Erste Group Bank Ag S/Adr

My name is Caroline and I'll be your coordinator for today's event. Please note this call has been recorded and for the duration of the call, your answer will be on listen only mode. However, you'll have an 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 questions. If you require assistance at any point, please press star 0 and you'll be connected to an operator. I will now hand over the call to your host, Thomas Samarillo, to begin today's conference. Thank you.

Thank you very much, Caroline, and good morning to everybody who is listening in from Vienna. Today's call will be hosted, as usual, by Willy Tsianko, our Chief Executive Officer, Stefan Dörfler, our Chief Financial Officer, and Alexandra Habela-Trabek, our Chief Risk Officer. They will lead you through a brief presentation highlighting the achievements of the past year and also of the fourth quarter of 2023. And after this, we will be ready to take your questions. As usual, my housekeeping remark on forward-looking statements, you will find the disclaimer on page two. And with this, I hand over to Willi.

Yeah, thank you. Ladies and gentlemen, good morning from my end as well. And once again, welcome to our full year 2023 conference call. To cut the long story short, and I'm on page four of the presentation, 23 was an exceptional year that was marked by records. We boasted record NI, record fees, record low risk costs, but to be fair, also record expenses. Most importantly, we achieved record net profit with an excellent return on tangible equity of 17.2%. and consequently will pay a record dividend of 2.7 euros per share, as indicated earlier. On top of targeting a second share buyback in the amount of 500 million euros, following the successful completion of our first share buyback of €300 million in the middle of February. If we look at the fourth quarter in isolation, we have not seen any unexpected trends. NII started to move sideways, as we have expected. Fees continued to go strong, and risk costs benefited from releases of overlays and FLI provisions. And while we had some year-end one-offs, another resided burdened net profit. Return on tangible equity still came in at almost 15% for the quarter. So overall, both the fourth quarter and the full year of 23 were very strong, which underpins our optimism for 24. But please bear with me. I will talk in more detail about our expectation for the current year at the end of the presentation. Based on what I have just said about our excellent P&L performance, and I am on slide 5 now, our P&L dashboard does not provide any surprises. Net interest margin continued to consolidate around the level of 2.5% in line with our expectations. The cost-income ratio stayed below 50% throughout 2023, coming in at 47.6% for the full year, and with this better than our upgraded guidance. The risk-cost ratio was at zero for the final quarter of 2023 and only six basis points for the full year, also significantly better than originally guided. And with all of this, we printed a return on tangible equity in the very healthy double digits in all quarters of 2023 and once again above guidance for the full year at 17.2%. When it comes to the development of the balance sheet, I'm on page 6 already. Trends were less pronounced than in P&L, but in light of a slow growth macro backdrop, still positive. Year on year, we grew consolidated net customer loans by 2.8%. And if we look at our core retail and corporate business lines, growth was actually better at the level of 3.7% and 5.6% respectively. What tracked us down somewhat was a weaker performance at the minority-owned savings banks and the lower level of non-core business. Customer deposits volumes increased by 3.9% year-on-year, with our core retail and SME deposits being broadly stable, despite consumers being challenged by inflationary pressures. and also having ample better yielding investment alternatives. Moving to our key balance sheet indicators on slide seven, all of them remained in excellent shape throughout 23. At year end 23, our loan to deposit ratio stood at a very healthy 89%, with loans and deposits showing satisfactory growth as already mentioned. Asset quality continued to go strong even through the NPL ratio peaked up a little bit to 2.3%, although from historic lows. This was mainly due to a mild increase in defaults in Austria, primarily at the minority-owned savings banks. The decline in NPL coverage excluded collateral and somewhat exaggerated by the release of overlay and FLI provisions in the amount of €200 million. Our capital print does not require any explanations. We reached a record CTO-1 ratio of 15.7% thanks to strong profitability and muted risk-weighted asset inflation. Consequently, we have increased capital return and M&A optionality and have decided, as I already mentioned, to continue buying back shares. This time we are targeting an amount of 500 million euros following successful completion of our first buyback. And with this, let's now have a look at the operating environment. I'm on slide 9 now. 23 was not the greatest year in terms of economic performance. GDP growth was low, average inflation still high, and even though declining rapidly, internal and external balances at manageable levels in most countries. Public debt remained at moderate levels when compared to EU averages. The bright spot was clearly the labour market that was broadly untouched in the C region despite the muted economic backdrop. For 2024, we are cautiously optimistic. GDP growth should recover somewhat. Inflation is projected to decline further. The labour market should remain healthy. and internal and external balances should improve. This combination should provide room for central banks to cut rates in order to stimulate economic growth, providing a fertile ground for the return of tangible volume growth in CE and beyond. 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 23 was a year of consolidation at low levels. While there were some positive trends in one or the other quarter, or one or the other country, no clear growth trends emerged. which is also not really surprising as customers wait for rates to come down somewhat. We are more optimistic looking ahead as clearly interest rates have already entered or will enter a downward path and underlying demand drivers such as a solid employment outlook are fully intact. As for consumer loans, last quarter I reported to you that trends were encouraging and today I can confirm that volumes remained at good levels also in the fourth quarter. New business volumes for consumer loans are on track to recover to pre-2020 levels. On the liability side, our retail deposit base was broadly stable quarter on quarter. as well as year-to-date. As regards deposit pass-through, retail pass-through rates continued moving up, but still at moderate speed, and customers, while continuing to shift some overnight deposits into term and savings accounts, into investment, of course still maintain more than 50% 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 2022. Moving to the corporates and markets business on page 11, Loan growth slowed markedly in 23, but at north of 5% was still satisfactory, considering the exceptional growth performance in 22. While all business lines in the corporate segment managed to grow their loan books year on year, we saw diverging patterns in the fourth quarter, with demand being weak, particularly in the large corporate segment. But this sub-segment tends to be more volatile. Corporate customer deposits were also up year on year, but slightly down quarter on quarter, completely in line with usual volatility. The markets business also performed well. We were involved in the issuance of €153 billion worth of bonds and generated healthy income growth in both retail securities and corporate treasury sales. Our asset management business also enjoyed a good year, with assets under management growing by almost 13% to €78 billion, thanks to strong net sales, particularly in Czech Republic and Hungary. This is good news for our fee performance. And now I hand over to Stefan for the presentation of the quarterly operating trends. Stefan, please.