developments
• Fiscal policy is expected to
remain prudent
• Government expected to
engage more in large investment
programs
• Exports and FDI continue to be
well diversified across sectors
• Fiscal discipline and prudential
market behaviour bring down debt
levels continuously
• Large import component
continues to pressure current
account
Economic balances
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Public & external debt
Source: Erste Group Research
1.1
-4.3-3.5
0.3
-8.0
-6.5
-3.4
-6.9
2005 2010 2019e2015
Government balance
Current account balance
46
39
75
5056
75
83
60
2005 2010 2015 2019e
External debt
Public debt
GROWTH
in % of GDP in % of GDP
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Economic environment –
Country risk significantly fades
Key developments
• Country risk has faded
significantly since 2004 when
Serbia received its first credit
rating
• Serbia currently waits for its first
ever upgrade to investment grade,
potentially to be confirmed in late
2020 or early 2021
• Recent debt issues on domestic-
and foreign markets attracted high
demand
• Central Bank under pressure to
ease more due to low inflation and
external uncertainties
Government bond yield
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Short-term interest rate
Source: ThomsonReuters, Erste Group Research
0
2
4
6
8
10
12
14
20172013 2015 2019
5y avg rate
0
2
4
6
8
10
12
2013 201920172015
3m BELIBOR
GROWTH
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Banking market –
From zero to hero
Key developments
• Serbian banking sector has
propelled since the political and
economic changes in 2005
• Consolidation wave has been in
full swing for three years, with
more M&A activities ahead
• Credit activity mostly driven by
retail business, while corporate
lending has picked up recently
• Low interest rates environment
puts pressure on margins,
however, sector profitability
remains high
• NPLs have been substantially
reduced since 2015
• Capital adequacy ratio at
historical highs
Market growth
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Penetration
Source: National Bank of Serbia
24
4945 44
7
17 1720
2019e2005 2010 2015
Customer loans
Household loans
-10
0
10
20
30
40
50
60
2005 Q3192010 2015
Customer deposit growth
Customer loan growth
GROWTH
in % in %
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Presentation topics
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• Executive summary
• The growth story
• Intro
• The macro story
• The micro story
• The digital story
• Conclusion
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Customer loans –
Highest growth among Serbian banks
Key developments
• EBS has had the highest organic
growth in Serbian banking sector
• Market CAGR 2015-2018: 5%
• EBS CAGR 2015-2018: 19%
• Ranked 6th on the market based
on customer lending
• Retail lending driven by housing
and cash loans
• Corporate lending driven by
commercial loans with main
contributor being SME segment
Volume evolution
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Market shares
0.7
3.0
4.2
6.5
7.1
1.72.2
4.4
6.1 6.2
20152005 2010 Q3 192018
Retail loans
Corporate loans
GROWTH
0.1
0.4
0.7
1.2
1.4
2005 2010 2015 2018 Q3 19
Customer loans
in EUR bn in %
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Customer deposits and asset management –
Continuously strong growth
Key developments
• Position of a challenger bank
has its price tag where entrance
card in client relationship is
mostly in loan business while
full client business is missing
at the beginning
• Market CAGR 2015-2018: 10%
• EBS CAGR 2015-2018: 19%
Development of volume
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Market shares
1.7
2.3
3.8
4.9 5.0
2005 2010 20182015 Q3 19
Customer deposits
0.1
0.5
0.6
1.0
1.1
Q3 192005 2010 2015 2018
Customer deposits
GROWTH
in EUR bn in %
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Net interest income and fee income –
EBS achieves high NII growth driven by significant volumes
Key developments
• Net interest income driven by constant volumes growth
• Significant decline of NIM
• Drop of market interest rates
• Dominance of housing loans
• Fee and commission income growing in line with market
NII & NIM
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Net fee and commission income
GROWTH
1.9
10.6
12.613.4
10.5
201520102005 2018 1-9 19
30
45
5747
6.9%
5.9%
2018
3.8%
2010
3
3.8%
2005
3.8%
2015 1-9 19
Net interest income (in EUR m)
Net interest margin
in EUR m
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Operating result –
Relatively high CIR driven by project costs in 2019
Key developments
• Main driver of operating income has been portfolio growth withits impact on NII as well as growth of net fee and commission income
• Operating expenses are higher in last two years mostly due to investment in bank transformation
• CIR has increased in 2019 due to projects cost
Operating income & expenses
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Operating result & CIR
7
43
61
75
62
11
32
39
50
42
1-9 192005 2010 20182015
Operating income
Operating expenses
-4
11
22
26
20
74%
2005
161%
2018
68%66%
2010 2015 1-9 19
64%
Operating result (in EUR m)
Cost/income ratio
GROWTH
in EUR m
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Asset quality and risk costs –
Improvements in all aspects
Key developments
• Positive macroeconomic environment led to decreasing risk densities
• High recoveries and NPL sales over last years
• IFRS 9 and enforced write offs by Central Bank
• NPL ratio at historical low with coverage above 100%
• Improved rating models and underwriting procedures led to overall improvement
Asset quality*
19
Risk costs
9
11
1
2012 2015 1-9 19
68.475.2
21.6
12.0% 10.5%1.5%
84.1%
129.0%
Q3 192012
88.4%
2015
NPL ratio
NPL (in EUR m)
NPL coverage*Asset quality based on segment reporting
in EUR m
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Net result –
Sustainable profitability
Key developments
• Recognised as a systemically important bank, EBS has been achieving record business resultsfor several consecutive years
• Growth of assets
• Increase of NII (despite decline of NIM)
• Favourable risk cost development since 2015
• Optimisation of funding
• Net profit has been achieved for 12 consecutive years
Net result evolution
20
-8
-28
0
8
4 3
811
9
2
10
17
2225
17
2013 1-9
19
2005 201120092007 20172015
GROWTH
in EUR m
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Presentation topics
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• Executive summary
• The growth story
• Intro
• The macro story
• The micro story
• The digital story
• Conclusion
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Digital snapshot –
Digital products have gained popularity
Key developments
• Continuous growth in numbersof digitally active users
• 24% YoY growth in 2017
• 28% YoY growth in 2018
• Noticeable shift towards usage of mobile banking over past few years
• Continuous increase in share of digitally sold products
• 8% in 2018
• Migration to new IT system will bring major improvements of digital channels
Number of branches
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Number of digital users
2015
31
Q3 19
68
DIGITAL
66
73
90
2005 2009 Q3 19
Active digital users
2015 Q3 19
2
31
Active mobile banking users
in thsd
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Digital snapshot –
New IT system will lead to many improvements
Main focus before implementing new IT system
• Increase in share of digitally active clients
• In-branch education of clients and investing effort in migration to digital channels
• Continuous focus on education of employees and raising digital awareness
• Further enhancement of digital sales capabilities
• Improvement of prospect management
• Introduction of video-legitimation (E2E online on boarding)
• Expanding existing product offering on digital channels
New possibilities by migration to new IT system
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• Migration to new IT system will bring major improvements of digital channels
• E2E online sales processes
• Scalability & integration
• Opportunities for cooperation with fintechsthrough open APIs
• Potential for new & innovative services in payments area
DIGITAL
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Presentation topics
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• Executive summary
• The growth story
• Intro
• The macro story
• The micro story
• The digital story
• Conclusion
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Conclusion –
Outlook Serbia/Erste Bank Serbia
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Erste Bank
Serbia
Digitalisation
Macro
Banking market
• EBS to remain one of the top banks in Serbia
• Sustainable profitability to continue
• Retail segment will stay very vivid
• New boost expected to come from corporate segment
• Domestic demand expected to remain the main driver
• Rapid convergence towards EU to continue
• Further increase of digital activity of client base
• New IT system to unleash new innovative features & services