Erste Group – Gaining strength during the crisis · Erste Group – Gaining strength during the...

Erste Group – Gaining strength during the crisis

HSBC’s Financial Institutions Conference

25-26 November 2010, Barcelona

Peter Makray, Investor RelationsRenée Bauer, Long Term Funding

25-26 November 2010Barcelona

HSBC’s Financial Institutions Conference2

Disclaimer – Cautionary note regarding forward-looking statements

−

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.



Presentation topics

−

Erste Group at a glance

−

Business environment

−

Key topics

−

Funding

−

Pfandbrief



- Erste Group went public in 1997 with a strategy to expand its retail business model into CEE

- Acquisition of more than 10 banks between 1997 and 2008

- Erste Group now runs market leading retail banking operations in the new EU member states, which remain underpenetrated compared to their Western European markets

2000

2001

2005

2006

2007

1997

2004

2003

New holding structure improving Group governance

2008

Erste Group at a glance – Austria’s first savings bank: Founded in 1819

- Erste Group’s customer base grew from 600,000 in 1997 to 17.3 million in 2009



Erste Group at a glance – Regional strategy: focusing on our strengths

−

Focus on the eastern part of the European Union−

Erste Group is the leading retail bank−

Erste Group is one of the leading corporate banks−

Erste Group is the leading bond originator−

Erste Group is the leading fund management company

Country xxxx

Product category xxxx

Market share

Market position

Retail loans 19% 2Retail deposits 19% 2Assets under mgmt 22% 1Corporate loans 17% 2Retail loans 27% 1Retail deposits 29% 1Assets under mgmt 26% 2Corporate loans 23% 2Retail loans 20% 1Retail deposits 23% 1Assets under mgmt 46% 1Corporate loans 24% 1Retail loans 27% 1Retail deposits 28% 1Assets under mgmt 22% 1Corporate loans 14% 3Retail loans 14% 2Retail deposits 8% 3Assets under mgmt 11% 3Corporate loans 9% 6Retail loans 13% 3Retail deposits 13% 3Assets under mgmt 21% 2Corporate loans 15% 3

Hun

gary

Cro

atia

Aus

tria

Cze

ch

Rep

ublic

Rom

ania

Slov

akia



Client base: 1.16 million

Upper Austria

Client market share:

Client base: 0.44 Mio

Salzburg


Client base: 1.34 million

Lower Austria


Sparkassen: 33 %

Sparkassen: 19 %

Sparkassen: 26%

Erste Bank: 8 %Client base: 1.42 million

Vienna

Client market share:Sparkassen: 1 %

Erste Bank: 24 %

Client base: 240 thousand

Burgenland


Erste Bank: 12 %Client base: 1.02 million

Styria



Carinthia



Tyrol



Vorarlberg


Source: FMDS 2009 Client base: bankable population = adults above the age of 15

Erste Group at a glance – The Cross Guarantee System

Clients: 3.1 million

Austria

Retail loans: 19.1%

Retail deposits: 19.0%

Branches: 1,048



Presentation topics

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−


−

Key topics

−

Funding

−

Pfandbrief



−

Economic growth continued to be mainly driven by exports in Q3 2010−

Industrial output has remained strong across the region−

Improved household consumption in selected countries −

More balanced growth forecast for next year with domestic demand expected to pick up in the region

−

Very strong fiscal commitment in CEE−

Fiscal measures in Romania and Hungary aimed at meeting agreed budget deficit targets−

Agreements with international organisations enforce fiscal discipline in selected countries

−

Benchmark interest rates remained at historic lows −

Czech Republic: 0.75%, Romania: 6.25%, Hungary: 5.25%−

Interest rates are not expected to rise in near future

−

More stable exchange rate environment in Romania and Hungary−

RON has stabilized at 4.2-4.3 versus the euro following historic low in June−

HUF has recovered against the euro and CHF since its July trading lows

−

Banking tax in Hungary and Austria to improve budget deficits−

Hungary: implemented banking tax for 2010 and 2011−

Pre-tax impact on Erste Group: ~ EUR 48m p.a.; post-tax: EUR 37m p.a.−

Austria: exact impact of banking tax yet to be determined

Business environment: Economy – What has recently changed in CEE?



Business environment: Economy – Short-term: Recovery on track in most of CEE

−

Significant improvement in industrial output thanks to rising exports

−

Main driver behind recovery−

Unit labour costs declined in CEE as productivity increased

−

All CEE countries expected to grow in 2011−

Economic recovery has started already in 2010 mainly driven by exports

−

In 2011 more balanced growth is expected supported by increased domestic demand

−

CEE countries to experience different growth patterns in line with level of export dependency and country- specific issues

−

Romania: growth to return in 2011 following negative impacts of VAT increase and public sector pay cuts in 2010

−

Hungary: expected improvement in household consumption to push growth to 2.6% in 2011

−

Croatia: weak domestic demand only partly offset by tourism in 2010

−

Serbia and Ukraine: more balanced growth seen in 2010

−

Czech Republic and Slovakia: growth rates of 2-4% for 2010, significantly ahead of Eurozone average (1.3%)

Source: Erste Group Research

Exports to GDP in CEE

20%

25%

63%

64%

34% 58

%

17% 36

%

0%

20%

40%

60%

80%

Austria CzechRepublic

Romania Slovakia Hungary Croatia Serbia Ukraine

Exports/GDP

Real GDP growth in CEE

2.0%

2.2%

-2.1

%

4.1%

0.9%

-1.5

%

1.3% 4.

3%

1.9%

2.0%

1.2% 4.

0%

2.6%

1.5% 3.

0% 4.5%

-2.9

%

-7.1

% -4.7

%

-6.3

%-3.6

%

-4.0

%

-5.8

%

-15.

1%

-20%-16%-12%

-8%-4%0%4%8%

AT CZ RO SK HU HR SRB UA

2009 2010e 2011e



Business environment: Banking market – 2011: the return of moderate volume growth

−

CEE lending: the crisis is behind us but growth will not arrive before 2011−

2010 will be a lost year in terms of growth, but valuable in terms of consolidation and digesting the effects of the downturn

−

2011: the return of volume growth, depending on the market, in the mid- to high single digits

−

With margins at highs there is scope for increased competition in CEE−

Retail business: focus is on existing clients with known credit histories and on secured business; higher share of LCY business

−

Corporate business: demand is rising across the region but competition for better rated assets leads to rise in unsecured lending and to relaxation of lending standards

−

Continued strong deposit market

*) Based on Retail & SME segment data.

Erste Group's net interest margins in CEE

1.60

% 3.72

%

3.37

%

4.17

%

5.46

%

4.03

%

1.77

% 4.06

%

3.52

%

4.00

% 6.80

%

3.97

%

1.96

% 4.21

%

3.41

%

4.38

% 7.24

%

3.99

%

2.04

% 3.85

%

3.67

%

4.40

% 6.97

%

4.31

%

0%

2%

4%

6%

8%

AT CZ HR HU RO SK2007 2008 2009 1-9 2010

EG segment - retail loan growth rates *(yoy, not adjusted for currency movements)

13.5

11.4

21.7 25

.8

10.6 17

.7

2.4 3.9

13.5

1.8 2.5 8.

2

4.1

1.4

12.3

5.0

0.3

0.3

0

10

20

30

40

50

AT CZ HR HU RO SK

in %

2008 2009 Q3 2010



Presentation topics

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−


−

Key topics

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Funding

−

Pfandbrief



Erste Group’s customer deposits – Deposit growth continues to outpace loan growth

−

Customer deposits grew by 2.9% ytd

(up 1.8% yoy)−

Mainly based on solid growth in Austria and strong inflows in the Czech Republic

−

Retail & SME deposits increased by 2.9% ytd−

Austria grew by 1.2%, supported by EB Oesterreich (+3.4% ytd) −

CEE enjoyed strong ytd growth (+5.2%): supported by the Czech Republic (+12.0%) driven by inflows from public sector and currency appreciation; other core markets saw stable or slightly declining volumes

−

GCIB deposits declined by 6.2% ytd−

Reversing the positive Q1 2010 trend, as short-term deposits from large corporates were not rolled-over

−

Loan/deposit ratio stable at 114.0% in Q3 2010

(year-end 2009: 115.3%)

Customer deposit trends by subsegments(Retail & SME detail: CEE)

24.0 22.4 24.9 25.0 25.1

7.3 7.3 7.5 7.0 7.2 7.2 7.1 6.9 6.9 7.0 3.4 3.9 4.1 3.9 3.7 3.4 4.1 3.9 4.1 4.1

45.8 45.3 47.8 47.4 47.7

0

10

20

30

40

50

Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

in E

UR

bill

ion

Czech Republic Romania Slovakia Hungary Croatia Andere CEE

Customer deposit trends by main segments

58.2 59.3 59.2 60.4 60.0

45.8 45.3 47.8 47.4 47.7

6.1 6.9 5.8 5.7113.3 112.0 115.6 116.6 115.3

6.3

0

25

50

75

100

125

Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

in E

UR

bill

ion

Retail & SME - Austria Retail & SME - CEE GCIB Group Markets

Customer deposit trends by subsegments(Retail & SME detail: Austria)

32.0 32.5 32.4 32.5 32.3

26.2 26.8 26.8 27.9 27.7

58.2 59.3 59.2 60.4 60.0

0

15

30

45

60

75

Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

in E

UR

bill

ion

Savings Banks Erste Bank Oesterreich



Erste Group’s loan book – Loan demand across the segments remained subdued

−

Customer loans increased by 1.8% ytd; up 1.2% yoy−

Growth in Retail & SME loans in Austria and CEE ytd and yoy was driven mainly by appreciation of CHF and CEE currencies vs euro

−

GCIB loan book declined by 5.5% ytd, and by 9.5% yoy due to redemptions and lower demand

−

Customer distribution remained broadly unchanged−

Retail continued to increase to 48.7% of portfolio−

SME and large corporates account for 45.7% of the loan book−

Public sector rose to 5.5% of total loans

−

Currency distribution shifted towards EUR and CHF−

No new CHF lending since 2009; existing loan book with conservative debt service to income ratios and LTVs

Quarterly loan book trends(Retail & SME detail: CEE)

17.7 16.7 17.3 17.1 17.9

11.2 11.2 11.4 11.2 11.2

5.7 5.7 5.5 5.6 5.7 7.2 7.3 7.4 7.6 7.6 4.8 4.7 4.7 5.4 5.3

47.5 46.6 47.4 47.9 48.7

0

10

20

30

40

50

Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

in E

UR

bill

ion

Czech Republic Romania Slovakia Hungary Croatia Andere CEE

Customer loans by main segments *

61.4 62.0 62.5 63.6 63.9

47.5 46.6 47.4 47.9 48.7

19.5 19.6 19.0 18.4130.0 129.1 130.3 131.0 131.5

20.3

0

30

60

90

120

150

Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

in E

UR

bill

ion

Retail & SME - Austria Retail & SME - CEE GCIB

*) Segments do not exactly add up to total due to consolidation effects

Customer loans by currency

63.4% 64.1% 63.3%

20.1% 19.2% 19.7% 18.9% 19.7%

12.2% 12.2% 12.4% 12.9% 12.6%2.7% 2.7% 2.8% 2.9% 2.4%

63.5% 63.5%

0%

20%

40%

60%

80%

100%

Sep 09 Dec 09 Mar 10 Jun 10 Sep 10EUR CEE-LCY CHF USD Other



−

Quarterly operating income again at record levels; EUR 2,010.3 million (up 4.7% yoy)−

Net interest income grew by 4.1% yoy to EUR 1,390.7m on the back substantially higher NIM, offsetting continued low loan demand; NII was up by 2.2% on strong Q2 2010 supported by slightly improved net interest margin

−

Net commission income

increased by 11.9% compared to Q3 2009 reaching EUR 475.7m; fee income declined by 3.6% qoq due to seasonal effects but the strong yoy performance of securities business continues

−

Net trading result recovered in Q3 2010 rising by 45.6% compared to Q2 2010, driven by higher contribution from securities and derivates trading, while income from FX transactions was stable; compared to very strong Q3 2009 net trading result reached EUR 143.9m, down 10.0% yoy

−

Quarterly operating expenses at EUR 973.3 million −

Increase of 2.9% on Q2 2010 mainly driven by rising CEE FX rates and consolidation of IT company at Group level−

Expenses increased by 5.8% yoy as successful implementation of efficiency measures already had a positive impact on Q3 2009

Operating expenses per quarter

539 565 546 545 567

257 314 303 31293 105 94 97 95

920 927 953 945 973

289

0

200

400

600

800

1,000

1,200

Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

in E

UR

mill

ion

Personnel expenses Other expenses Depreciation

1) Operating result = Operating income (NII + net fee & commission income + net trading result) minus general administrative expenses

Operating income per quarter

1,336 1,380 1,324 1,361 1,391

425 460 472 494 47682 141 99 144

1,921 1,922 1,936 1,954 2,010160

0

500

1,000

1,500

2,000

2,500

Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

in E

UR

mill

ion

Net interest income Net fee and commission income Net trading result

Erste Group’s operating performance – Operating result of more than EUR 1 billion in Q3 2010



Erste Group‘s bottom line performance – Net profit of EUR 736.8 million in 1-9 2010

*) Red bars denote reported EPS and ROE respectively. Cash EPS and EPS calculated on average number of shares: 374.6m (ex treasury shares and shares owned by savings banks with EB participations: 3.5m), adjusted for non cash items amounting to EUR 30.5m in Q3 2010 (linear amortisation of customer relationships after tax and non-controlling interests) and dividend on the participation capital (EUR 105.8m).

Cash earnings per share *

2.202.80

4.78

2.06 1.77 2.69

4.67

1.96 1.68

0.01.0

2.03.04.0

5.06.0

1-9 06 1-9 07 1-9 08 1-9 09 1-9 10

in E

UR

Cost/income ratio

60.4% 60.4%58.2%

50.9%48.7%

45%

50%

55%

60%

65%

1-9 06 1-9 07 1-9 08 1-9 09 1-9 10

Cash return on equity *

13.3% 14.0%

22.2%

10.7%7.8%

13.5%

21.7%

10.3%7.5%

0%4%

8%12%16%

20%24%

1-9 06 1-9 07 1-9 08 1-9 09 1-9 10

−

Net profit grew by 2.3% to EUR 736.8 million−

Lower Cash-EPS and Cash-ROE due to substantially enlarged capital base

−

Issuance of participation capital in H1 09 (EUR 1.76bn)−

Issuance of equity in November 2009 (EUR 1.74bn)

−

Stable NIM at 3.08% (1-9 09: 2.98%)−

NIM was stable qoq in CEE (4.59%), with slight improvement registered in Austria (2.04%) supported by solid margins in core customer business

−

Cost/income ratio improved to 48.7%−

Supported by record operating income and strict cost control



Erste Group’s asset quality – Group trends: declining NPL formation, coverage rises

−

New NPL formation declined in line with target risk costs

−

Excellent performance in Austria both at the savings banks and Erste Bank Oesterreich resulted in reduced NPLs

−

NPL growth in CEE driven by local corporate segment mainly in Romania and Croatia

−

NPLs in Slovakia, Ukraine and Serbia flat or in decline

−

NPL ratio based on customer loans increased to 7.6% (YE 2009: 6.6%)

−

Continued low demand for new loans but downward migration trend in existing portfolio slowed down considerably

−

NPL coverage continued to improve to 60.9% (YE 2009: 57.2%)

−

NPL coverage improved throughout all major segments (Retail & SME as well as GCIB segment)

Erste Group: NPL ratio vs NPL coverage

6.3% 6.6% 6.9% 7.3% 7.6%

56.7% 57.2%59.0% 59.7%

60.9%

0%

5%

10%

15%

20%

25%

30%

Sep 09 Dec 09 Mar 10 Jun 10 Sep 1050%

55%

60%

65%

NPL ratio NPL coverage (exc collateral)

Quarterly NPL growth (absolute/relative)

531403

471 531 505

7.0%

5.0%5.5% 5.9%

5.3%

0

200

400

600

800

1,000

Sep 09 Dec 09 Mar 10 Jun 10 Sep 10

in E

UR

mill

ion

0%

2%

4%

6%

8%

NPL growth (absolute) NPL growth (relative)



Erste Group’s capital position – Further strengthening of the capital base

−

Total equity (IFRS) increased by EUR 0.9 billion (+5.5%) year-to-date based on:−

Retained earnings and …−

… improved AfS reserve …−

… and positive FX effects−

Dividend payout in May 2010 of EUR 423m to shareholders and owners of participation capital

−

Shareholders’

equity rose by EUR 0.7 billion (+5.4%) ytd

−

Intangibles fluctuate in line with currency movements in CEE (mainly in Romania and Hungary)

Erste Group's intangibles composition

1.8 1.8 1.9 1.8 1.8

0.3 0.3 0.3 0.3 0.30.7 0.6 0.6 0.5 0.5

0.5 0.5 0.5 0.5 0.50.3 0.3 0.3 0.3 0.3

0.5 0.4 0.4 0.4 0.4

0.5 0.7 0.7 0.7 0.7

5.0 4.9 4.9 4.7 4.8

0

1

2

3

4

5

6

Q3 09 Q4 09 Q1 10 Q2 10 Q3 10

in E

UR

bill

ion

BCR goodwill Brand Customer relationshipsCzech goodwill Hungarian goodwill Slovak goodwillOther goodwill Software

Total capital reconciliation

12.7

3.4

0.90.3

3.6

16.1

13.4

0.1 -0.517.0

10

12

14

16

18

TotalcapitalDec 09

Net profit AfS FX-∆ Dividend TotalcapitalSep 10

in E

UR

bill

ion

Equity Minority capital



Erste Group’s capital position – Further strengthening of capital ratios

1) Tier 1 ratio (total risk) = tier 1 capital incl. hybrid and after regulatory deductions divided by total RWA - including credit risk, market and operational risk.

2) Core tier 1 ratio (total risk) = tier 1 capital excl. hybrid and after regulatory deductions divided by total RWA - including credit risk, market and operational risk.

2008 2009 Q3 10

Tier 1 ratio (total risk)1

6.2%

9.2%9.7%

2008 2009 Q3 10

Core tier 1 ratio (total risk)2

5.2%

8.3%8.7%



Conclusion – Outlook

−

Economies will continue to recover in 2011−

Austria, Czech Republic and Slovakia to lead the way based on rising domestic demand, following export-led growth in 2010

−

Strong year-to-date operating performance to be sustained in Q4 2010−

Positive outlook for 2011 operating performance is based on −

Expectation for mid-single digit loan growth at group level, resilient margins in core business and rising fee income

−

Continued strict cost management

−

Credit risk performance in Q3 2010 confirming outlook for year-end−

H2 2010 will see lower risk costs than H1 2010 −

2011: continued declining risk cost trend based on economic recovery

−

Participation capital can be repaid with no need to raise equity−

Ability to generate retained earnings remains strong−

Common equity ratio in accordance with Basel III comfortably above 7%



Presentation topics

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−


−

Key topics

−

Funding

−

Pfandbrief



TPI

Long-Term Credit Rating

A(negative)

Aa3(negative)

A(stable)

Short-Term Credit Rating A-1 P-1 F1

Public Sector Covered Bond Aaa -4

Mortgage Covered Bond Aaa -3

AA+ Aa1 AA+

AA Aa2 AA+

AA- Aa3 AA-

A+ A1 Bank A Bank B A+

A Bank A Bank B A2 A Bank A Bank B Bank D

A- A3 A-

BBB+ Baa1 Bank C Bank D Bank E BBB+ Bank C

FitchS&P Moody`s

Erste Group’s ratings – Erste Group in comparison to other Austrian banks



Erste Group’s funding profile – Retail deposits remain a key pillar in the funding mix

−

Customer deposits remain the main source of funding−

Providing a solid funding base in all local currencies−

Reflected in loan/deposit ratio improvement to 114.0%

−

Short-term funding needs well covered−

Well collateralised and stable share of short-term funding

−

Limited long-term funding required−

Close to 95% of EUR 4 billion funding needs for 2010 already covered

−

Q3 10 funding mix:−

43% private placements: senior unsecured −

7% private placements: Pfandbrief−

50% public benchmark: Pfandbrief−

Continued focus on extension of maturity profile

Evolution of Erste Group's funding mix

54.6% 57.0% 58.9% 59.7%

17.0% 15.9% 15.6% 16.6%19.2% 18.1% 13.8% 11.8%6.2% 5.8% 8.5% 8.8%3.0% 3.2% 3.2% 3.1%

0%

20%

40%

60%

80%

100%

Dec 07 Dec 08 Dec 09 Sep 10Customer deposits Issued bonds & CDs Deposits by banksEquity Subordinated capital

Short-term funding vs collateral coverage

36.232.1

25.7 25.019.1

23.427.6 27.752.7%

72.9%

107.4% 110.5%

0

10

20

30

40

50

60

Dec 07 Dec 08 Dec 09 Sep 10

in E

UR

bill

ion

0%

20%

40%

60%

80%

100%

120%

Short-term funding Collateral Collateral coverage

Redemption profile of Erste Group(Q3 2010)

1.6

4.2

5.14.3

5.0

3.02.2

1.8

0.30.7 0.6 0.7

2.1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022+

in E

UR

bill

ion

Senior unsecured Covered Bonds Subordinated Debt Debt CEE Subsidiaries



Presentation topics

−


−


−

Key topics

−

Funding

−

Pfandbrief



Austrian Covered Bonds

Pfandbriefe

(Mortgage Banking Act) Fundierte Schuldverschreibungen

Hypothekenbankgesetz(Mortgage Banking Act 1899)

Pfandbriefgesetz(Pfandbrief Law 1938)

Law from 1905

Erste Group BankBank Austria Creditanstalt

LandeshypothekenbankenPfandbriefstelle

BAWAGKommunalkredit

Legal Framework in Austria – Mortgage and Public Sector Pfandbrief



Pfandbriefe

– Legislation comparison

Criteria of Pfandbrief

law Austria (Pfandbriefe)1

Germany France Spain Norway

Pfandbrief law in place

Mortgage and public sector collateral assets in separate pools

X X2

Cover register X

Collateral assets limited to Europe X X XLegally required minimum over- collateralization

X

Cover Pool monitoring (Trustee) X

Special proceedings in case of insolvency

Pfandbriefe remain outstanding in case of issuer‘s bankruptcy

NPV matching 3 X X

1) Hypothekenpfandbriefgesetz

2) Several single cover pools possible 3) If included in the articles of association of the respective credit institution which is the case for EGB



Focus: residential real estate – Austria benefits from stable real estate markets

−

Residential real estate prices developed in line with economy in

Austria−

Sufficient availability of affordable housing thanks to high share of state-subsidised cooperative and council housing

−

Home ownership is still comparatively low at 20-25% compared to Western as well as Eastern Europe due to limited incentives to purchase homes

−

Vienna enjoyed bursts of growth in the late 1980ies and since 2005−

But overall CAGR (1986-2009) remained at a sustainable 5.1%−

City of Vienna is largest landlord managing 220,000 council flats; roughly a third of Vienna’s population live in such council flats

−

Prices should continue to rise based on immigration and gradual shift towards home ownership

Real estate prices in Austria

-10-505

1015202530

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Q1

10

Q2

10Q

3 10

020406080100120140160

YOY change in % - Austria ex Vienna (lhs)YOY change in % - Vienna (lhs)Index (2000 = 100) Austria ex Vienna (rhs)Index (2000 = 100) Vienna (rhs)



Overview of Erste Group – Mortgage Cover Pool - Key characteristics

−

Aaa

Rating from Moody’s

−

Strong and long existing legal framework for Austrian Pfandbriefe−

Highest LTV allowed by law is 60%

−

Low average LTV of 48.8%

−

First-ranking mortgage loans of mostly Austrian properties−

92% Austria and 8% Germany

−

Stable real estate market in Vienna

−

Solid mortgage origination through own savings bank network

−

Quarterly updates on our homepage−

www.erstegroup.com

– Investor Relations – Debt Investors



Distribution Data

Structure

of Cover Pool per 30.09.2010 Rating: Aaa

Moody´sPfandbriefCover Pool

Regional distribution Distribution by property

type

Total volume EUR 5.033 mnNumber of loans 22.965 Number of borrowers 17.352 Number of properties 32.533 Avg. LTV 48,8% Fixed rate assets 13,0% Average seasoning 4,5 yrsAverage remaining life 17,3 yrs

Pfandbrief Cover Pool(in EUR mn equivalent) Issues (Deckungsstock)Total Volume 3.829 5.033thereof:

530Average Maturity 4,9 17,3Over-collaterisation 53%

ECB Collateral

Germany 8%

Tyrol 10%

Vienna 33%

Lower Austria

18%Styria 12%

Other Austria

18%

Mixed use 3% Office 3% Retail 13%

Residential assets 33%

Multi-Family assets 40%

Other commercial assets 8%

Overview of Erste Group – Mortgage Cover Pool



Distribution by Volume

Cluster Volume

per 30.09.2010

Cluster LTV per 30.09.2010

Distribution by LTV

Cluster Volume EUR mn Nr.under 100.000 652 12.117100.000 - 300.000 1.287 8.063300.000 - 500.000 431 1.107500.000 - 1.000.000 657 9371.000.000 - 5.000.000 1.249 670over 5.000.000 638 71Total 4.913 22.965

13%

25%13%

13%26%

9%

under 100.000

100.000 - 300.000

300.000 - 500.000

500.000 - 1.000.000

1.000.000 - 5.000.000

over 5.000.000

Cluster LTV EUR mn Nr.under 40 % 1.683 7.14440 - 50 % 839 2.54450 - 60 % 2.392 13.277Total 4.913 22.965

49%

17%

34%under 40 %

40 - 50 %

50 - 60 %

Overview of Erste Group – Mortgage Cover Pool



Overview of Erste Group – Public Sector Cover Pool - Key characteristics

−

Aaa

Rating from Moody’s

−

Strong and long existing legal framework for Austrian Pfandbriefe

−

97% of the Cover Pool assets are originated in Austria, 3% are in Europe

−

Public Sector loans represent 97% of the Cover Pool

−

Average exposure per entity is less than €

2mn

−

Average seasoning is 5 years



Cover Pool

Structure

of Cover Pool per 30.09.2010 Rating: Aaa

Moody´sPfandbriefe

Total volume € 3.106 mn

Number of loans 6.258

Number of borrowers 1.776

Average exposure per borrower € 1,7 mn

Avg. seasoning 5,0 yrs

Avg. remaining life 14,1 yrs

Volume of bonds issued € 2.715 mn

thereof ECB collateral € 950 mn

Average remaining maturity 4,5 yrs

Over-collaterisation 76%

Number of covered bonds 78

Average size of issue € 22,6 mn

Overview of Erste Group – Public Sector Cover Pool



(Primary) Loans Cover Pool by Rating

Regional DistributionRegional distribution Austrian

regional distribution

Austria97%

EU3%

Other provinces

25%

Vienna (incl.

central govt)16%

Lower Austria

23%Styria19%

Salzburg17%

A-Rating2%

Aa-Rating1%

Aaa-Rating

97%

Bonds3%

Loans97%

Overview of Erste Group – Public Sector Cover Pool



Stand per 30.09.2010

Collateral Pool – Risk Management features

in EUR Notional

Yield curve unchanged

NPV Yield curve unchanged

NPV Yield Curve

-100bp

NPV Yield Curve

+100bp Mortgage Cover Pool 5.033.436.520 5.147.815.380 5.190.593.412 5.106.028.558

Mortgage Covered Bonds 2.828.302.395 3.007.337.639 3.167.478.304 2.855.454.326

Overcollateralisation 2.205.134.125 2.140.477.741 2.023.115.108 2.250.566.232

in % of outstanding Mortgage Covered Bonds

78,0% 71,2% 63,9% 78,8%

in EUR Notional

Yield curve unchanged

NPV Yield curve unchanged

NPV Yield Curve

-100bp

NPV Yield Curve

+100bp Public Sector Cover Pool 3.106.257.098 3.140.781.431 3.167.828.026 3.115.651.191

Public Sector Covered Bonds 1.769.935.582 1.870.724.731 1.950.915.718 1.793.329.595

Overcollateralisation 1.336.321.516 1.270.056.700 1.216.912.308 1.322.321.596in % of outstanding Public Covered Bonds 75,5% 67,9% 62,4% 73,7%



Conclusion – Erste Group Bank’s Pfandbriefe

−

Safe investment

−

Stable economic situation in Austria

−

Stable real estate market conditions



Contacts

−

Erste Group Bank AG, Börsegasse 14, 1010 Vienna

E-mail: [email protected]: www.erstegroup.com

/ Investor Relations

/ Bond

Investors

−

Investor RelationsGabriele Werzer Tel: +43 (0)5 0100-11286 e-mail: [email protected]

Thomas Sommerauer Tel: +43 (0)5 0100-17326 e-mail: [email protected] Makray Tel: +43 (0)5 0100 16878 e-mail: [email protected]

−

Debt

Capital Markets/ Long Term FundingChristian Reiss Tel: +43 (0)5 0100-84012 e-mail: [email protected]ée Bauer Tel: +43 (0)5 0100-84013 e-mail: [email protected]

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