ml banking and insurance ceo conference - erste group · ml banking and insurance ceo conference...

ERSTE GROUP

ML Banking and Insurance CEO Conference2-4 October 2007, London

Strategic consistency and successful executionAndreas Treichl, CEO, Erste Group

ERSTE GROUP

ML Banking and Insurance CEO Conference2-4 October 2007

Strategic consistency andsuccessful execution2

DisclaimerCautionary note regarding forward-looking statements

− THE INFORMATION CONTAINED IN THIS DOCUMENT HAS NOT BEEN INDEPENDENTLYVERIFIED AND NO REPRESENTATION OR WARRANTY EXPRESSED OR IMPLIED IS MADE ASTO, AND NO RELIANCE SHOULD BE PLACED ON, THE FAIRNESS, ACCURACY, COMPLETENESSOR CORRECTNESS OF THIS INFORMATION OR OPINIONS CONTAINED HEREIN.

− CERTAIN STATEMENTS CONTAINED IN THIS DOCUMENT MAY BE STATEMENTS OF FUTUREEXPECTATIONS AND OTHER FORWARD-LOOKING STATEMENTS THAT ARE BASED ONMANAGEMENT’S CURRENT VIEWS AND ASSUMPTIONS AND INVOLVE KNOWN AND UNKNOWNRISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS, PERFORMANCE OREVENTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN SUCHSTATEMENTS.

− NONE OF ERSTE BANK OR ANY OF ITS AFFILIATES, ADVISORS OR REPRESENTATIVES SHALLHAVE ANY LIABILITY WHATSOEVER (IN NEGLIGENCE OR OTHERWISE) FOR ANY LOSSHOWSOEVER ARISING FROM ANY USE OF THIS DOCUMENT OR ITS CONTENT OR OTHERWISEARISING IN CONNECTION WITH THIS DOCUMENT.

− THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR INVITATION TO PURCHASE ORSUBSCRIBE FOR ANY SHARES AND NEITHER IT NOR ANY PART OF IT SHALL FORM THE BASISOF OR BE RELIED UPON IN CONNECTION WITH ANY CONTRACT OR COMMITMENTWHATSOEVER.

ERSTE GROUP



Presentation topics

−Continued strategic consistency

−Setting the scene for future growth

−Summing up the region

−Outlook and targets

ERSTE GROUP



Erste Group strategy –Defining and sticking to a clear strategy

Value creation for shareholders

Consistent but evolving strategy since IPO in 1997

Businessfocus:

RetailBanking

Geographicfocus:

Central andEasternEurope

Efficiencyfocus:

New GroupArchitecture

New GroupArchitecture

Projects

NewGroup

Structure

ERSTE GROUP



Business focus –Retail banking

−Erste Group – a CEE retail powerhouse− We benefit uniquely from our low risk exposure to

the fastest growing EU-markets of Central andEastern Europe− No 2 in Austria− No 1 in the Czech Republic− No 1 in Romania− No 1 in Slovakia− No 2 in Hungary− No 3 in Croatia− Top 10 in Serbia− Start-up in the Ukraine

Among the top CEE banks interms of customers (million)*

8.2

8.4

10.0

12.1

24.0

16.1

KBC

SocGen

OTP

Raiffeisen

Erste Bank

Unicredit

Retail loan market shares in 2006

31.6%

10.6%

25.1%26.0%

18.8%

12.0%

0%5%

10%15%20%25%30%35%

Austria Czech R Slovakia Romania Hungary Croatia

*) Customer numbers based on latest available company data: UCI figure excludes Italy and Germany; SocGen includes Africa and Mediterranean basin.

ERSTE GROUP



Geographic focus –Central and Eastern Europe

Total population: 120m

Bankable population: 92m

EG customers: 16.1m

Key market stats

EU resident customers: 15.1m

Indirect presence

− Integrated savings banks sector with closer collaboration in Austria ahead−Ample growth opportunities across the whole banking portfolio−New group structure deployed to better capture growth opportunities

ERSTE GROUP



NGA initiatives launched in 2004 with the objective of transforming a “federation ofbanks” into a “real” group− Joint effort by major Erste Group banks in five key markets

(EB Austria, CS, SLSP, EBH and EB Croatia)− Selective participation by recently acquired group banks

(BCR, EBUA, EB Serbia)

Three years into the programme, most NGA initiatives show very positive results andare close to completion− Budgeted pre-tax P&L effect at YE 2007: EUR 205m− 2008 target (EUR 270m) within reach− Most projects closed, remaining tasks transferred to line management

New Group Structure introduced as a logical next step to build on and acceleratecurrent and future efficiency efforts− Tighter control of operating performance and synergies delivery− Improved execution power through dedicated responsibilities (CFO/CPO(1), COO)

Efficiency focus –New group structure follows NGA initiatives

(1) CPO: Chief Performance Officer

ERSTE GROUP



SteeringFunctions

Efficiency focus –Clearly defined new group structure

DivisionalizedBusinesses

Group BoardHeadGCIB(1)

Kinský

HeadGM(2)

Hochstrasser

COO

Juranek

CRO

Spalt

CEO

Treichl

CFO/CPO(3)

Kisbenedek

Retail & SME Business

Center FunctionsInfrastructure

(3) CPO: Chief Performance Officer(2) GM: Global Markets/Treasury(1) GCIB: Group Corporate & Investment Banking

ERSTE GROUP



Presentation topics





ERSTE GROUP



Why did we go into CEE? –Credit catch-up potential

Per capita indebtedness in CEE (2006)

32.2

5.8 5.4 5.0 3.61.3 0.9 0.8

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Austria Croatia Hungary Czech R Slovakia Romania Serbia Ukraine

in E

UR

thou

sand Developing

transformationeconomies

Emergingtransformations

economies

ERSTE GROUP



Why did we go into CEE? –The mortgage loan opportunity

Retail loan penetration - Romania

1.4%3.8% 4.8%

7.4%

11.5% 12.4%

2.3% 2.3%0.0% 0.0%

1.4% 1.8%

0%

3%

6%

9%

12%

15%

2002 2003 2004 2005 2006 Jun 07

Household loans/GDP Housing loans/GDP

Retail loan penetration - Czech Republic

7.2%9.1%

11.1%13.8%

16.5% 17.1%

11.5% 12.1%

4.5%6.0%

7.4%9.4%

0%

5%

10%

15%

20%

2002 2003 2004 2005 2006 Jun 07


Retail loan penetration - Hungary

8.5%12.4%

14.5%17.2%

19.9% 19.9%

11.4% 11.0%

4.5%8.0% 9.2% 10.4%

0%

5%

10%

15%

20%

25%

2002 2003 2004 2005 2006 Jun 07


Retail loan penetration - Slovakia

5.5%7.0%

8.7%11.3%

13.5% 13.7%

5.3%7.5%

1.1% 2.0% 2.9%4.3%

0%2%4%6%8%

10%12%14%16%

2002 2003 2004 2005 2006 Jun 07


ERSTE GROUP



Why did we go into CEE? –The fund management opportunity

Funds under management/capita (2006)

0.9 1.00.7 0.6

0.0 0.0

20.2

0.0

1.0

2.0

3.0

Austria Czech R Hungary Slovakia Croatia Serbia Romania

in E

UR

thou

sand

25.0Developing

transformationeconomies

Emergingtransformation

economies

ERSTE GROUP



Setting the scene for future growth –EU membership, emerging markets opportunity

Population: 10.1m

Hungary

FUM/capita: 1,000Housing/GDP: 12%

Population: 10.2m

Czech R

FUM/capita: 900Housing/GDP: 12%

Population: 5.4m

Slovakia


Population: 4.4m

Croatia

FUM/capita: 600

Housing/GDP: 15%

Population: 7.5m

Serbia

FUM/capita: nmHousing/GDP: 3%

Population: 21.6m

Romania


Population: 47.0m

Ukraine

FUM/capita: nmHousing/GDP: nm

Population: 8.3m

Austria

FUM/capita: 20,300

Housing/GDP: 23%

Population: 314m

Euro zone

FUM/capita: 20,200

Housing/GDP: 48%

FUM = funds under management in EUR

Housing/GDP = Housing loan penetration

ERSTE GROUP



Setting the scene for future growth –All buildings blocks are in place

− Favourable macro environment in CEE− Real GDP growth of 4-8% in most CEE markets− Continued strong FDI inflows− Euro adoption in most CEE countries within the

foreseeable future

− Superior customer base in terms of futurepotential− 16.1 million retail customers− Under penetrated banking markets

− Foundation for above-average growth isunder-penetration in key product areas− Case study: Ceska sporitelna

− 5m customers− Market share in mortgage loans: 34%− # of disbursed mortgages: 80 000

− Outperforming the fastest-growingmarkets in the EU

20.0

16.1

2007 2010e

Fast growing customer base

# of retail customers in million

ERSTE GROUP



“Tuning the Engine!”

Capture low-hanging fruit

- Build-up of Group Divisions

- Steering/optimizing of riskapproach/appetite

- Stronger alignment of IT landscape

Clarify responsibilities andimprove transparency

- Holding responsibilities- Capital Markets/Treasury- Large Corporate Business- Steering, Risk, Infrastructure

- Local responsibilities- Retail- SME

Reward performance

- EVA replaces local RoE targets

- Renewed focus on value creation

- Increased attention on people andleadership development

Monitor performance

- Putting Group Performance Modelinto action

- Regular Performance Dialogues ofCPO with local banks

Setting the scene for future growth –Realising the potential through new Group structure ERSTE GROUP

ERSTE GROUP

ERSTE GROUP



Presentation topics





ERSTE GROUP



Core region –Economies continue to outgrow EU average

Key economic indicators

8.69.8

11.012.2

13.74.6%

6.5% 6.4%

4.1%5.4%

02468

10121416

2004 2005 2006 2007e 2008e

in E

UR

thou

sand

0%

2%

4%

6%

8%

GDP per capita Real GDP growth

CZ – Short term growth to moderate due to tax reform Key economic indicators

6.37.1

8.110.0

11.3

5.4% 6.0%

8.3%7.1%

8.9%

0

2

4

6

8

10

12

2004 2005 2006 2007e 2008e

in E

UR

thou

sand

0%

2%

4%

6%

8%

10%


SK – Record growth driven by foreign & domestic demand


8.8 8.910.3 10.8 11.6

4.1% 3.9%

2.2%

3.9%3.0%

02468

101214

2005 2006 2007e 2008e 2009e

in E

UR

thou

sand

0%

2%

4%

6%

8%


Hungary – Slow down due to austerity package butrecovery expected for 2008


6.5 7.17.8 8.4

9.14.3% 4.3%4.8% 4.7%

5.4%

0

2

4

6

8

10

2004 2005 2006 2007e 2008e

in E

UR

thou

sand

0%

1%

2%

3%

4%

5%

6%


Croatia – Economic growth set to reach 4 year high

ERSTE GROUP



Retail loan development

5.2 5.6 6.3 6.5 6.8

2.3 2.6 2.9 3.1 3.3

33% 30% 32% 33%33%

0

4

8

12

Jun 06 Sep 06 Dec 06 Mar 07 Jun 07

in E

UR

bill

ion

0%

10%

20%

30%

40%

Retail loans Private mortgages Retail loan growth (yoy)

Loan book trends

1.7 1.9 2.1 2.1 2.32.6 2.8 3.0 3.0 3.1

67%

42%30%

18%

61%

0

1

2

3

4


in E

UR

bill

ion

0%10%20%30%40%50%60%70%80%

Retail loans Corporate loans Retail loans

Customer loan development

1.3 1.5 1.8 2.0 2.12.8 3.0

3.6 3.84.247%

41%46% 48%

38%

0

1

2

3

4

5


in E

UR

bill

ion

0%10%20%30%40%50%60%

Retail loans Customer loans Retail loan growth (yoy)

Loan development

1.4 1.5 1.6 1.7 1.71.5 1.5 1.5 1.5 1.7

31%25%

27%24%26%

0

1

2

3


in E

UR

bill

ion

0%5%10%15%20%25%30%35%

Retail loans Corporate loans Retail loan growth (yoy)

Core region –Retail loans continue to be growth drivers

CS – Retail loans continuously grow above 30% (1) SLSP – Retail loan growth supported by > 40% increase inmortgages (1)

EB Hungary – Outgrowing the market in retail loans (1) EB Croatia – Strong growth despite tight regulatoryenvironment (1)

(1) Retail loan growth tredns based on LCY growth rates (excluding exchange rate movements)

ERSTE GROUP



BCR –Integration and development in a nutshell

Key goals of the Integration and Development Programme (IDP)− Further strengthen BCR position in the Romanian banking market− Contribute to increasing BCR’s profitability− Adopt Erste Group best practices and align processes to EG standards

IDP touches almost every aspect of the business− IDP comprises 42 projects supported by approx. 550 team members

− Various projects in retail and corporate banking, risk management, back-office and support functions, egmarketing, controlling, etc.

− BCR is making significant investments in the future:− Investments target strengthening of customer service and expansion of branch network,

the ATM and POS distribution and the implementation of a new call center

IDP transfers know-how and experience from Erste Group− Project teams include members from BCR and Erste Group, plus consultancy support− Senior managers from BCR and Erste Group sponsor each project− Approx. 100 people from Erste Group are involved in projects

Programme started in mid-2006 and is set to be completed by mid-2008

ERSTE GROUP



BCR Group headcount

Structural impacts of integration –Higher efficiency, lower headcount

BCR (bank only) headcount targets to 2008

Front-Office /Back-Office

& Support Ratio2.4 / 1.0 2.4 / 1.0

Key drivers of achievingthe headcount targets:

-Outsourcing

-Process reengineering

-Centralisation

Front-Office Back-Office + Support

Dec-06 Aug-07 Dec-07 Dec-08

1.4 / 1.01.0 / 1.0

Aiming to transform BCR intothe most efficient bank

in Erste Group

13,492

5,7756,4006,1355,514

2,4252,670

4,4575,5778,200

9,070

10,59211,091

ERSTE GROUP



− Net profit expected to grow above 40%(CAGR 2006-2009)

− Cost/income ratio expected to be about40% in 2009

− 2009 Return on equity to be above 35% -based on a 9% Tier 1 ratio

− Return on investment to exceed 10%(excluding funding costs)

BCR –Financial targets: Guidance remains unchanged

Cost/income ratio guidance

40.0%

55.3%

0%

20%

40%

60%

2006 2009e

Return on equity guidance

35.0%

20.0%

0%

20%

40%

2006 2009e

ERSTE GROUP



Ukraine –Erste Bank Ukraine in high growth phase

− Successful rebranding to Erste BankUkraine in May 2007

− Exceptional growth ahead− 10-fold increase in branch numbers− Fast rising employee base (now: 635)− Supported by ambitious investment programme:

about EUR 400m to 2010

− Market share to grow strongly− Retail lending market share already stands at

0.6%; up to 4% in selected regions; 1% in Kiev− Strong outperformance of market growth

expected in all segments in the coming years− Goal: 4% retail lending share in 2009

− Erste Bank Ukraine will make positivegroup contribution by 2010

Retail lending market share

0.6%

4.0%

0.0%0%

1%

2%

3%

4%

5%

Jun 06 Jun 07 Dec 09

Branch network development

100

400

35

10

100

1,000

Jun 07 Dec 07 (e) Dec 09 (e)

ERSTE GROUP



Presentation topics





ERSTE GROUP



Outlook –Erste Group financial targets confirmed

−Guidance 2007 unchanged− Net profit growth of at least 25%− Cost growth of about 25% over 2006

−Guidance 2008: 7% cost growth – full update for 2008 at Q3 results

−Mid-term group targets reconfirmed

Net profit(1) growth

Return on equity(2)

More than 20% p.a. average until 2009

Below 55% in 2009Cost/income ratio

18-20% in 2009

(1) Net profit after minorities(2) Based on a Tier 1 ratio of at least 7%

ERSTE GROUP



Investor relations contacts

−Erste Bank, Graben 21, 1010 Vienna

− Fax +43 (0)5 0100-13112− E-mail: [email protected]− Internet: www.erstebank.com− Reuters: ERST.VI Bloomberg: EBS AV− Datastream: O:ERS ISIN: AT0000652011

− Gabriele WerzerTel: +43 (0)5 0100-11286 E-Mail: [email protected]− Thomas Sommerauer

Tel: 43 (0)5 0100-17326 E-Mail: [email protected]

Investor relations

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