Q1 2017 consolidated results (unaudited, IFRS) · * Wholesale defined as Corporate and Group...

Page

Strong Q1 2017 supported by loan growth and improving loan

portfolio quality

5 May 2017

Česká spořitelna -

Q1 2017 consolidated results

(unaudited, IFRS)

Page

Executive summary –

Czech economy development remains favourable

2

• The GDP growth is expected to accelerate in 2017 as

cyclical position improved in the 2016/2017 turn, ČS

expects 2.8% growth of GDP in 2017

• Headline inflation arrived at 2.6% in March driven

by growing prices of food, fuel, solid domestic demand

and the wage growth. Core inflation (2.2% y/y in March)

reflects improving domestic demand pressures

• ČNB abandoned its FX commitment at the beginning of

April. The EUR/CZK appreciated only slightly and

remained relatively stable thereafter. In 2017, we expect

only a very moderate appreciation of the EUR/CZK

• Yields on Czech government bonds increased

recently (from negative territory) due to the inflation

development and an increase in German yields.

Moreover, the termination of the FX cap raised yields at

the short end of the yield curve. For the rest of this year,

yields will increase only slightly

• We expect the first ČNB interest rates increase in H2

2018. However, the risk is tilted towards the 2017/18 turn.

The foreign inflation pressures and ECB policy will be

crucial

Growth of GDP, household consumption and investments

-6%

-2%

2%

6%

10%

2011 2012 2013 2014 2015 2016

GDP (y/y, %)

Household consumption (y/y, in %)

Fixed investment (y/y, in %)

-1%

-1%

0%

1%

5Y T-Bond YieldsCZGB5YR IndexGDBR5 IndexGTATS5Y Govt

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Executive summary –Financial results reflect growing loans and continuing improvement of loan quality

3

Net profit of Česká spořitelna increased by 4.5% y/y to CZK 3.5 bn

supported by continuing improvement of loan portfolio quality and by income

from sale of financial assets from AFS portfolio given favourable market

conditions

Operating result decreased by 6.7% y/y due to drop of net interest income

and growth of operating expenses • Net interest income suffered from persisting low interest rate environment

• On the other hand, net fee income maintained flat y/y

• Operating expenses increased by 5.6% mainly due to uneven booking of expected

contribution to Deposit Insurance Fund (in 2016 booked also in Q2)

Capitalisation of ČS Group is very strong, total capital ratio stands at 19.1%,

Tier 1 ratio at 18.5%

At the Annual General Meeting held on 25 April ČS shareholders approved

the distribution of the 2016 profit and payment of a gross dividend of

CZK 76 per share; overall CZK 11.6 bn will be paid in dividends

Net profit

Operating result

AGM

Capital ratio

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Executive summary –

Strong loan growth with significantly improved risk costs

4

Group customer loans (gross) increased by 8.0% y/y, driven by private

mortgages and loans to largest corporate customers

• Newly granted private mortgages increased by 61% y/y and exceeded

CZK 17.5 bn which is the historically highest volume for Q1 and the highest

on the market. Mortgage loan outstanding increased by 13.7% y/y

• Consumer loans declined by 0.8% y/y reflecting extraordinary write-offs of NPLs,

excluding this impact we would see 2.2% growth in consumer lending

• Wholesale loans* (outstanding) boosted by 12.5% y/y driven by the largest corporate

clients

Risk costs significantly reduced by 63% from 33 bps to 12 bps y/y reflecting

decreasing default rates, recoveries and low inflow of NPLs

• Share of NPLs reduced to 2.7% y/y (from 3.9% in March 2016), driven by write-offs

of old NPLs

• NPL coverage by credit risk provisions at strong 84%, total coverage grew to 123%

Increasing demand for more advantageous investment products evidenced

in growing assets in pension funds of ČSPS (up by 9.0% y/y) and in domestic

and foreign mutual funds (up by 15.2% y/y) * Wholesale defined as Corporate and Group Markets customer segments

Lending

Risk costs

Investments

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Q1 2017 Business highlights – Retail

MHF

Mortgages

Real Estate

Loans

More than 320,000 clients are saving

money with the “My Healthy Finance”

service. Through this service we help

our clients to reduce their regular

expenditure and advise them how to

save and appreciate the savings

My Healthy Finance application is

used by more than 70,000 clients.

They can monitor their expenses,

which are automatically sorted into

categories. Clients can thus easily see

on what they spend the most and on

what they can save

The application also allows them

to compare their costs with

demographically similar people, set

up budgets or display how much money

is left till the next salary

Low interest rates and convenient

process of applying for mortgage are

still attractive. In Q1 2017 we provided

our clients with almost 8,700

mortgages worth above CZK 17.5 bn,

which is the highest ever volume for

Q1

Our cash loans are affordable and

convenient. In Q1 2017 we lent our

clients almost CZK 9 bn in more than

40.000 consumer loans. More than

43.000 clients have already used our

product "Peníze na klik" and borrowed

from us CZK 400 m

ČS Real Estate Fund managed by

REICO investiční společnost České

spořitelny acquired office building

Park One in Bratislava with the

headquarters of Amazon and L‘Oréal. ČS

Real Estate fund celebrated 10 year

anniversary and plans to expand to

Poland and Hungary

Friends 24

With Friends 24 application our clients

can transfer small payments without

knowing account numbers. So far over

11,000 people downloaded and

installed the app. and made around

38,000 transfers sending approx.

CZK 14 m to their friends and

acquaintances

5

BranchesWe are changing the service model

of our branch network to increase the

advisory role. All branches under the

new concept include self-service zones.

There are three types of branches –

small, medium with extended product

and service offer, and big with full

offer of products and services

InvestmentsClients of Erste Private Banking

and institutional clients of Česká

spořitelna asset management have

thanks to the new fund ČS PRIVATE

EQUITY 1 a chance to participate on

private equity yields

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Q1 2017 Business highlights – Corporates

A bundle of easy products and a

fast-track approval process for SME

clients

Easy Loan is an alternative to the

standard lending process.

Its benefits are primarily: acceleration

and cost reduction of the lending

process, guaranteed period for

approval and preparation of

contractual documentation

In Q1 2017 we provided Easy Loan to

84 clients with the total volume of

almost CZK 1 bn

EASY LOAN

We are participating in introducing contactless payment in the

public transport of our towns.

In Děčín we have helped develop a new smart payment card

making it possible to pay a fare in contactless way. It is the

first project of its kind in the Czech Republic where it is possible

to use a prepaid bank card like a conventional payment card and

also assign fares to it - one-off fares and in the form of a time

coupon

TOP EU+New bundle of services where we

offer investment loans along with

requests for EU fund grants.

Top EU+ enables more effective

cooperation with the EIB during the

providing process of low-cost loans to

innovative firms

EIBČeská spořitelna signed a new

guarantee contract with the European

Investment Bank (EIB) ensuring

EUR 100 m for domestic firms and

covering 50 percent of credit risks for

new investment contracts with

enterprises up to 3,000 employees.

Česká spořitelna has loaned in

cooperation with EIB a total of EUR

1.15 bn

E-invoiceThanks to the E-Invoice service our clients can now receive

electronic calls to settle local charges for dog licences or

refuse collection in their SERVIS 24 internet banking. We are

presenting the new service in cooperation with the city of

Tábor

Smart townhallIn cooperation with the Office of the Government

and the company O2, we have declared the competition

Smart Townhall to recognise cities and towns for

introducing modern technology simplifying their running.

As part of our "Smart City" package of services we help cities

make investments in so-called "smart" solutions

Transport cards

6

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Presentation topics

7

• Česká spořitelna

• Financial performance analysis

• Macroeconomic developments

• Economic trends in details

• Banking market

• Czech banking market developments

• Česká spořitelna market shares

• ČS digital

• Appendix

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Financial statements – Income statement (CZK m)

8

1-3 16 1-3 17 Change

Net interest income 6,379 6,169 -3.3%

Net fee and commission income 2,282 2,293 0.5%

Dividend income 3 5 66.7%

Net trading and fair value result 633 792 25.1%

Net result from equity method investments 0 -10 -

Rental income from investment properties & other operating leases 131 82 -37.4%

General administrative expenses -4,369 -4,613 5.6%

Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 2 230 >100%

Net impairment loss on financial assets not measured at fair value through profit or loss -460 -184 -60.0%

Other operating result -395 -369 -6.6%

Pre-tax result from continuing operations 4,206 4,395 4.5%

Taxes on income -831 -869 4.6%

Post-tax result from continuing operations 3,375 3,526 4.5%

Net result for the period

Net result attributable to non-controlling interests 0 -2 -

Net result attributable to owners of the parent 3,375 3,528 4.5%

Operating income 9,428 9,331 -1.0%

Operating expenses -4,369 -4,613 5.6%

Operating result 5,059 4,718 -6.7%

Cost/income ratio 46.3% 49.4%

Return on equity 11.1% 11.5%

Page

Financial statements – Balance sheet I (CZK m)

Assets

9

Assets Dec 16 Mar 17 Change

Cash and cash balances with central banks 173,100 231,235 33.6%

Financial assets - held for trading 20,944 112,434 >100%

Derivatives 13,357 12,403 -7.1%

Other trading assets 7,587 100,031 >100%

Financial assets - designated at fair value through profit or loss 423 405 -4.3%

Financial assets - available-for-sale 81,274 69,165 -14.9%

Financial assets - held to maturity 167,899 168,988 0.6%

Loans and receivables to credit institutions (net) 22,328 115,563 >100%

Loans and receivables to customers (net) 577,453 590,288 2.2%

Derivatives - hedge accounting 519 483 -6.9%

Property and equipment 10,456 10,205 -2.4%

Investment properties 2,390 2,390 0.0%

Intangible assets 4,284 4,100 -4.3%

Investments in associates and joint ventures 753 744 -1.2%

Current tax assets 611 745 21.9%

Deferred tax assets 136 246 80.9%

Assets held for sale 320 241 -24.7%

Other assets 3,636 3,609 -0.7%

Total assets 1,066,526 1,310,841 22.9%

Page

Financial statements – Balance sheet II (CZK m)

Liabilities

10

Liabilities and equity Dec 16 Mar 17 Change

Financial liabilities - held for trading 17,982 136,363 >100%

Derivatives 13,877 13,057 -5.9%

Other trading liabilities 4,105 123,306 >100%

Financial liabilities designated at fair value through profit or loss 1,997 1,721 -13.8%

Deposits from customers 1,997 1,721 -13.8%

Financial liabilities measured at amortised cost 911,350 1,033,602 13.4%

Deposits from banks 114,282 198,330 73.5%

Deposits from customers 786,876 824,453 4.8%

Debt securities issued 9,173 9,146 -0.3%

Other financial liabilities 1,019 1,673 64.2%

Derivatives - hedge accounting 452 501 10.8%

Provisions 2,909 3,412 17.3%

Current tax liabilities 109 210 92.7%

Deferred tax liabilities 188 137 -27.1%

Liabilities associated with assets held for sale 125 124 -0.8%

Other liabilities 9,684 10,229 5.6%

Total equity 121,730 124,542 2.3%

Equity attributable to non-controlling interests 166 164 -1.2%

Equity attributable to owners of the parent 121,564 124,378 2.3%

Total liabilities and equity 1,066,526 1,310,841 22.9%

,534

3,528

-443301

658 -65 -456

0

Q4 16 Operatingincome

Operatingexpenses

Netprovision

creation

Other result* Taxes onincome

Minorities Q1 17

-0.2%

3,375

3,528

-97-244

275

254-38 3

1-3 16 Operatingincome

Operatingexpenses

Net provisioncreation

Other result* Taxes onincome

Minorities 1-3 17

4.5%

Financial performance – Executive summary

Net profit increased by 4.5% y/y in Q1 2017

Q/Q net profit reconciliation (CZK m) Y/Y net profit reconciliation (CZK m)

11

• Operating income decreased by 5% q/q driven by lower net interest

income (-2%), net trading and FV result (-14%) and net fee and

commission income (-5%)

• Operating expenses reduced by 6% q/q mainly due to seasonality

• In Q4 2016 higher costs for marketing and property management

and creation of restructuring provision

• Net provision creation dropped by 78% q/q due to higher creation

in Q4 2016 covering several individual defaults

• Income tax development impacted by deferred tax asset from

impairment of buildings created in Q4 2016

• Important contributor to growth of net profit was sale of financial

assets from AFS portfolio with positive impact CZK 230 m (visible

in Other result)

• Decline of operating income attributed mainly to net interest

income (CZK -0.2 bn), on the other hand net fee income kept

flat and net trading and FV result grew by 25%

• Growth of operating expenses caused mainly by uneven booking

of expected contribution to Deposit Insurance Fund (in 2016

booked also in Q2)

• Low default rates, higher recoveries and significant releases

in individual creation led to further reduction of net provision

creation (-60.0%)

P/L positive

P/L negative

* Includes Gains/losses from financial assets and liabilities not measured at fair value and Other operating result

P/L positive

P/L negative

Page

Positive

Negative

1,066.5

1,310.8

11884

37 0 2 3

Dec 16 Trading

liabilities

Bank

deposits

Customer

deposits

Debt

securities

Other

liabilities

Equity Mar 17

22.9%

1,066.5

1,310.8

5880

93 13 0 0

Dec 16 Cash andbalances

with ČNB

Trading,financial

assets

Loans tobanks

Netcustomer

loans

Intangibles Other assets Mar 17

22.9%


Balance sheet influenced by huge inflow of liquidity in connection with FX interventions

YTD total asset reconciliation (CZK bn) YTD total liability reconciliation (CZK bn)

12

• Asset side of the B/S reflects placing of liquidity inflow to ČNB

• Cash and balances with ČNB increased by CZK 58 bn

in Q1 2017 driven by overnight deposits with ČNB

• Trading assets grew by more than 100% due to reverse repo

operations with ČNB

• Loans to banks increased by CZK 93 bn due to placing

of overliquidity (including funds from institutional investors)

to ČNB

• Net customer loans added 2.2% in Q1 2017

• Liability side influenced by huge inflow of liquidity into CR as

a consequence of expectations regarding FX interventions

• Trading liabilities boosted by more than 100% due to repo operations

with non-banking financial institutions

• Bank deposits rose by 73.5% since YE 2016

• Group customer deposit base increased by 4.7% since YE 2016

• Deposits in parent bank up by 6.4%, driven by deposits from public

sector (+28.4%) and corporate deposits (+10.3%); deposits from private

individuals grew by 2.8% since YE 2016

Increase

Decrease

1% 20.1% 19.1%

Mar 16 Dec 16 Mar 17


Sound capitalisation and stable ROE

Cost/income ratio

13

Loan/deposit ratio Number of branches

ROE Total capital ratio Number of employees (eop)

42.8%

46.3%49.4%

1-3 15 1-3 16 1-3 17

634608

546

Mar 15 Mar 16 Mar 17

10,545 10,487

10,213

Mar 15 Mar 16 Mar 17

13.3%

11.1% 11.5%

1-3 15 1-3 16 1-3 17

* Uneven booking of expected contribution to Deposit Insurance Fund added 1pp

* 74.7%73.2%

71.4%

Mar 16 Dec 16 Mar 17

Page

Operating result –

6.7 % below Q1 2016

• Shrinking operating income (-1.0% y/y)

and higher operating expenses

caused decline of operating result

• Net interest income and rental income went

down but net fee income maintained at Q1

2016 level

• Rental income down by 37.4% due to reduction

of investment in real estate SPV

• Net trading and FV result increased by

25.1% y/y

• Driven by growing profit from foreign currency

derivatives (customers´ hedging connected

to expected exit from ČNB interventions)

• Operating expenses rose by 5.6% driven

mainly by uneven booking of expected

contribution to Deposit Insurance Fund /details on slide 17/

Operating result (CZK m)

14

5,911

5,0594,718

1-3 15 1-3 16 1-3 17

-6.7%

Operating income structure (CZK m)

6,429 6,379 6,169

2,521 2,282 2,293

1,190633 792

192134 77

1-3 15 1-3 16 1-3 17

Net interest income Net fee and commision Net trading and fair value result Other

,429 6,379 6,169

1-3 15 1-3 16 1-3 17

-3.3%

Net interest income –

Decreased by 3.3% y/y

• Increase in loan volumes did not offset

effect of prevailing pressure on interest

margins• Lower interest income from bonds reflecting

declining yields partly mitigated by lower cost

of funds

• Net interest margin decreased

to 2.71%

• Reflected a pressure on interest margins

and extraordinary increase of interest

bearing assets, mainly interbank assets

with almost no margin which rose by CZK

81 bn y/y (+233%) due to placing of funds

from institutional investors to ČNB.

Excluding this extraordinary effect

interest margin would reach 3.0%

15

Net interest margin

Net interest income (CZK m)

3.32% 3.19%2.71%

0.17% -0.05% -0.04%

1-3 15 1-3 16 1-3 17

Net interest margin 5Y CZGB yield; Q1 AVG

,5212,282 2,293

1-3 15 1-3 16 1-3 17

0.5%

529 457 350

1,4231,233

1,182

346382 495

222211 267

1-3 15 1-3 16 1-3 17

Lending Payment transfers Securities transactions Other

Net fee and commission income –

Kept at Q1 2016 level

• Net fee income maintained flat in y/y

comparison as declining fee income

from lending was offset by growing

income from securities and asset

management• Income from securities and asset management

rose by 30% y/y, supported also by higher fees

from pension funds in connection with legislative

change in 2016

• Higher income from sale of insurance

products served as another contributor

to net fee income

• Net fee income from payment transfers

declined by 4% y/y

16

Net fee and commission income structure (CZK m)

Net fee and commission income (CZK m)

*

* Including fees from account maintenance and payment cards fees

,151 2,188 2,235

1,735 1,677 1,833

535 504545

1-3 15 1-3 16 1-3 17

Personnel expenses Other administrative expenses

Depreciation and amortisation

4,421 4,369 4,613

1-3 15 1-3 16 1-3 17

5.6%

Operating expenses –

Increased by 5.6% y/y

• Development of operating expenses

influenced by uneven booking of expected

contribution to Deposit Insurance Fund

(in 2016 booked also in Q2), excluding this

effect operating expenses rose by 2.8%

• Personnel expenses rose by 2.1%

reflecting higher wages and employee

benefits

• Other administrative expenses excluding

impact of Deposit insurance fund

increased by 2.0% mainly due to IT

investments in digitalisation and regulatory

requirements

• Depreciation went up by 8.1% y/y affected

by higher depreciation of software

Operating expenses (CZK m)

17

Operating expenses structure (CZK m)

Page

Group capital position–

Total capital ratio at sound 19.1%

Regulatory capital (CZK bn) Risk exposures (CZK bn)

18

Capital ratios

• Total capital grew by 2.2% y/y thanks to

higher retained profit and lower dividends;

slight decline since YE 2016 reflected

credit risk provisions that were not audited

yet

• Tier II capital increased following inclusion

of preference shares from CET 1

• Growing risk exposures driven mainly

by credit risk area reflecting growth

of corporate and retail loans

• Total capital ratio decreased mostly due

to the business growth (reflected in

growing risk exposures) which is in line with

ČS business strategy; total capital increased

89.4 90.7 88.9

8.1 8.1 8.10.3 3.1 2.9

97.7 101.9 99.9

31/03/2016 31/12/2016 31/03/2017

CET 1 capital Additional Tier 1

Tier 2 Total capital

415.8 424.9 434.2

7.6 8.4 6.762.5 73.9 82.9486.0 507.1 523.9

31/03/2016 31/12/2016 31/03/2017

Credit risk Market risk

Operational risk Total

20.1% 19.5% 18.5%20.1% 20.1% 19.1%

31/03/2016 31/12/2016 31/03/2017

Tier 1 ratio Total capital ratio

Page

Balance sheet development –

High growth in loans and even faster growth in deposits

Group net customer loans (CZK bn) Group customer deposits (CZK bn)

19

• Group net customer loans increased by 8.7% compared

to March 2016 driven by retail mortgages and loans to

the largest corporate customers

/details to loans in the lending part of the presentation/

• FX loans represent 14% of net loans, concentrated solely

in corporate area almost only in EUR

• Double digit growth of customer deposits attributed

mainly to growing deposit base from private individuals

and corporate clients

540.7 553.0 560.9 579.9 593.3

125.5 138.3 138.4 151.7 159.160.571.7 73.0 57.4 73.7726.6 763.1 772.3 788.9 826.2

Mar 16 Jun 16 Sep 16 Dec 16 Mar 17

Households Corporates General governments

13.7%

478.7 485.0 498.4 498.3 505.7

60.3 63.4 67.3 74.9 80.34.2 4.8 4.7 4.2 4.3543.2 553.2 570.3 577.5 590.3


CZK EUR Other

8.7%

Page

IFRS, in CZK bn Mar-16 Dec-16 Mar-17Change

(y/y)

ČS - customer deposits 654.3 713.4 758.9 16.0%

SSČS - building society 73.9 77.1 69.0 -6.5%

ČSPS - pension company 66.0 70.4 72.0 9.0%

Dom. and foreign mutual funds 98.4 109.5 113.4 15.2%

thereof Reico - investment company 9.3 13.1 14.2 51.4%

Asset management 71.3 75.2 76.3 7.0%

Total 963.9 1,045.6 1,089.6 13.0%

963.91,045.6 1,089.6

Mar-16 Dec-16 Mar-17

CS asset

management

Domestic and

foreign mutual

fundsČSPS

SSČS

ČS

Total

ČS Group deposits –Persisting growth of alternative and standard deposit products

• Customer deposits in parent bank

accelerated and grew by 16.0% y/y

• Private individuals and corporate clients were

the major contributors to the overall growth

of customer deposits

• Assets in pension company increased

by 9.0%

• Organic increase of volumes split between

transformed and participant funds

• Domestic and foreign mutual funds* added

15.2% in 2016

• Prevailing low interest rates support higher

clients´ demand for alternative higher-yielding

products

• In Reico investment company customer assets

increased by more than 50% in y/y comparison

• Assets under discretionary management

grew by 7.0% in y/y comparison

ČS Group deposits (CZK bn)

20

13.0%

*

*Mutual funds are now reported in line with AKAT methodology. History has been restated.

Page

Group loan portfolio – Summary

Portfolio growth accompanied with low risk costs and better quality

21

• Gross loans to customers in ČS Group increased by 8.0% y/y to CZK 604 bn

• Outstanding demand for private mortgages in previous months materialized in a rapid growth of on balance.

Consumer lending affected by nonrecurring large write offs. Growth of wholesale was driven by the largest

clients and non-banking financial institutions

• Detail segment figures are affected by internal resegmentation of public and non profit sector

(CZK 9.1 bn moved from retail to wholesale in Q4 2016) and further reshuffle in wholesale itself (transfers

among sub-segments following an implementation of a new corporate strategy)*

• Risk costs reduced significantly by 63% from 33 bps to 12 bps y/y

• Declining default rates and recoveries in private individuals

• Recoveries and low NPL inflow in wholesale

• When including provisions for guarantees, risk costs would decrease from 31 bps to 11 bps y/y

• Portfolio quality further improved and NPL ratio dropped from 3.9% to 2.7% y/y

• Quality improvement driven by nonrecurring write off of retail loans (CZK 2.0 bn, of which consumer lending

CZK 1.9 bn), recoveries and low inflow of new NPLs combined with loan portfolio growth

• Provision coverage remained at strong 84%, total coverage (provisions+collateral to NPL) improved

to 123% (from 106% in Q1 2016)

* Historic data has not been reclassified

Page

Group loan portfolio –

Group loans increased by 8.0% y/y driven by all CS Group members

ČS Group loan portfolio (gross) Industry split of loan portfolio as of March 2017

22

• ČS Bank dominates the ČS Group

• Interest rates at bottom for housing markets and continuing economic growth led to further growth in ČS

bank and all of its major subsidiaries

• Private households remains behind more than half of the loan portfolio

in CZK m, IFRS 31/03/2016 % share 31/03/2017 % shareY/Y

Change

I. ČS Bank 520,028 93.0% 563,534 93.3% 8.4%

II.1. Stavební spořitelna ČS 35,437 6.3% 35,967 6.0% 1.5%

II.2. Leasing (sAL, EL) 14,837 2.7% 15,979 2.6% 7.7%

II.3. Factoring ČS 4,436 0.8% 5,064 0.8% 14.2%

III. Other subs and Consolidation items -15,368 -2.7% -16,664 -2.8% 8.4%

Total Loans (consolidated) 559,370 100.0% 603,880 100.0% 8.0%

Private Households

51%

Real Estate12%

Manufacturing10%

Wholesale and retail

trade6%

Energy3%

Other <3%18%

Page

Bank loan portfolio –

Portfolio growth fuelled proportionally by both retail and wholesale*

Loan portfolio development - ČS BankLoan portfolio by customer segments

as of March 2017

23

• Loans to retail rose by 6.2% y/y (excluding

resegmentation of CZK 9.1 bn in Q4 2016

by 9.2%)

• Driven primarily by private mortgages (+13.7%)

• Commercial loans when excluding

resegmentation of public sector grew by 5.4%

• Loans to wholesale* added 12.5% y/y

(excluding resegmentation in Q4 2016

of CZK 9.1 bn by 8.2%)

• Growth driven mainly by real estate, public sector

and SMEs

* Wholesale defined as Corporate and Group Markets.

304.7 310.9 319.5 318.0 323.6

212.5 217.4 226.6 233.1 239.1

6.6% 7.4%8.8%

8.3% 8.4%

0%

10%

20%

30%

0

50

100

150

200

250

300

350


in C

ZK

bn

Retail loans Wholesale loans Total loan growth (y/y)

Large corporates

13.2%

SME23.6%

Consumer, private credit cards,

overdrafts and home equity

11.2%

Mortgage & real est.46.0%

Others 6.0%

Page

Bank loan portfolio –

Mortgages further accelerated, consumer lending affected by write offs

Private mortgages development Consumer lending development*

24

• Private mortgages accelerated

to CZK 216.1 bn (+13.7% y/y)

• Strong sales in Q4 2016 and Q1 2017 started to be

utilized now

• LTV ratio for the whole portfolio declined from 64.3%

to 62.0%, following regular collateral repricing

• Consumer lending* at CZK 63.0 bn (-0.8% y/y)

after nonrecurring write offs (CZK 1.9 bn)

• Outstanding sale of cash loans was offset by

extraordinary write offs in March 2017. Underlying

growth of the portfolio would reach +2.2%

*Consumer lending here includes Cash loans, home equity loans,

private credit cards and private overdrafts. Social loans are excluded.

190.1196.0

203.0209.6

216.1

11.9% 11.5%11.9% 12.2%

13.7%

10%

15%

20%

25%

160

170

180

190

200

210

220

230


in C

ZK

bn

Private Mortgages Private Mortgages growth (y/y)

63.5 63.5 64.2 64.5 63.0

-2.5% -1.8% -0.3% 1.1% -0.8%

-20%

0%

20%

40%

60%

0

20

40

60

80

100


in C

ZK

bn

Consumer Lending Consumer Lending growth (y/y)

Page

Group asset quality

Improving risk profile and coverage, significant decline of risk costs

NPL ratio and NPL coverage Risk costs development

25

• Group NPL share dropped to 2.7%

• Driven by write offs in retail, low NPL inflow

and recoveries

• Provision coverage at strong 84%, total coverage

(provisions+collateral to NPL) improved to 123%

• Annualized group risk costs declined to 12 bps

• Ongoing positive macroeconomic development with

limited number of small defaults, no larger defaults

or additional provision creations on already defaulted

wholesale clients

3.9% 3.6% 3.3% 3.2% 2.7%

73%76%

80%83% 84%

40%

45%

50%

55%

60%

65%

70%

75%

80%

85%

90%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%


Group NPLs Risk Provisions / NPLs

33

24 24

32

12

-50.2% -53.6% -47.8%-33.4%

-62.9%

-100%

0%

100%

200%

300%

0

5

10

15

20

25

30

35


in b

p

Group risk costs Y/Y change

Page

Presentation topics

26


• Segment financial performance analysis



• Banking market



• ČS digital

• Appendix

Page

Macroeconomic developments –

GDP growth will accelerate in 2017

Real GDP growth y/y Components of GDP

27

• The GDP growth slowed down to 2.3% in 2016, was driven mainly by

a temporary decrease in investments

• However, real economic activity remained solid, favourably

influenced by both domestic and foreign demand. Also, the weak

EUR/CZK exchange rate positively affected the GDP growth

• In 2016/17 turn, the cyclical position further improved mainly due to

economic recovery in the Eurozone. We expect GDP growth will reach

almost 3% in 2017 and 2018 as the favourable development in both

domestic and foreign demand will continue

• Relatively stable growth of household consumption is the most important

GDP growth contributor. It is being supported by a strong labour market and

positive sentiment of households

• Decrease in fixed investment in 2016 was affected by significant public

investments financed by EU funds in 2015. In 2017, investment

expenditures will contribute positively to the GDP growth due to the improved

economic development in Eurozone and higher public investments

• The manufacturing sector, supported to a large extent by continuing

expansion in the automotive industry, remained the most significant contributor

to GDP growth on the supply side (adding 1.2pp in Q4 2016)

Note: Source for historic figures is Czech statistical office. Figures for forthcoming years are ČS forecasts

-0.5%

2.7%

4.6%

2.3%2.8% 2.9%

2013 2014 2015 2016 2017e 2018e

0.5%1.8%

3.1% 2.9% 2.7% 2.8%

-2.5%

3.9%

9.1%

-3.6%

1.9% 2.5%

2013 2014 2015 2016 2017e 2018e

Private consumption growth

Fixed capital formation growth

Page


The lowest unemployment rate in the EU

Unemployment and inflation General government debt and government balance

28

• Average CPI arrived at 2.6% in March as it was supported by prices of food,

fuel and also by domestic demand pressures

• We expect a slight increase in CPI inflation during 2017 due to solid

domestic demand, increase in wage costs of firms and also lower

anti-inflationary pressures from the Eurozone

• The general unemployment rate (ILO) reached 3.4% in February

and is still the lowest in the EU

• The strong growth of the Czech economy and high inflow of EU funds

positively affected the central government’s cash flow-based budget, which

reached a surplus in 2016

• In 2017 and 2018, we expect a slight deficit in general government balance

due to higher public consumption and investment expenditures

• The share of public debt to nominal GDP is anticipated to further

decrease, mainly thanks to the favourable development of the Czech economy

Note: Source for historic figures is Czech statistical office. Figures for forthcoming years are ČS forecasts

6.8%

5.9%

4.6%

3.7% 3.6% 3.5%

1.4%

0.3% 0.3%0.7%

2.7%2.0%

2013 2014 2015 2016 2017e 2018e

Unemployment rate (eop)

Consumer price inflation (avg)

44.9% 42.2% 40.3% 37.2% 35.7% 35.9%

-1.2% -1.9% -0.6%

0.6%

-0.6% -0.4%

2013 2014 2015 2016e 2017e 2018e

General government debt (share of GDP)

General government balance (share of GDP)

Page


Yields of Czech T-bonds increased

• Domestic demand pressures are important

factors behind the inflation development as

the core inflation contributed approx. 1.2pp

to the overall inflation in March

• The ČNB abandoned the FX commitment

at the beginning of April 2017. The EUR/CZK

appreciated only slightly and remained

relatively stable thereafter

• We expect only a moderate appreciation

in coming quarters as foreign investors

will gradually sell CZK and thus mitigate the

appreciation tendencies

• We expect a first increase in ČNB rates

in H2 2018. However, the risk is tilted towards

the 2017/18 turn. The inflation pressures in

the Eurozone and ECB policy will be crucial

• Yields of government bonds increased

reflecting higher pro-inflationary

pressures and exit from the FX cap

29

-2

-1

0

1

2

3

2015 2016 2017

Break-down of CPI

Regulated prices Indirect taxes

Food, beverages and tobacco Core

Fuel CPI

-0.5%

0%

0.5%

1%

1.5%

1-1

5

2-1

5

3-1

5

4-1

5

5-1

5

6-1

5

7-1

5

9-1

5

10-1

5

11-1

5

12-1

5

1-1

6

2-1

6

4-1

6

5-1

6

6-1

6

7-1

6

8-1

6

9-1

6

10-1

6

12-1

6

1-1

7

2-1

7

3-1

7

10Y T-Bond YieldsCZGB10YR IndexGDBR10 IndexGTATS10Y Govt

CPI Inflation y/y

Page

Presentation topics

30





• Banking market



• ČS digital

• Appendix

0 17.919.8 20.5

16.118.9

0

5

10

15

20

25

Q4 2016 Q4 2016 Q4 2016 Q4 2016 Q4 2016 Q4 2016

Large banks Medium-sized banksbanks

Small banks

T1 Capital ratio Total capital ratio

• According to latest ČNB stress tests the Czech banking sector has

a strong capital adequacy, liquidity and robust profitability

• The counter-cyclical capital buffer rate for exposures of Czech banks

is set at 0.5%; this rate is applicable from January 2017. In March 2017

the ČNB decided to keep the buffer rate at this level also following April

2018

• Impact of the ČNB‘s exit from its FX floor will be small since

movements of the exchange rate are unlikely to be sizeable and

banks are largely hedged against them

Czech banking market –

Sufficiently capitalized and resilient, with low and falling NPL share

Capital ratios of Czech banks* (%) Non-performing loan ratios (%)

• The share of non-performing loans (NPL ratio) in the retail

sector has been falling since 2013 in line with the improving

economic situation

• The NPL ratio in the corporate sector has been hovering

around 5% since the Spring of 2016

31

* Compliant with ČNB segmentation of banks, data for March not available yet

4.0%

5.2%

3.8%3.4%

5.0%

2.9%

0%

1%

2%

3%

4%

5%

6%

Total Non-financialcorporations

Households

Mar 16 Mar 17

Page


Vivid growth of loans and deposits in retail as well as corporate sector

Retail and corporate loans (y/y growth) Retail and corporate deposits (y/y growth)

32

• In March 2017, total loans grew by 7.3% y/y. The main source was

growth of loans to households. In the first quarter of 2017 this growth

accelerated to values above 8% (average for the previous year

was by a percentage point lower)

• In 2017, ČS expects client loans to grow by some 5.7%. Growth of

loans to households will ease, relative to current tempos, to 7%.

Housing loans will grow at a similar pace. For corporate loans, ČS

expects growth slightly above 5%

• Y/y growth in household deposits has been increasing in recent

quarters; in first quarter of 2017 it rose above 9%

• After very low figures in H2 2016, during the first quarter of the

current year y/y growth of corporate deposits reached a level

above 10%. Deposits of financial institutions keep their fast y/y

growth observable already since the Autumn of 2015

• For 2017 ČS expects total deposits to grow slightly less than 6% y/y

6.4%6.9% 7.3%

8.2%

6.7%5.9% 6.0%

4.7%

Jun 16 Sep 16 Dec 16 Mar 17

Retail loans Corporate loans

7.3% 7.7%8.4%

9.6%

6.5%5.9%

0.0%

11.6%

Jun 16 Sep 16 Dec 16 Mar 17

Retail deposits Corporate deposits

Page


Limited exposure of clients to FX risk

Customer loans (March 2017) Customer deposits (March 2017)

33

58.7%28.6%

0.1%

12.5%

LC retail loans LC corporate loans

FX retail loans FX corporate loans

67.7%

24.9%

2.3%5.1%

LC retail deposits LC corporate deposits

FX retail deposits FX corporate deposits

Page

Banking market –

Market shares of ČS (March 2017)

Asset side Liability side

34

• Market leadership in:

• Number of customers (4.7 m)

• Total mortgages (market share of 27%)

• Consumer loans incl. credit cards (market share of 28%)

• Total loans (market share of 21%)

• No. 2 in:

• Total assets (market share 19%)

• Private mortgages (market share 25%)

• Market leadership in:

• Total deposits (market share of 22%)

• 25% in retail deposits, 12% in corporate deposits

• Mutual funds with market share of 25%*

18% 19% 19% 19% 19%

23% 23% 23% 23% 23%

19% 19% 19% 20% 20%


Total assets Retail loans Corporate loans

25% 25% 25% 25% 25%

11% 12% 12% 12% 12%


Retail deposits Corporate deposits

*Data as of Dec 2016

Page

Presentation topics

35





• Banking market



• ČS digital

• Appendix

Page

ČS digital

Česká spořitelna is a traditional bank

with almost 200 years of history. At

the same time it is modern institution,

which introduces unique digital and

mobile products and services on

the banking market.

Here are some of them:

SERVIS 24 Mobile bank

Allows clients to transfer money,

make QR code payments and

manage payment cards wherever

they are

My status

Application for clients who do not

need to make payments, but want to

continually monitor their finances

Ticket dispenser

This application allows clients to set

up a meeting in the branch

BUSINESS 24 Mobile bank

Makes the management of company

finances easy even during traveling

Friends 24

New way of making small payments

without knowing the account number

Melinda

Offers easy way to contribute to

various charitable projects

Investment centre

Easy way to monitor stock-exchange,

market analyses, exchange rates and

commodity prices

36

Page

Presentation topics

37





• Banking market



• ČS digital

• Appendix

Page

Outstand. Share Outstand. Share Outstand. Share Outstand. Rate Outstand. Rate

RETAIL 304,701 54.5% 318,003 53.6% 323,615 53.6% 5,612 1.8% 18,913 6.2%

Overdrafts 5,996 1.1% 5,725 1.0% 5,740 1.0% 16 0.3% -256 -4.3%

of which non-private (MSE, Muni) 1,746 0.3% 1,697 0.3% 1,882 0.3% 185 10.9% 136 7.8%

Credit cards 3,325 0.6% 3,054 0.5% 2,723 0.5% -331 -10.8% -602 -18.1%

of which non-private (MSE, Muni) 15 0.0% 15 0.0% 14 0.0% -1 -4.3% -1 -8.9%

Cash loans 52,016 9.3% 53,968 9.1% 53,067 8.8% -900 -1.7% 1,051 2.0%

Private social 901 0.2% 776 0.1% 734 0.1% -42 -5.5% -167 -18.6%

Home equity mortgages 3,910 0.7% 3,453 0.6% 3,321 0.5% -132 -3.8% -589 -15.1%

Private mortgages 190,078 34.0% 209,568 35.3% 216,053 35.8% 6,486 3.1% 25,976 13.7%

Commercial loans 48,474 8.7% 41,459 7.0% 41,975 7.0% 517 1.2% -6,499 -13.4%

WHOLESALE 212,487 38.0% 233,138 39.3% 239,082 39.6% 5,944 2.5% 26,595 12.5%

Corporate 211,493 37.8% 226,803 38.2% 232,785 38.5% 5,983 2.6% 21,293 10.1%

Group Large corporates 31,962 5.7% 36,206 6.1% 39,973 6.6% 3,768 10.4% 8,011 25.1%

Local Large corporates 38,073 6.8% 39,006 6.6% 34,196 5.7% -4,810 -12.3% -3,877 -10.2%

SME 89,551 16.0% 89,244 15.0% 91,019 15.1% 1,775 2.0% 1,468 1.6%

Real estate 38,489 6.9% 40,523 6.8% 43,136 7.1% 2,613 6.4% 4,646 12.1%

Public sector 13,417 2.4% 21,824 3.7% 24,461 4.1% 2,637 12.1% 11,045 82.3%

Group Markets 994 0.2% 6,336 1.1% 6,297 1.0% -39 -0.6% 5,302 533.3%

OTHER 2,840 0.5% 806 0.1% 838 0.1% 32 3.9% -2,002 -70.5%

BANK: LOANS TO CUSTOMERS 520,028 93.0% 551,947 93.1% 563,534 93.3% 11,588 2.1% 43,507 8.4%

SUBSIDIARIES 54,710 9.8% 56,877 9.6% 57,010 9.4% 134 0.2% 2,301 4.2%

CONSOLIDATION ITEMS -15,368 -2.7% -15,831 -2.7% -16,664 -2.8% -833 5.3% -1,297 8.4%

GROUP: LOANS TO CUSTOMERS 559,370 100.0% 592,992 100.0% 603,880 100.0% 10,888 1.8% 44,510 8.0%

YTD change YTY changein CZK m, IFRS

31/03/2016 31/12/2016 31/03/2017

38

Structure of ČS Group loan portfolio (gross) –

Group customer loans

* Wholesale defined as Corporate and Group Markets.

*

Page

Ratings of Česká spořitelna

Status as of 5th May 2017

39

• Latest rating actions

• Fitch upgraded short-term rating to F1 (from F2) and confirmed all other ČS ratings on 26th April 2017

• Rating agency Standard & Poor´s upgraded all ČS ratings on 16th March 2017, outlook remained

negative

• Moody´s revised the outlook for LT rating of ČS from negative to stable on 17th March 2015

Fitch A- F1 a- 2 stable 26/04/2017

Moody's A2 Prime - 1 stable 17/03/2015

Standard & Poor's A A-1 negative 16/03/2017

OutlookLatest

actionsRating Agency Long-term Short-term Viability Support

Page

Macroeconomic figures –

Historical and forecasted macroeconomic data

40

2011 2012 2013 2014 2015 2016 2017e 2018e

Population (avg, m) 10.5 10.5 10.5 10.5 10.5 10.5 10.5 10.5

GDP/capita (EUR thsd) 15.6 15.1 14.6 14.1 14.9 15.4 16.1 16.9

Real GDP growth 2.0 -0.7 -0.5 2.7 4.6 2.3 2.8 2.9

Consumer price inflation (avg) 1.9 3.3 1.4 0.3 0.3 0.7 2.7 2.0

Unemployment rate (eop) 6.5 7.3 6.8 5.9 4.6 3.7 3.6 3.5

Current account balance (share of GDP) -2.1 -1.6 -0.5 0.2 0.2 1.1 0.8 0.6

General government balance (share of GDP) -2.7 -3.9 -1.2 -1.9 -0.6 0.6 -0.6 -0.4

Public debt (share of GDP) 39.9 44.5 44.9 42.2 40.3 37.2 35.7 35.9

Short term interest rate (3 months, eop) 1.2 1.0 0.5 0.4 0.3 0.3 0.3 0.3

EUR FX rate (eop) 25.8 25.1 27.4 27.7 27.0 27.0 26.4 25.7

Page

Financial statements – Quarterly development (CZK m)

41

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q/Q %

Net interest income 6,379 6,396 6,412 6,326 6,169 -2.5%

Net fee and commission income 2,282 2,364 2,252 2,410 2,293 -4.9%

Dividend income 3 51 6 26 5 -80.8%

Net trading and fair value result 633 604 692 924 792 -14.3%

Net result from equity method investments 0 3 -4 -9 -10 11.1%

Rental income from investment properties & other operating leases 131 127 123 97 82 -15.5%

General administrative expenses -4,369 -4,413 -4,450 -4,915 -4,613 -6.1%

Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 2 1,421 -1 -2 230 -

Net impairment loss on financial assets not measured at fair value through profit or loss -460 -235 -369 -842 -184 -78.15%

Other operating result -395 -149 -57 -71 -369 >100%

Pre-tax result from continuing operations 4,206 6,170 4,607 3,941 4,395 11.5%

Taxes on income -831 -1,305 -921 -413 -869 >100%

Post-tax result from continuing operations 3,375 4,864 3,685 3,530 3,526 -0.1%

Net result for the period

Net result attributable to non-controlling interests 0 1 0 -3 -2 -33.3%

Net result attributable to owners of the parent 3,375 4,863 3,686 3,534 3,528 -0.2%

Operating income 9,427 9,546 9,480 9,774 9,331 -4.5%

Operating expenses -4,369 -4,413 -4,450 -4,915 -4,613 -6.1%

Operating result 5,059 5,131 5,031 4,860 4,718 -2.9%

Cost/income ratio 46.3% 46.2% 46.9% 50.3% 49.4%

3 16 1-3 17 Change

Net interest income 226.9 222.9 -1.7%

Net fee and commission income 84.4 84.9 0.6%

Dividend income 0.1 0.2 na

Net trading and fair value result 23.4 29.3 25.2%

Net result from equity method investments 0.0 -0.4 na

Rental income from investment properties & other operating leases 4.8 3.0 -36.9%

General administrative expenses -161.6 -170.7 5.7%

Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 0.1 8.5 9568.7%

Net impairment loss on financial assets -17.0 -6.8 -59.9%

Other operating result -14.6 -13.7 -6.7%

Levies on banking activities 0.0 0.0 na

Pre-tax result from continuing operations 146.5 157.3 7.4%

Taxes on income -29.5 -31.2 5.6%

Post-tax result from continuing operations 117.0 126.1 7.8%

Post-tax result from discontinued operations 0.0 0.0 na

Net result for the period 117.0 126.1 7.8%

Net result attributable to non-controlling interests 1.3 1.3 5.2%

Net result attributable to owners of the parent 115.7 124.8 7.8%

Operating income 339.6 339.9 0.1%

Operating expenses -161.6 -170.7 5.7%

Operating result 178.0 169.2 -5.0%

Cost/income ratio 47.6% 50.2%

Return on allocated capital 26.8% 26.6%

Segment financial statements –

Segment Czech Republic - income statement (EUR m)

42

Page

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17

Net interest income 226.9 228.7 230.9 227.9 222.9

Net fee and commission income 84.4 87.4 83.3 89.2 84.9

Dividend income 0.1 1.8 0.2 1.0 0.2

Net trading and fair value result 23.4 22.3 25.6 34.2 29.3

Net result from equity method investments 0.0 0.1 -0.2 -0.3 -0.4

Rental income from investment properties & other operating leases 4.8 4.7 4.6 3.6 3.0

General administrative expenses -162 -163.2 -164.6 -181.8 -170.7

Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 0.1 52.6 0.0 -0.1 8.5

Net impairment loss on financial assets -17.0 -8.7 -13.6 -31.1 -6.8

Other operating result -14.6 -5.5 -2.0 -2.7 -13.7

Levies on banking activities 0.0 0.0 0.0 0.0 0.0

Pre-tax result from continuing operations 146.5 220.2 164.1 139.8 157.3

Taxes on income -29.5 -46.7 -32.9 -13.7 -31.2

Post-tax result from continuing operations 117.0 173.5 131.2 126.0 126.1

Post-tax result from discontinued operations 0.0 0.0 0.0 0.0 0.0

Net result for the period 117.0 173.5 131.2 126.0 126.1

Net result attributable to non-controlling interests 1.3 2.0 1.3 1.2 1.3

Net result attributable to owners of the parent 115.7 171.6 129.9 124.8 124.8

Operating income 339.6 345.0 344.4 355.5 339.9

Operating expenses -162 -163.2 -164.6 -181.8 -170.7

Operating result 178.0 181.8 179.8 173.7 169.2

Cost/income ratio 47.6% 47.3% 47.8% 51.1% 50.2%

Return on allocated capital 26.8% 41.5% 29.3% 27.5% 26.6%

Segment financial statements – Quarterly development

Segment Czech Republic - income statement (EUR m)

43

Page

Investor Relations contacts

44

Česká spořitelnaMiloš Novák

Tel: +420 956 712 410

E-Mail: [email protected]

Eva Čulíková

Tel: +420 956 712 011

E-mail: [email protected]

Josef Boček

Tel: +420 956 712 461

E-mail: [email protected]

Erste GroupThomas Sommerauer, Head of Group Investor Relations

Tel: +43 50100 17326


Peter Makray, Investor Relations Manager

Tel: +43 50100 16878


mailto:[email protected]





Q1 2017 consolidated results (unaudited, IFRS) · * Wholesale defined as Corporate and Group...

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