Erste Group Bank Ag S/Adr

Good day and welcome to today's full-year 2024 Preliminary Results Conference call of ERSTI Group. Throughout today's presentation, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be provided at that time. And now, I'd like to hand the call over to your host, Mr. Thomas Sauerauer. Please go ahead, sir.

Thank you very much, Sergey, and a very warm welcome to everybody who is listening in, also on behalf of Erste Group. Today's call will be hosted, as per the usual format, by Peter Bossek, Chief Executive Officer of Erste Group, Stefan Dörfler, Chief Financial Officer of Erste Group, and Alexandra Habel-Adrabek, Chief Risk Officer of Erste Group. They will lead you through a brief presentation highlighting the performance of the fourth quarter and the full year of 2024, after which time they are ready to take your questions. And before handing over to Peter Bossek, the usual pointing to the disclaimer on page two in regard of forward-looking statements. With this, Peter, please.

Thank you, Thomas. Good morning, ladies and gentlemen. Welcome again to our full year 2024 conference call. I'm on page four of the presentation now, 2024, and particularly the fourth quarter of 2024 was all about strong revenue and volume momentum. We have delivered on all our promises and produced the fourth consecutive record annual net profit. We bought back another €500 million worth of shares, paid a healthy regular dividend, And most importantly, we grew the business organically. Customer loans and deposits rose in the mid-single digits. Net interest income as well as fees easily hit new quarterly and annual highs. We have clearly set the bar high for 2025. But we are optimistic that we can again do very well this year. More on this later. And of course, we have set the path to the future by kicking off a number of strategic initiatives. that target the further development of our brand, of our digital offering, improved efficiency, expansion of our asset management offering, and the consideration of M&A opportunities. If we look at our P&L performance metrics in more detail on page 5, one of the key achievements of 2024 definitely was that we managed to keep our net interest margin stable despite market interest rates coming down. Stefan will talk about the reasons later. This paired with a very strong fee print, fees were up north of 11% in 2024, was certainly the basis for yet again delivering record efficiency. Risk costs came in line with guidance, with diverging trends in CE and Austria. Alexander will give you all the details shortly. Consequently, net profit hit a new record in 2024 and return on tangible equity equaled 16.3%. Earnings per share reached 7.2 euros as a new record. As I already mentioned, and I'm on page 6 in the meantime, organic growth was a key contributor to our strong operating performance in 2024. While loan growth was subdued in the first half of the year, loan demand definitely picked up in the second half of 2024. and particularly in fourth quarter. And this improved momentum was not restricted to a single country, but visible in all our key markets, most importantly Austria, Czech Republic, Romania and Slovakia. This means that we have achieved our mid-single digital loan growth target for 2024, even though this looked a bit shaky earlier in the year. Even more importantly, these trends bode well for 2025, so we certainly target loan growth of about 5% again in 2025. And if you are a little lucky and the current bumpy economic recovery gains a little bit more traction and geopolitical tension relaxed somewhat, it could be even higher, but let's see. Customer deposit was equally reassuring with trends being similar as on the asset side, while total deposits were up by a healthy 3.8 in 2024. Core retail and SME deposits even grew faster at 5.2%. This beside the fact that we are certainly not chasing or overpaying deposits as is evident by our strong NII performance. In terms of quarterly dynamics, we observed the same positive momentum that we saw in customer loans. There is not too much to report on other balance sheet developments other than we had a busy start to the year. When it comes to bond issuance, here as well Stefan will give you the details later, and that we deployed excess liquidity into financial assets. Moving to our key balance sheet indicators on slide 7, thanks to our overall strong business performance, all parameters continue to be strong. Our loan-to-deposit ratio was at a healthy and sustainable 90%, reflecting balanced loan and deposit growth as already mentioned. Asset quality continued to be satisfactory, with NPL ratios creeping up slightly to 2.6% at year-end 2024. This was exclusively owed to increased defaults in Austria, as we already witnessed in the early quarters of 2024, while asset quality situation across Central and Eastern Europe remained outstandingly strong. The fact that NPL coverage, excluding correctness, dropped again in the first quarter was on the one hand attributable to the new NPL inflows being well collateralized and on the other hand due to significant releases of FLI and industry overlays. More about this later from Alexandra. Before moving to the macro backdrop, a word of clarification on our capital ratios. The fact that our fully loaded CT1 ratio is unchanged quote-on-quote at 15.1 is not a typo, but a consequence of us already having applied for another share buyback. in the amount of 3.7% of 2024 reported net profit adjusted for 81 dividends. So if you do the math, that's about 700 million euros. This is the third round after having bought back shares in the amount of 300 million and 500 million euros in 2023 and 2024 respectively. Of course, this planned share buyback, even though it's already fully deducted from capital, is subject to regulatory approval. And with this, let's now turn to the operating environment. I'm on slide 9. Now, the economic outlook is still far from exciting, which led to a cut in growth projections for 2025 compared to last autumn. But to focus on the positive, growth is still forecast to improve in 2025 vis-à-vis 2024 in many of our core markets. Inflation is not going away anytime soon in the region, as higher energy prices led to upward adjustments of forecasts in quite a few of the markets. Overall, the expectation is still that consumer price inflation will hover in the low mid-single digits, in the CE region. Current account balances for most countries are set to remain balanced or even positive, with the only notable exceptions being Romania and Serbia. In many of our markets, especially in those that reported larger deficits in 2024, the budgetary situation is forecast to improve in 2025, which will keep public debt in relation to GDP at sustainable levels. Looking at this forecast, we are clearly not in boom times, but they provide an acceptable basis for further organic growth in all our markets. Analyzing the 2024 performance of our retail business, I'm on page 10 now, organic growth was a theme that became increasingly relevant as the year progressed. While at the start of the year loan demand was muted, first consumer loan demand picked up, especially in Romania, but also in other markets, which was followed by better demand for mortgage loans, most notably in the Czech Republic and Austria. We also registered improved volume growth in retail customer deposits, as I already mentioned. Our success story in promoting retail security savings plans as a means of building long-term wealth also continued. The stock of such savings plans reached 1.6 million, supporting long-term fee growth in our asset management business. As proposed to previous quarters, the time series now also incorporates the savings banks, which previously were not included. Our market-leading digital retail platform George also contributed to this success by making it easy and convenient for our clients to manage their savings plans. In the meantime, we have onboarded almost 10.8 million customers to George, which was instrumental in pushing our digital sales ratio in the retail business to 60%. Going forward, it's our clear target to build on this success by further developing this platform so that we can provide meaningful financial advice to even more customers. In the corporate business, and I'm on page 11 now, loan volume strength took a positive turn in the fourth quarter, with quarter-on-quarter growth of 2.6%, which lifted annual growth to 4.7%. Good growth contributions were made by all segments, but in particular in the real estate business, where we executed a high-profile transaction in Vienna. On the liability side, deposits in the corporate business were up year-on-year by 6.8%, and somewhat down quarter-on-quarter, effectively business as usual. The market business continued to do well, although tracking somewhat below the exceptional strong performance of the previous year. This came as no surprise in light of lower central bank rates. Our customer business performed very well, though. We were involved in the issuance of €132 billion worth of bonds and 250 book-running mandates, generating healthy income in the security business. Asset management built on a good start to the year, with assets under management reaching an all-time high of €91.6 billion. In addition to a strong organic performance, acquisitions added €6 billion to this total. And with this, I hand over to Stefan for the presentation of the quarterly operating trends.