Erste Group Bank Ag S/Adr

My name is Laura and I will be a coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand you over to your host, Thomas Sommarowa, to begin today's conference. Thank you.

Today we follow our usual conference call procedure, which means that Willy Cianco, our Chief Executive Officer, Stefan Dörfler, our Chief Financial Officer, and Alexandra Habela-Drabek, our Chief Risk Officer, will host this call. As usual, they will lead you through a brief presentation highlighting the major achievements and developments of the quarter and also year-to-date, after which they are ready to take your questions. With this, let me also once again draw your attention to a forward-looking information disclaimer on page 2. And with having said this, I hand over to Willi Cianco for the presentation. Thank you.

Ladies and gentlemen, good morning from my end as well, and welcome to our third quarter 23 conference call. Even at the risk of sounding repetitive, we once again present to you an exceptionally strong set of figures, both for the quarter and for the first nine months of 23. And I think it is by now fair to say that 23 shapes up to be an outstanding year in terms of P&L performance. Let me start the presentation on page four with the development of our income statement. In short, most trends we saw in the first half of the year continued without any exception in the third quarter. And while revenue momentum slowed somewhat, this was mainly due to the volatile elements of our P&L, most notably net trading and fair value reside, while our core revenue lines, net interest, income and fees, continued to produce dynamic growth, and actually again reached quarterly record levels. Operating expenses developed perfectly in line with our expectations and guidance. Risk costs saw somewhat of an increase, but this was due to parameter and FLI updates rather than due to any significant defaults. And most importantly, this does not change our strong credit risk outlook. All of this contributed to a strong bottom line performance in the first nine months of 23, which fully underpins our capital distribution plans already announced in the second quarter. Consisting of a very healthy regular dividend of €2.70 per share that equates to a yield north of 8%. And the share buyback in the amount of €300 million, which, as we speak, is underway. All of what I just said about our P&L dynamics is very well reflected in our P&L dashboard on page five. Net interest margin edged up again slightly, but a level of around 2.5% seems to be as good as it gets for the time being. This is not really surprising, given that the slowing rate hike dynamics in the Eurozone and declining rates in certain C markets go hand in hand with slightly increasing deposit pass-through rates and smaller tailwinds from asset repricing. Our fees continue to perform strongly driven by asset management and payment services. As already mentioned, net trading and fair value result was a track this quarter, but only in relation to the exceptionally strong previous quarter. Our cost income ratio is significantly ahead of guidance for the quarter as well as year to date. Hence, we are confident that we will deliver on our promise also for the full year. We can also comfortably confirm our outlook for risk cost for 23. As year to date, we booked only eight basis points of risk cost. And if you add all this up, it's clear we will produce a return on tangible equity well above 15% in 23. When it comes to the development of the balance sheet, I'm on page six already. Trends were less pronounced than in P&L, but in light of an unfavorable macro backdrop, when we talk about growth or when we talk about inflation, it is still positive. We saw an uptick in underlying quarterly loan growth. This is driven by Slovakia, Croatia, and Erste Bank Österreich. While in Austria, this was mostly driven by corporate demand, growth was well-balanced in Slovakia and Croatia. And even in the Czech Republic, loan demand improved, but in Euro terms, was eaten up by currency depreciation this quarter. As for deposit volumes, they remained in the range we have seen throughout this year. And importantly, our core retail and SME deposits stayed by and large stable, while the more volatile corporate deposits already increased year to date. Overall volume trends are in line with our expectations, and even though we are tracking somewhat below our annual loan growth guidance, I'm confident we will get close enough so we keep it unchanged at about plus 5%. Moving to our key balance sheet indicators on slide seven. All of them remain in excellent shape. Our loan-to-deposit ratio was right in the middle of its customer range of 85 to 90%. Asset quality continued to go strong with NPL ratio staying at 2% flat, while the NPL coverage excluding collateral was unchanged at 97%. The performance of the one ratio including interim profit and the pro rata dividend deduction improved to just shy of 15%, while the liquidity coverage and net stable funding ratios remained almost stable. The leverage ratio at 6.6% remained among the best in the industry. And with this, let's now have a look at the operating environment. I'm on slide nine now. The economic forecast for 2023 hardly changed since the second quarter. It's consensus that economic growth will be weak this year and that inflation has clearly peaked in all our markets, but is moderating more slowly than expected earlier. And this in turn means that interest rates stay higher for longer. Currency appreciation in countries like Hungary and Czech Republic support the improvement in external and fiscal balances. Labor markets are continuing to be tight, somewhat slowing the inflationary trend, but at the end of the day, they are key for maintaining consumer demand and keeping asset quality strong. Looking into 2024, the economic picture in Central and Eastern Europe should brighten. even though economists currently expect this to happen more moderately than they expected a couple of months ago. Inflation is expected to continue its downward trend, opening up the way for central banks to cut rates, and this, together with better economic growth, should support the return of tangible volume growth. Talking about volume growth, and I'm on page 10 in the meantime, let's have a look at the latest trends in our retail business. As for housing loan demand, on a consolidated level, we are still bumping around the bottom. with some bright spots in one of the other countries, such as the Czech Republic, where new business volumes are up for the third quarter in a row, or Romania, where new business volumes more than doubled quarter on quarter. But to talk about a sustainable and visible growth trend is still premature. The situation is different with consumer loans, where new business volumes remain healthy and are on an increasing trend. And that's more or less true for all geographies. On the liability side, our retail deposit base was broadly stable quarter on quarter, but as well as year to date. As regards deposit pass through, and Stefan will be more detailed on this later, Retail bathroom rates are moving up, but moderately so, and customers, while continuing to shift some overnight deposits into term and savings accounts and to investments, of course, still maintain the largest portion of their deposits in current accounts. This notwithstanding, We continue to see strong growth in the stock of security savings plans, confirming the positive trend that started in the second half of 22. Moving to the corporates and markets business on page 11. Volume trends have been mixed, while all business lines in the corporate segment managed to grow their loan books both year on year as well as quarter on quarter. On the liability side, we saw diverging trends. Deposit volumes came down somewhat quarter on quarter. This is mainly driven by the usual volatility in the large corporate business. while year-on-year they were slightly up. So all in all, given the circumstances, quite a good performance. The markets business also performed well. We were mandated in 204 bond transactions year-to-date and generated healthy income growth in both retail securities and corporate treasury sales. Our asset management business recorded a slight decline in assets under management to 73.9 billion euros, but this was mostly due to the market movements offsetting positive net sales, confirming that there is a growing fee opportunity in this business. And with this, I want to hand it over to Stefan.