Erste Group Bank Ag S/Adr

Ladies and gentlemen, welcome to the Erste Gruppe Third Quarter 2026 Results Conference Call. I am Sergen, the Chorus Call Operator. I would like to remind you that all participants will be in listen-only mode and the conference being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Thomas Sommerauer, Head of Group Investor Relations. Please go ahead.

Thank you, Sergen, for the kind introduction. And also, welcome to everybody who is listening in to this call on behalf of ERC Group. Today's call, as usual, will be hosted Peter Bosek, our chief executive officer, Stefan Dorfler, our chief financial officer, and Alexandra Habeler-Drabek, our chief risk officer. They will lead you through a brief presentation highlighting the financial achievements of the third quarter, after which they are ready to take your questions. As usual, my recommendation to look at the disclaimer on page two on forward-looking statements, because there will be one or the other in this call.

Good morning, ladies and gentlemen. Welcome again to our third quarter conference call. Even though everything around us seems to change ever faster, our message to Airstream investors does not. I can share with you quarterly financials that set records in many respects. We posted record revenues, complemented by a decline in costs quarter on quarter, which The risk costs remained moderate and consequently net profit also hit the new quarterly net cost. But let's look a little deeper and start off with water on water operating performance highlights. Net interest income was clearly the star performer, up 5.9%. This was mainly attributable to continued volume growth and rising rates. As income from security business as well as payment services continued to enjoy a strong momentum. Trading and fair value result came in somewhat lower, but this was mainly due to fair valuation's volatility of customer loans. With this quarterly revenues almost reached 4.1 billion euros. At the same time, costs reduced slightly. If you look at a light-for-light year-to-date comparison, so excluding the contribution from Erste Bank Polska, the picture is equally positive. Net interest income was up 7%, net fee income by almost 10%, net trading and familiar results most of 30%, while costs rose by about 3%. These goals were broadly in line with what we saw in the first nine months of 2025. And if you add all this up, we also posted record operating profit and record net profit year-to-date, excluding S&P 500. Based on these strong figures, we decided to upgrade our financial outlook for 2026. We now believe And with this should be the NII target for the enlarged group of 11 billion euros by a comfortable margin. This will be helped by better loan growth, which should propel our year-end loan stock to beyond 290 billion euros instead of previously about 290 billion. Field growth for Erste Ex Polska should be around 10% compared to 7%. The cost-income ratio should also come in better for Erste x Polska at below 46%. In addition, risk costs are expected to stay at the lower end of our 25 to 30 basis points guidance for Erste including Polska. While all of this bodes well for 2027, I would kindly ask you for patience when it Knowing the outcome of the offer, it makes little sense to issue concrete numbers. Having said this, despite all the noise that is currently out there, we see no reason why the favorable business momentum should not continue into 2027. Let's now move to page 5 for some additional details on our financial performance. With net interest income climbing to a new high, And interest-bearing assets growing broadly in line with loans made interest margin increase to 273 basis points. The cost-income ratio also continues to improve, supported by strong revenue momentum and new The strong P&L performance is clearly linked to healthy balance sheet growth. And with this, I'm on page 6 of the presentation. The major growth driver is the inclusion of Erste Bank Polska, starting with the first quarter. This, to a large degree, improved the material increase in intangibles and equity, but more importantly, also the significant increase in customer loan and deposit volumes. The good news is that hidden behind this inorganic growth, there is also substantial organic growth in the business excluding Erste Bank. In this period, the customer loans grew by 5.8 year-to-date, putting us right on track to achieve our 6-8% growth target for 2026. Customer deposits rose 4.5 year-to-date. On the asset side, we saw a good growth balance with both the retail and corporate segments making good contributions. On the liability side, slower retail deposit growth was offset by higher inflows in the corporate business. But while customer deposit growth was quite in line with loan growth year-to-date, quarter-on-quarter it was only small, while loans continued to grow at a good pace. And this explains the quarter-on-quarter rise in the loan-to-deposit ratio shown on the upper left-hand chart on page 7. While it was down, Talking about year-on-year customer growth, excluding S&P 500, equals 7.7, while customer deposits advance by 6.6, in line with moderate risk costs. The decline in the reported seed-tier-one ratio is estimated to not In this respect, the magnitude of the final dividend for 2026 will be, of course, dependent on the outcome of the Erster Bank-Polska tender offer. When it comes to liquidity and leverage ratio traditional strengths of ours, in the third quarter we registered a slight decline in liquidity coverage and in stable funding ratios, while the leverage ratio was stable. All these ratios remained at various satisfactory levels. Let's now briefly examine the macroeconomics in our region on slide 9. A quarter ago I told you that the geopolitical and within the global economy situation was fluid. Today I cannot say anything different, maybe with one tangible difference that in the meantime we saw significant increases in interest rates across the yield curve and also across geographies. Not in all our geographies, but in most of them. And of course, we also saw renewed upward pressure on energy prices. Despite all of this, the growth performance and outlook for our region remained broadly unchanged from a quarter ago, as did other key macroeconomic indicators like inflation expectations, unemployment rates, as well as external and fiscal balances. Take all of this into account, we are therefore still operating in an environment that is favorable for us. Solid economic growth combined with positive upward sloping yield curves. That's at least for the time being a mix that supports sustainable volume growth and profitable margins. Talking about sustainable volume growth, let me share a couple of performance highlights on the retail business in the third quarter of 2016 with you. I'm on slide 10 now. You are by now familiar with CONTINUE. We saw continued good demand for housing loans across all geographic segments, particularly in the Czech Republic, Hungary, Croatia, but interestingly also in the Austrian savings plans. Our success story of enabling customers to manage their own security savings plans digitally also continued. We now have a stock of 2.3 million plans This may also be one explanation, in addition to rising interest rates, why we saw a consolidation of retail deposit volumes near record levels in the third quarter. It may also help in understanding the minor mid-shift we observed in the And finally, George continues to grow. We have now onboarded more than 12 million clients to the platform, but this is not the end of the story. We are also doing a lot of business through our digital platform, thanks to which our overall digital sales share surpassed 80%. In the corporate segment, excluding S&B Polestar, now on page 11 already, loans were up by 7.3% year-on-year and 1.6% quarter-on-quarter. That's somewhat better than we saw in the retail business. The quarterly growth drivers were similar as in the second quarter. There was good loan demand from SMEs as well as from large corporate customers, This is consistent with the constructive economic backdrop that I was mentioning before. Czech Republic, Hungary, but also the three Austrian segments made good growth contributions. Corporate deposits, which are traditionally quite volatile, grew even faster than those. Year-on-year, this was mainly due to inflows in all sub-segments. While quote-unquote, this was mostly driven by large corporate and public sector clients. Similar growth rates were registered for current account in It is one of the drivers of our fees growth story. In addition, the ECM and DCM teams also contributed to this effort. Year to date, they successfully executed 256 transactions with a co-arranged issuance volume of 189 billion. In asset management, year to date, net sales of 3.9 Thank you very much Peter and also welcome to this call from my side.