Page
Accelerated growth of the Czech economy and strong consumer
confidence leads to business growth in major CS segments
7 August 2015
Česká spořitelna -
H1 2015 consolidated results (unaudited, IFRS)
Page
Executive summary –
Czech economy shifts into higher gear
2
• Unexpectedly strong expansion of the Czech
economy at the beginning of 2015 (4.0% y/y in Q1
2015), paves the way for more than 3% GDP growth
for the whole 2015
• CPI climbing to 0.8% in June, confirming successful
transformation of ongoing economic expansion into
demand-inflation pressures
• EUR/CZK moving significantly closer to the 27 CNB‘s
floor, due to a large extent to increasing demand for
Czech exports from the EMU countries
• Following the recent upswing in the yields of German
10Y benchmarks encouraged by recent increase in
CPI within the EMU, the yields of the Czech 10Y
T-bonds have jumped from their historical lows at
0.37% reached in late April up to 1.26% at the end of
H1 2015; persisting ultra easy monetary policies are
pushing the yields of 2Y T-bonds to negative territory
• Recent escalation of situation in Greece not to have
direct impact on the Czech economy
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2009 2010 2011 2012 2013 2014 15
Contributions to GDP Growth (y/y)
Net Exports Inventories
Fixed Investment Government Final Consumption Exp.
Household Final Consumption Exp. GDP Growth (y/y, %)
0%
1%
2%
3%
1-14
2-14
3-14
4-14
5-14
6-14
8-14
9-14
10-1
4
11-1
4
12-1
4
1-15
2-15
4-15
5-15
6-15
10Y T-Bond YieldsCZGB10YR IndexGDBR10 IndexGTATS10Y Govt
Page
Executive summary – Core income increased by 2% in Q2 vs Q1 2015
3
• Net profit of Ceska sporitelna declined by almost 6% y/y to CZK 7.3 bn in H1 2015
• Negatively influenced by creation of provision for expected annual contribution to Resolution
Fund in 2015 (CZK 444 mil)
• Operating result down by 5% due to decline of operating income reflecting difficult
market conditions, core income (NII+net fee income) decreased y/y but in Q2
increased by 2% vs Q1 2015
• Net interest income still determined by low interest rate environment, contracted by almost 3%
y/y but in Q2 NII increased by 1% compared to Q1 2015
• Net fee income fell by almost 8% y/y. In Q2 increased by 2% vs Q1 2015 supported by strong
fee income from securities business
• Net trading and FV result grew by 20% y/y in H1 2015, affected by one off income of CZK 520
mil (methodology change of derivatives valuation - implementation of OIS* discounting in Q1
2015)
• Operating expenses remained flat compared to H1 2014 as a result of strict cost control
• Creation of credit risk provisions dropped by 27% y/y reflecting continuously improving
risk profile
*Overnight index swap
Page
Executive summary – Faster growing loans, significantly reduced risk costs
4
• Customer loans achieved the highest growth rate since December 2013, increased by
4% y/y
• Major growth drivers are private mortgages (+10%y/y), commercial real estate loans (+7%)
and loans to large corporates (+6%)
• Volume of new private mortgages expanded by 47% in Q2 vs Q1 2015; CS became market
leader in private mortgages generation in Q2 2015 (with market share of 27%)
• Risk costs sharply declined from 75 bps to 53 bps due to improved loan quality
in all segments
• Share of NPLs reduced y/y from 4.6% to 4.2%
• NPL coverage by credit risk provisions stable at strong 81%
• Growing demand for investment products mirrored in growing assets in pension funds
of CSPS (up by 13% y/y) and in domestic and foreign mutual funds (up by 33% y/y).
Assets under discretionary management up by 12% y/y
• CS Group is strongly capitalized, CET 1 capital ratio increased to 19.2%
(from 18.6% in June 2014)
• Strong financial and business position of CS acknowledged by rating agencies,
Standard & Poor´s and Moody´s confirmed all CS´s ratings
Page
• In June, at 19 of its branches, CS launched its unique My Healthy Finance (MHF)
service, in which it sees the future of banking advisory services. With the MHF service,
the bank is returning to its original mission – helping clients to save. With the MHF service,
it helps clients better manage their finance and, uniquely on the banking market, truly reduce
their regular monthly expenditures (e.g., on utilities or telephone)
• CS keeps improving its mortgage offering: in addition to attractive low interest
rates, it is newly presenting the possibility of mortgage refinancing without any
paperwork. Clients can reserve the advantageous interest rate for up to one year
free of charge.
• In May 2015, Investicni spolecnost Ceske sporitelny won
the Best Investment Company in Central and Eastern
Europe award for 2015 granted by The European
magazine
• CS’s clients increasingly use ATMs for cashless transactions: since January 2015, they have entered
nearly 1.8 million payments (+12% y/y) amounting to an aggregate of CZK 8.7 bn (+26% y/y). After cash
withdrawals and balance enquiries, payment orders are the third most frequently used service. Thanks to ATMs,
clients do not need to visit a branch even when they want to arrange or top up an overdraft facility, take out
travel insurance, or boost their credit card limit
• In May and June, Ceska sporitelna offered students over the age of 18 unlimited free withdrawals from
CS ATMs and outgoing payments for two years, with every newly opened FRESH account
Q2 2015 business highlights - Retail
5
Page
Q2 2015 business highlights – Corporates
• Ceska sporitelna provided short-term multicurrency working capital financing facility in the amount of
CZK 500 mil to T-Mobile Czech Republic a.s. The new financing followed listing of Erste Group as a relationship
bank of Deutsche Telekom Group
• Ceska sporitelna provided a loan in total amount of CZK 1 bn for general corporate purposes with exceptionally
favourable conditions to one of the largest electricity suppliers in the Czech Republic, Prazska energetika, a.s.
• Ceska sporitelna was the Lead Arranger and agent of a syndicated loan, which provided working capital
financing to Prazska plynarenska, a.s., one of the most significant companies in energy supply. Total client loan
limit reached CZK 4 bn
• Ceska sporitelna as a Mandated Lead Arranger participated in the long-term club credit facility in the total
amount of EUR 250 mil for the financing of a strategic investment of Duslo, a.s. into Ammonia 4
construction. The investment is focused on long-term sustainable corporate competitiveness and strengthening of
Duslo's significant position on the European fertilizer market. The financing is one of the largest transactions closed
on the Slovak market in 2015
• Ceska sporitelna provided financing in the amount of EUR 17.5 mil in form
of purchase of receivables to the company SKODA ELECTRIC a.s., where the final customer was the
transport company of Riga City Municipality, Rigas Satiksme, Latvia. Ceska sporitelna finances
receivables regarding delivery of 2nd lot of 25pieces of trolley-busses under 5-year frame export contract for the total
of 125 pieces of trolley-busses, whereby the 1st lot was also financed by Ceska sporitelna. The transaction was
insured by Exportni garancni a pojistovaci spolecnost a.s.
• Erste Group Bank was a Sole Lead Arranger of the private placements in the form of bearer bonds under
German law issued by Ceske drahy, a.s. Total issue size was EUR 115.2 mil, out of which amount of EUR 77.5
mil was represented by 20-year tranche with a coupon of 3% p.a. and EUR 37.7 mil by 7-year tranche with a coupon
of 1.89% p.a. The issuer took advantage of the low interest rate environment and favourable market conditions. With
20yr tranche, Ceske drahy issued its longest-dated debt issue ever
6
Page
Q2 2015 Good things matter (CSR)
• Ceska sporitelna won the Zlata koruna (Golden Crown) award for Corporate
Social Responsibility, newly granted in 2015. The winner was determined
on the basis of an exclusive survey that Zlata koruna commissioned from Ipsos
• The oldest socially responsible project supported by Ceska sporitelna is the Palata Home,
a facility providing care to visually impaired people. The bank was one of its founders 120 years ago,
and it stands by its side to this day. In April and May, Ceska sporitelna’s clients had the opportunity to help Palata in the
Your Card Too Can Help project. For each payment with a Ceska sporitelna card, the bank made a contribution to the
home for the purchase of special positioning care beds. In the year 2015, the contribution amounted to CZK 1,017,655;
in the previous year it also exceeded CZK 1 mil
• The Ceska sporitelna Foundation distributed CZK 1 mil among 15 successful non-profit projects. In the third
annual Grant Programme of the Ceska sporitelna Foundation, our clients could obtain up to CZK 70,000 for a non-profit
organisation with which they cooperate, which is CZK 20,000 more than last year. The bank also distributed a million
crowns in its grant programme for employees, who applied for finance for the non-profits in which they volunteer. The
Ceska sporitelna Foundation granted its Floccus award to organisations and individuals helping people who are
on the fringe of society
• The country’s oldest university, Charles University, and the country’s oldest bank, Ceska sporitelna, have
decided to join forces in enhancing education and science in the Czech Republic. The two institutions signed a
Memorandum of Partnership and Cooperation in which they expressed their interest in cooperating in the Elixir for
Schools project managed by the Depositum Bonum Foundation
• Ceska sporitelna is also the General Partner of the University of Hradec Kralove and also cooperates with universities in Brno,
Ostrava, Olomouc and Jindrichuv Hradec
7
Page
Presentation topics
8
• Česká spořitelna
• Financial performance analysis
• Macroeconomic developments
• Economic trends in details
• Banking market
• Czech banking market developments
• Česká spořitelna market shares
• Appendix
Page
1-6 14 1-6 15 Change
Net interest income 13,305 12,933 -2.8%
Net fee and commision income 5,555 5,115 -7.9%
Dividend income 46 57 23.9%
Net trading and fair value result 1,195 1,435 20.1%
Rental income from investment properties & other operating leases 412 401 -2.7%
General administrative expenses -9,045 -9,084 0.4%
Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 136 143 5.1%
Net impairment loss on financial assets not measured at fair value through profit or loss -1,917 -1,390 -27.5%
Other operating result 10 -577 -
Pre-tax result from continuing operations 9,697 9,033 -6.8%
Taxes on income -1,898 -1,713 -9.7%
Post-tax result from continuing operations 7,799 7,320 -6.1%
Net result for the period
Net result attributable to non-controlling interests 17 -1 -
Net result attributable to owners of the parent 7,782 7,321 -5.9%
Operating income 20,513 19,941 -2.8%
Operating expenses -9,045 -9,084 0.4%
Operating result 11,468 10,857 -5.3%
Cost/income ratio 44.1% 45.5%
Return on equity 15.0% 13.3%
Financial statements – Income statement (CZK mil)
9
Page
Financial statements – Balance sheet I (CZK mil)
Assets
10
Assets Dec 14 Jun 15 Change
Cash and cash balances 54,489 70,975 30.3%
Financial assets - held for trading 23,231 17,890 -23.0%
Derivatives 18,740 14,596 -22.1%
Other trading assets 4,491 3,294 -26.7%
Financial assets - designated at fair value through profit or loss 1,272 925 -27.3%
Financial assets - available-for-sale 99,289 94,087 -5.2%
Financial assets - held to maturity 151,513 161,158 6.4%
Loans and receivables to credit institutions 38,533 34,942 -9.3%
Loans and receivables to customers 500,039 510,765 2.1%
Derivatives - hedge accounting 878 823 -6.3%
Property and equipment 13,431 13,081 -2.6%
Investment properties 7,342 5,894 -19.7%
Intangible assets 3,593 3,413 -5.0%
Current tax assets 543 969 78.5%
Deferred tax assets 159 144 -9.4%
Assets held for sale 0 1,634 -
Other assets 8,277 6,799 -17.9%
Total assets 902,589 923,499 2.3%
*
*New item; sale of commercial real estate project
Page
Financial statements – Balance sheet II (CZK mil)
Liabilities
11
Liabilities and equity Dec 14 Jun 15 Change
Financial liabilities - held for trading 23,431 24,985 6.6%
Derivatives 20,654 16,013 -22.5%
Other trading liabilities 2,777 8,972 >100%
Financial liabilities designated at fair value through profit or loss 9,664 6,467 -33.1%
Deposits from customers 8,874 6,467 -27.1%
Debt securities issued 790 0 -100.0%
Financial liabilities measured at amortised cost 751,959 774,850 3.0%
Deposits from banks 54,570 65,124 19.3%
Deposits from customers 671,565 683,988 1.8%
Debt securities issued 23,043 22,811 -1.0%
Other financial liabilities 2,781 2,927 5.2%
Derivatives - hedge accounting 169 267 58.0%
Provisions 2,418 2,885 19.3%
Current tax liabilities 45 104 >100%
Deferred tax liabilities 474 310 -34.6%
Liabilities associated with assets held for sale 0 904 -
Other liabilities 6,646 9,636 45.0%
Total equity 107,783 103,091 -4.4%
Equity attributable to non-controlling interests -26 -27 3.8%
Equity attributable to owners of the parent 107,809 103,118 -4.4%
Total liabilities and equity 902,589 923,499 2.3%
*New item; liabilities connected with sale of commercial real estate project
*
Page
7,782
7,321-811
240 -39527 -580 185 18
1-6 14 Coreincome
Otherincome
Operatingexpenses
Risk costs Otherresult
Taxes onincome
Minorities 1-6 15
Operating income 0
-6%
3,6663,655
149 -872
-242340 618
-3 1
Q1 15 Coreincome
Otherincome
Operatingexpenses
Risk costs Otherresult
Taxes onincome
Minorities Q2 15
Operating income 0
0%
Financial performance – Executive summary
Core income increased in Q2 versus Q1
Q/Q net profit reconciliation (CZK mil) Y/Y net profit reconciliation (CZK mil)
12
• Net profit flat between Q1 and Q2 2015
• Core income (NII and net fee income) increased by 2% Q/Q.
• NII rose by CZK 75 mil mainly due to repricing of deposits
• Net fee income increased by CZK 74 mil due to higher income from card
business and from securities business
• Contraction of other income attributed to methodology change of
derivatives valuation (CZK -880 mil)
• Positive deviation in Other result caused by booking of provision
for expected annual contribution to Resolution Fund in Q1 2015
(CZK 444 mil) and by income from sale of bonds in AFS and HTM portfolio
in Q2 2015
• Booking of provision for expected annual contribution to Resolution
Fund in 2015 (CZK 444 mil in Other result) and lower operating income
led to decrease of net profit
• Decline of net fee income and NII (=core income) partly offset by
growing net trading and FV result (in other income)
• Net trading and FV result includes one-off gain from methodology change
of derivatives valuation (OIS discounting)
• Operating expenses remained flat
• Risk costs declined by 27% reflecting better risk profile across the
segments (details in the lending part)
P/L positive
P/L negative
* Includes Gains/losses from financial assets and liabilities not measured at fair value and Other operating result
* *
Page
Positive
Negative
902,589
923,499
3,900
10,554
10,017 -232 1,365 -4,693
Dec 14 Trading
liabilities
Bank
deposits
Customer
deposits
Debt
securities
Other
liabilities
Equity Jun 15
2%
902,589
923,49916,486 -1,245 -3,591
10,726 -180 -1,286
Dec 14 Cash andbalances
with CNB
Trading,financial
assets
Loans tobanks
Net loans Intangibles Other assets Jun 15
2%
Financial performance – Executive summary
Inflow of deposits continues
YTD total asset reconciliation (CZK mil) YTD total liability reconciliation (CZK mil)
13
• Cash and balances with CNB increased by 30% since YE 2014
as growing customer deposits were partially placed with CNB
• Net customer loans expanded by 2%
• Driven by private mortgages, commercial real estate loans
and loans to large corporates
• Total balance sheet raised by almost CZK 21 bn
• Deposits from banks went up by 19% (CZK 10.6 bn)
• Mainly driven by term deposits
• Customer deposits grew by more than CZK 10 bn (+1%) in 2015
• Deposits in parent bank representing 88% of group customer
deposits rose by 3%, driven by demand deposits, representing
already 91% of deposits
• Public sector deposits rose by 24% (excl. repo by 47%)
• Equity lowered by dividend payment
Increase
Decrease
Page
Financial performance – Executive summary
Strong solvency ratio and improving Loan/deposit ratio
Cost/income ratio
14
Loan/deposit ratio Number of branches
ROE Solvency ratio Number of employees (eop)
45.1%44.1%
45.5%
1-6 13 1-6 14 1-6 15
17.1%
15.0%13.3%
1-6 13 1-6 14 1-6 15
653644
633
Jun 13 Jun 14 Jun 15
10,621 10,474 10,545
Jun 13 Jun 14 Jun 15
72.7% 73.5% 74.0%
Jun 14 Dec 14 Jun 15
18.7% 18.5%19.2%
Jun 14 Dec 14 Jun 15
Page
Operating result –
Lower by 5% compared to H1 2014
• Operating result decreased as strong
growth of net trading and FV result did
not outweigh decline of net interest
income and net fee income
• NII still affected by low interest rate
environment
• Contraction in NFCI driven by declining
fees from account maintenance and from
lending
• Net trading and FV result affected
by one off income from methodology
change in valuation of derivatives (impact
CZK 520 mil); fuelled also by higher result
from customer derivatives
• Operating expenses remained flat
Operating result (CZK mil)
15
11,510 11,468 10,857
1-6 13 1-6 14 1-6 15
-5%
Operating income structure (CZK mil)
13,681 13,305 12,933
5,725 5,555 5,115
1,090 1,1951,435
475 458458
1-6 13 1-6 14 1-6 15
Net interest income Net fee and commision Net trading and fair value result Other
Page
13,681 13,305 12,933
1-6 13 1-6 14 1-6 15
-3%
Net interest income –
Effected by low interest rates environment
• Despite higher growth dynamics in lending
net interest income contracted as the interest
income generation is limited by zero market
interest rates
• Volume growth did not compensate for
continuously maturing higher yielding
assets and changes in balance sheet structure
• On the other hand, ongoing repricing of
deposits led to optimisation of costs of funds
• In Q2 NII increased by 1% compared to Q1
2015 driven mainly by further repricing of
deposits; supported by continuing lending
growth (e.g. private mortgages q/q up by
3.5%)
• Net interest margin decreased to 3.34% but
went up by 2 bps compared to Q1 2015
16
Net interest margin
Net interest income (CZK mil)
3.60% 3.55% 3.34%
0.95% 1.03%
0.55%
1-6 13 1-6 14 1-6 15
Net interest margin 5Y IRS H1 AVG
Page
5,725 5,5555,115
1-6 13 1-6 14 1-6 15
-8%
1,586 1,437 1,139
3,229 3,0642,873
378 562693
532 493411
1-6 13 1-6 14 1-6 15
Lending Payment transfers Securities transactions Other
Net fee and commission income –
Down by 8% y/y
• Decline of net fee income from current
account maintenance and from lending was
partly mitigated by growing income from
securities business
• Shift of clients´ interest from deposits to
investment products contributed to 23% y/y
growth of net fee income from securities
business
• Successful sale of investment products evidenced
in 33% growth of clients´ assets in mutual funds
• Lower fee income from current account
maintenance and payment transactions
reflected higher usage of advantageous
products and approaching new EU regulation
of card fees
• Lending fees suffered from fee holidays in
retail loans
17
Net fee and commission income structure (CZK mil)
Net fee and commission income (CZK mil)
*
* Including fees from account maintenance and payment cards fees
Page
4,685 4,311 4,368
3,6223,582 3,645
1,1541,152 1,071
1-6 13 1-6 14 1-6 15
Personnel expenses Other administrative expenses
Depreciation and amortisation
9,461 9,045 9,084
1-6 13 1-6 14 1-6 15
0%
Operating expenses –
Remained flat
• Operating expenses stayed flat
reflecting new cost optimization
initiatives
• Other administrative expenses (OAE)
up by 2% y/y
• Excluding contribution to Deposit insurance
fund OAE up by 1%
• Personnel expenses up by 1%
• Depreciation down by 7%
• Major decline in depreciation of tangible
assets (hardware and office equipment)
Operating expenses (CZK mil)
18
Operating expenses structure (CZK mil)
Page
Group capital adequacy* –
CET 1 ratio at strong 19.2%
• CS Group is strongly capitalized,
CET 1 capital adequacy increased by
60 bps y/y to 19.2% as a result of
higher Tier I capital
• Tier I capital increased by almost 10%
compared to June 2014 due to inclusion
of retained profit; supported by AFS
reserve
• Group solvency ratio (Tier I+Tier II)
equal to Tier I ratio (zero Tier II capital)
• All subordinated debt bought back due
to strong capital position of CS
19
Basel III Basel III Basel III
30/6/2014 31/12/2014 30/06/2015
Tier I capital 81,855 84,165 89,668
Tier I+II capital 82,015 84,361 89,676
Risk exposure to credit risk 371,485 389,721 396,821
Risk exposure to market risks 9,528 8,261 12,263
Risk exposure to operational risk 58,595 58,682 57,033
Total risk exposure 439,608 456,664 466,117
Capital Adequacy Tier I ratio 18.6% 18.4% 19.2%
Capital Adequacy Tier I+II ratio 18.7% 18.5% 19.2%
CS Group, CZK mil.
*Preliminary figures
Page
Balance sheet development –
Loan to deposit ratio increased to 74.0%
Net customer loans (CZK mil) Group customer deposits (CZK mil)
20
• Net customer loans increased by 4% since June 2014,
driven by private mortgages, corporate real estate loans
and loans to large corporates /details in the lending part of
the presentation/
• Group customer deposits picked up by 3% y/y mainly
due to continuous inflow of deposits from individuals
• Excluding repo operations the deposits would increase
slightly slower by 2% y/y
489,483 491,289 500,039 505,080 510,765
Jun 14 Sep 14 Dec 14 Mar 15 Jun 15
4%673,558 664,746 680,439 686,320 690,455
Jun 14 Sep 14 Dec 14 Mar 15 Jun 15
3%
Page
851.9 887.7 918.4
30/06/2014 31/12/2014 30/6/2015
Assetmanagement
Dom. andforeign mutualfunds
CSPS
SSCS
CS
CZK
bn
CS Group deposits – Market environment advantaging alternative deposit products • Customer deposits in parent bank increased
by nearly 7% y/y
• Growth came mainly from deposits of individuals
and public sector deposits (both added around +9% y/y)
• Growth of clients´ assets in pension company
carried on by 13% y/y
• Driven by persisting rise of clients´ funds
in the 3rd pillar (both in transformed fund and participants´
funds)
• Domestic and foreign mutual funds grew on fast
track; added 33% y/y
• Driven by persisting higher clients´ demand
for investment products stemming from low-rates
environment
• Assets under discretionary management increased
significantly by 12% y/y
• Asset management for private individuals more than
doubled in y/y comparison
• SSCS (building society) showed further outflow of
deposits
CS Group deposits (CZK bn)
21
8%
IFRS, in CZK bn 30/06/2014 31/12/2014 30/6/2015Change
(y/y)
CS - customer deposits 573.2 596.1 611.6 6.7%
SSCS - building society 89.0 81.4 77.6 -12.8%
CSPS - pension company 54.2 57.7 61.3 13.1%
Dom. and foreign mutual funds 75.9 86.4 100.9 33.0%
Asset management 59.6 66.0 67.0 12.4%
Total 851.9 887.7 918.4 7.8%
Page
Group loan portfolio – Summary
Mortgage driven growth continues, sharp drop in risk costs
22
• Loan portfolio in CS Group (gross) increased by 4% y/y
• Growth driven by private mortgages supported by continuing improvement of consumer
confidence, by commercial real estate loans and large corporates (blue chip names mainly
from energy sector and beverages)
• Risk costs decreased significantly from 75 bps to 53 bps y/y
• Better performance in all segments, but mainly supported by recoveries in corporate area
• Quality of loan portfolio as share of NPLs on total customer loans improved from 4.6%
to 4.2% y/y
• Provision to NPL coverage stable at strong 81%
• Total NPL coverage (including collateral) at 118.0%
Page
Group loan portfolio –
Group loans increased by 4% y/y
CS Group Loan Portfolio (gross) Loan Book by Group members as of June 2015
23
• CS Bank dominates the CS Group
• Continuing economic recovery in corporate and positive sentiment of housing market fuels growth in CS
bank and leasing companies
• Decline in Stavebni sporitelna CS caused by prevailing low interest rate environment unwinding advantages
of building savings loans compared to mortgages
in CZK mil, IFRS 30/06/2014 31/12/2014 30/06/2015Y/Y
Change
I. CS Bank 473,174 482,033 493,519 4.3%
II.1. Stavebni sporitelna CS 37,091 36,442 35,320 -4.8%
II.2. Leasing (sAL, EL) 13,568 13,711 14,060 3.6%
II.3. Factoring CS 2,085 2,134 1,813 -13.0%
II.4. Other subsidiaries 2,022 2,431 2,574 27.3%
III. Consolidation items -19,853 -18,563 -18,800 -5.3%
Total Loans (consolidated) 508,087 518,188 528,486 4.0%
Bank90.2%
Stavebni sporitelna
6.5%
Leasing subs.2.6%
Factoring0.3%
Others0.5%
Page
Bank loan portfolio –
Private mortgages added 10% y/y
Loan portfolio development - CS Bank Loan portfolio by customer segments
as of June 2015
24
• Loans to retail rose by 4% y/y
• Growth driven by mortgages (+10%) supported
by present low interest rates and strong consumer
confidence
• Loans to corporate added 4% y/y
• Growth driven by Real estate with key projects in
logistics and shopping malls
• Large corporates of blue chip names in energy
sector and beverages
Large corporates
8.0%
SME33.9%
Consumer, private credit
cards, overdrafts and home equity
13.3%
Mortgage & real est.41.9%
Others 2.8%
267.1275.9 278.5 284.0 290.8
193.6 197.0 194.7 198.0 202.7
4% 5% 3%2%
4%
-10%
10%
30%
50%
0
50
100
150
200
250
300
Jun 13 Dec 13 Jun 14 Dec 14 Jun 15
in C
ZK
bn
Retail loans Corporate loans Total loan growth (y/y)
Page
Bank loan portfolio –
Growing mortgage book further strengthens the risk profile
Private mortgages development Consumer lending development*
25
• Private mortgages rose to CZK 175.8 bn
(+10% y/y)
• Healthy growth with low risk costs continues
• In Q2 2015 volume of new private mortgages rose
by 47 % q/q
• Whole portfolio: average weighted maturity at 23.2
years, residual maturity at 19 years; LTV ratio at
comfortable 64.5%
• Consumer lending* at CZK 64.6 bn (-5% y/y)
• Higher new business in fix term loans held back by
overdrafts and credit cards
• Nevertheless, consumer lending excluding
overdrafts and credit cards stabilised vis-à-vis Dec
2014
*Consumer lending here includes also home equity loans, credit cards
and overdrafts. Social loans are excluded.
146.0155.1 160.3 167.2
175.8
10%11%
10% 8%10%
-5%
5%
15%
25%
020406080
100120140160180200
Jun 13 Dec 13 Jun 14 Dec 14 Jun 15
in C
ZK
bn
Private Mortgages Private Mortgages growth (y/y)
70.4 69.7 67.7 66.2 64.6
-5% -4% -4% -5% -5%
-20%
0%
20%
40%
60%
0
20
40
60
80
100
Jun 13 Dec 13 Jun 14 Dec 14 Jun 15
in C
ZK
bn
Consumer Lending Consumer Lending growth (y/y)
Page
Group asset quality Gradual improvements of portfolio quality with sharply declining risk costs
NPL ratio and NPL coverage Risk cost development
26
• Group share of NPL declined to 4.2% y/y
• Portfolio quality further improved in retail as well
as corporate
• Provision coverage at strong 81%
• Total coverage (provisions and collateral
to NPL) at 118.0%
• Annualized group risk* costs declined to 53 bps
• Following positive development especially in real estate
(upgrades and recoveries)
• Lower risk costs observed also in other major segments
(private mortgages, SMEs, micro enterprises)
* Since 2013 on-balance risk costs only
5.2%4.6% 4.6% 4.4% 4.2%
73%78% 79% 80% 81%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Jun 13 Dec 13 Jun 14 Dec 14 Jun 15
Group NPLs Risk Provisions / NPLs
81
67
75 72
53
-13% -11% -7% 7%
-30%
-100%
0%
100%
200%
300%
0
10
20
30
40
50
60
70
80
90
Jun 13 Dec 13 Jun 14 Dec 14 Jun 15
in b
ps
Group Y/Y change
Page
Presentation topics
27
• Česká spořitelna
• Segment financial performance analysis
• Macroeconomic developments
• Economic trends in details
• Banking market
• Czech banking market developments
• Česká spořitelna market shares
• Appendix
Page
Macroeconomic developments –
GDP growth in Q1 15 beating all estimates
Real GDP growth y/y Components of GDP
28
• Czech GDP growth skyrocketed by 2.5% q/q (4.0% y/y) in Q1
2015, reaching its highest-ever level
• Although the acceleration of economic growth in q/q terms was
significantly boosted by a one-off increase in tax collection due to
legislative changes in the area of excise taxes on tobacco
products, the 1.3% q/q GDP increase after adjusting for taxes on
these products confirms the surprisingly strong expansion of the
Czech economy (higher utilization of EU funds serving as one of
the most supportive elements)
• Similarly to previous quarters, the main contributions to the Czech GDP
growth in Q1 2015 (y/y) came from capital formation (contributing by 2.5 p.p.
to the y/y growth, due mainly to an increase in inventories) and private
consumption (adding 1.4 p.p. thanks to 2.9% y/y growth), boosted by
accelerating growth in real wages and declining unemployment
• Net exports subtracted -0.3 p.p. from the y/y GDP growth in Q1 2015
• Manufacturing sector supported to a large extent by continuing expansion in
the automotive industry and remained the most significant positive
contributor to the GDP growth on the supply side (adding 1.7 p.p.)
-0.5%
2.0%
3.7%
2.2% 2.4%
2013 2014 2015e 2016e 2017e
0.7%1.5%
2.9% 3.0% 2.6%
-2.8%
2.0%
6.1%
-0.4%
1.2%
2013 2014 2015e 2016e 2017e
Private consumption growth
Fixed capital formation growth
Page
Macroeconomic developments –
CPI bottoming out in H1 2015
Unemployment and inflation General government debt and government balance
29
• CPI climbed to 0.8% at the end of H1 2015, reaching the highest level
since December 2013
• General unemployment rate remaining close to lowest ever levels (6.0%
in May)
• Unexpectedly strong expansion of the Czech economy at the beginning
of 2015, suggests that central government’s cash-flow-based budget
deficit will end up fairly below the level of CZK 100 bn, approved by the
Czech government for the year 2015
• The MoF‘s excessive cash buffer (roughly CZK 200 bn as of the end of
H1 2015) will be sufficient to fully cover the central government deficit in
2015 and keep the central government debt at a stable level
8.2%7.5%
6.7% 6.5% 6.5%
1.4%0.4% 0.7%
1.6%2.1%
2013 2014 2015e 2016e 2017e
Unemployment rate (eop)
Consumer price inflation (ave)
45.7% 42.6% 41.1% 41.2% 41.9%
-1.3% -2.0% -2.0% -1.4% -1.3%
2013 2014 2015e 2016e 2017e
Public debt (share of GDP)
General government balance (share of GDP)
Page
Macroeconomic developments –
Risk of deflation warded-off, CZK/EUR foreseen to remain close to 27 • CPI increased to 0.8% at the end of H1 2015, as adjusted
(core) inflation reflecting successful transformation of
ongoing domestic economic expansion into inflation
pressures has served as its main driver
• Recent upswing in headline CPI significantly lowers the
probability that the CNB will have to proceed with further
monetary easing (most probably via further CZK
weakening) in the coming months
• Moreover, headline CPI heading closer to 2% in H1 2016
may force the CNB to contemplate abandoning of its FX
intervention commitment (to keep the EUR/CZK close to
27) in early H2 2016
• Surging Czech current account surplus represents one of
the key fundamental factors standing behind the recent
EUR/CZK decline close to the 27 level
• In order to avoid a loss of credibility related to the risk of a
sudden EUR/CZK decrease below the 27 floor, the CNB
stressed that it is determined to prevent excessive firming
of CZK below the 27 threshold, instead of committing
itself to a full-fledged defence
• EUR/CZK is expected to hover close to 27 in H2 2015
30
Development of CPI and its structure
-3%
-2%
-1%
0%
1%
2%
3%
4%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2012 2013 2014 2015
Fuel prices
Adjusted inflation excluding fuels and food
Food prices (including alcoholic beverages and tobacco)
Indirect taxes in nonregulated prices
Regulated prices
Annual consumer price inflation (in per cent)
Page
Presentation topics
31
• Česká spořitelna
• Segment financial performance analysis
• Macroeconomic developments
• Economic trends in details
• Banking market
• Czech banking market developments
• Česká spořitelna market shares
• Appendix
Page
• The Czech banking sector is resilient to potential
adverse shocks, thanks to its high capital adequacy
ratio (Tier 1 at 18.0% in 3/2015) and sufficient liquidity
• This is confirmed by CNB stress tests (6/2015)
• Rating agency Moody's changed its outlook for the
Czech banking system to stable from negative
Czech banking market –
Sufficiently capitalized and resilient
Capital ratios of Czech banks* (%) Non-performing loans ratios (%)
• The shares of non-performing loans (NPL)
in residential sectors have further declined
with improving economic situation
• High NPL in non-residential loans due to one-off
developments in non-commercial financing
32
* Compliant with CNB segmentation of banks
17.1 17.419.9
21.6
13.215.1
0
5
10
15
20
25
Q1 2014 Q1 2015 Q1 2014 Q1 2015 Q1 2014 Q1 2015
Large banks Medium-sized banks banks Small banks
T1 Capital ratio Total capital ratio
5.4
7.2
4.9
14.3
4.76.1
4.4
14.9
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Total Non-financialcorporations
Households
Residents Non-residents
31/05/2014 31/05/2015
Page
Czech banking market –
Continuing growth in loans and deposits
Retail and corporate loans* (Y/Y growth) Retail and corporate deposits* (Y/Y growth)
33
• As of 30/6/2015 growth of total loans slightly bellow 6% y/y,
thanks to strong growth in housing loans (7% y/y)
• In 2015, CS expects average growth rate of client loans of
around 5%. Retail loans will keep their 2014 dynamics, with
housing loans growing 6% and consumer loans 2% y/y
• Total deposits grew by 2% y/y as of 30/6/2015 driven by strong
increase of retail and corporate deposits, while public sector
deposits were significantly reduced (-25% y/y)
• In 2015, CS expects growth rate of total deposits of 2-3%,
since uncertainty about public sector deposits continues
* 2014 growth rates of both total loans and total deposits were influenced by FX interventions of CNB
4.7%4.0%
4.4%
6.7%
0.2%0.9%
3.0%
4.8%
30/9/14 31/12/14 31/3/15 30/6/15
Retail loans Corporate loans
4.8%
6.1% 5.7% 5.3%6.4%
8.0%
10.0%10.6%
30/9/14 31/12/14 31/3/15 30/6/15
Retail deposits
Corporate deposits
Page
Czech banking market –
Around 90% of loans and deposits denominated in local currency
Customer loans (June 2015) Customer deposits (June 2015)
34
58.4%
32.5%
0.1% 9.0%
LC retail loans LC corporate loans
FX retail loans FX corporate loans
67.6%
21.9%
3.0%7.6%
LC Retail deposits LC Corporate deposits
FX Retail deposits FX Corporate deposits
Page
Banking market –
Market shares of CS (June 2015)
Asset side Liability side
35
• Market leadership in:
• Total loans (market share of 19%)
• Number of customers (5.0 mil)
• Total mortgages (market share of 27%)
• Consumer loans incl. credit cards (market share of 30%)
• No. 2 in:
• Total assets (market share 18%)
• Market leadership in:
• Total deposits (market share of 20%)
• 25% in retail deposits, 12% in corporate deposits
• No. 2 in mutual funds with market share of 26%*
18% 18% 18% 18% 18%
24% 23% 23% 23% 23%
19% 19% 19% 19% 19%
Jun 14 Sep 14 Dec 14 Mar 15 Jun 15
Total assets Retail loans Corporate loans
26% 26% 26% 26% 26%
11% 11% 11% 12% 12%
Jun 14 Sep 14 Dec 14 Mar 15 Jun 15
Retail deposits Corporate deposits
*As of 31/3/2015
Page
Presentation topics
36
• Česká spořitelna
• Segment financial performance analysis
• Macroeconomic developments
• Economic trends in details
• Banking market
• Czech banking market developments
• Česká spořitelna market shares
• Appendix
Page
37
Structure of CS Group loan portfolio (gross) –
Group customer loans
Outstand. Share Outstand. Share Outstand. Share Outstand. Rate Outstand. Rate
Retail 278,455 54.8% 284,029 54.8% 290,802 55.0% 6,773 2.4% 12,347 4.4%
Private overdrafts 5,622 1.1% 5,188 1.0% 4,568 0.9% -620 -12.0% -1,054 -18.7%
Private credit cards 4,201 0.8% 4,184 0.8% 3,724 0.7% -460 -11.0% -478 -11.4%
Consumer lending 52,148 10.3% 51,647 10.0% 51,681 9.8% 33 0.1% -468 -0.9%
Private social 1,270 0.2% 1,159 0.2% 1,051 0.2% -109 -9.4% -219 -17.3%
Home equity mortgages 5,756 1.1% 5,178 1.0% 4,654 0.9% -524 -10.1% -1,102 -19.1%
Private mortgages 160,328 31.6% 167,160 32.3% 175,818 33.3% 8,658 5.2% 15,490 9.7%
Micro and Small Enterprises 39,633 7.8% 39,755 7.7% 39,770 7.5% 15 0.0% 137 0.3%
Municipalities 9,496 1.9% 9,758 1.9% 9,537 1.8% -221 -2.3% 41 0.4%
Corporate 194,719 38.3% 198,004 38.2% 202,717 38.4% 4,713 2.4% 7,998 4.1%
Large corporate 35,671 7.0% 35,448 6.8% 37,705 7.1% 2,257 6.4% 2,034 5.7%
SME 126,761 24.9% 123,473 23.8% 126,848 24.0% 3,375 2.7% 87 0.1%
Real estate 32,101 6.3% 36,459 7.0% 34,497 6.5% -1,962 -5.4% 2,396 7.5%
ALM/Other 186 0.0% 2,623 0.5% 3,666 0.7% 1,043 39.8% 3,481 >100%
BANK: LOANS TO CUSTOMERS 473,174 93.1% 482,033 93.0% 493,519 93.4% 11,486 2.4% 20,346 4.3%
SUBSIDIARIES 54,766 10.8% 54,718 10.6% 53,767 10.2% -951 -1.7% -999 -1.8%
CONSOLIDATION ITEMS -19,853 -3.9% -18,563 -3.6% -18,800 -3.6% -237 1.3% 1,053 -5.3%
GROUP: LOANS TO CUSTOMERS 508,087 100.0% 518,188 100.0% 528,486 100.0% 10,298 2.0% 20,399 4.0%
in CZK mil, IFRS30/06/2014 31/12/2014 30/06/2015 YTD change YTY change
Page
Ratings of Ceska sporitelna
Status as of 31 July 2015
38
Fitch A- F2 a- 2 stable 20/05/2015
Moody's A2 Prime - 1 stable 17/03/2015
Standard & Poor's A- A-2 negative 09/06/2015
Latest
actionsRating Agency Long-term Short-term Viability Support Outlook
• Latest rating actions
• Rating agency Standard & Poor´s confirmed all CS ratings on 9 June 2015
• Fitch downgraded LT and ST ratings of CS on 20 May after downgrade of parent company Erste Group
Bank as government support has been taken out
• Moody´s revised the outlook for LT rating of CS from negative to stable on 17 March 2015
Page
Macroeconomic figures –
Historical and forecasted macroeconomic data
39
2011 2012 2013 2014 2015e
Population (ave, m) 10.5 10.5 10.5 10.5 10.5
GDP/capita (EUR thsd) 15.6 15.3 15.0 14.7 15.0
Real GDP growth 2.0 -0.8 -0.5 2.0 3.7
Consumer price inflation (ave) 1.9 3.3 1.4 0.4 0.7
Unemployment rate (eop) 6.8 7.4 8.2 7.5 6.7
Current account balance (share of GDP) -2.1 -1.6 -0.5 0.6 1.4
General government balance (share of GDP) -2.9 -4.0 -1.3 -2.0 -2.0
Public debt (share of GDP) 41.0 45.5 45.7 42.6 41.1
Short term interest rate (3 months, eop) 1.2 0.5 0.4 0.3 0.3
EUR FX rate (eop) 25.56 25.57 27.50 27.90 27.30
Page
Financial statements – Quarterly development (CZK mil)
QoQ increase in NII and NFCI
40
Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q/Q %
Net interest income 6,595 6,641 6,727 6,429 6,504 1.2%
Net fee and commision income 2,768 2,697 3,054 2,521 2,595 2.9%
Dividend income 36 3 1 1 57 >100%
Net trading and fair value result 606 527 566 1,190 245 -79.4%
Rental income from investment properties & other operating leases 193 208 203 191 209 9.4%
General administrative expenses -4,526 -4,553 -4,636 -4,421 -4,663 5.5%
Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 21 2 8 9 134 >100%
Net impairment loss on financial assets not measured at fair value through profit or loss -941 -983 -829 -865 -525 -39.3%
Other operating result -55 -294 -319 -535 -42 -92.1%
Pre-tax result from continuing operations 4,696 4,249 4,774 4,521 4,512 -0.2%
Taxes on income -905 -801 -951 -855 -858 0.4%
Post-tax result from continuing operations 3,791 3,447 3,824 3,666 3,654 -0.3%
Net result for the period
Net result attributable to non-controlling interests 9 4 -22 0 -1 -
Net result attributable to owners of the parent 3,782 3,443 3,846 3,666 3,655 -0.3%
Operating income 10,197 10,076 10,550 10,332 9,609 -7.0%
Operating expenses -4,526 -4,553 -4,636 -4,421 -4,663 5.5%
Operating result 5,671 5,522 5,915 5,910 4,947 -16.3%
Page
Segment financial statements –
Segment Czech Republic - income statement (EUR mil)
41
1-6 14 1-6 15 Change
Net interest income 462.7 450.9 -2.5%
Net fee and commission income 202.4 186.0 -8.1%
Dividend income 1.7 2.1 na
Net trading and fair value result 43.5 52.2 19.8%
Rental income from investment properties & other operating leases 15.0 14.6 -3.0%
General administrative expenses -329.6 -330.3 0.2%
Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 5.0 5.2 4.8%
Net impairment loss on financial assets not measured at fair value through profit or loss -69.9 -50.5 -27.7%
Other operating result 0.3 -21.0 -
Pre-tax result from continuing operations 331.2 309.1 -6.7%
Taxes on income -64.9 -57.7 -11.1%
Post-tax result from continuing operations 266.2 251.4 -5.6%
Net result for the period 266.2 251.4 -5.6%
Net result attributable to non-controlling interests 2.9 2.4 -15.3%
Net result attributable to owners of the parent 263.4 249.0 -5.5%
Operating income 725.3 705.8 -2.7%
Operating expenses -329.6 -330.3 0.2%
Operating result 395.7 375.5 -5.1%
Cost/income ratio 45.4% 46.8%
Return on allocated capital 36.7% 36.3%
Page
Segment financial statements – Quarterly development
Segment Czech Republic - income statement (EUR mil)
42
Q2 14 Q3 14 Q4 14 Q1 15 Q2 15
Net interest income 229.3 230.2 231.1 222.9 228.0
Net fee and commission income 100.8 97.6 110.6 91.3 94.7
Dividend income 1.3 0.1 0.0 0.0 2.1
Net trading and fair value result 22.1 19.1 20.5 43.1 9.1
Rental income from investment properties & other operating leases 7.0 7.5 7.3 6.9 7.6
General administrative expenses -165 -164.8 -167.8 -160.0 -170.2
Gains/losses from financial assets and liabilities not measured at fair value through profit or loss, net 0.8 0.1 0.3 0.3 4.9
Net impairment loss on financial assets not measured at fair value through profit or loss -34.3 -35.6 -30.0 -31.3 -19.2
Other operating result -2.0 -10.7 -11.6 -19.4 -1.7
Pre-tax result from continuing operations 160.1 143.5 160.5 153.8 155.3
Taxes on income -30.9 -27.1 -32.0 -28.6 -29.1
Post-tax result from continuing operations 129.2 116.4 128.4 125.2 126.2
Net result for the period 129.2 116.4 128.4 125.2 126.2
Net result attributable to non-controlling interests 2.1 0.9 1.1 1.1 1.3
Net result attributable to owners of the parent 127.2 115.5 127.4 124.0 124.9
Operating income 360.5 354.5 369.6 364.2 341.5
Operating expenses -165 -164.8 -167.8 -160.0 -170.2
Operating result 195.6 189.7 201.8 204.2 171.3
Cost/income ratio 45.7% 46.5% 45.4% 43.9% 49.8%
Return on allocated capital 35.6% 32.6% 37.1% 36.4% 36.1%
Page
Investor Relations contacts
43
Česká spořitelna Milos Novak
Tel: +420 956 712 410
E-Mail: [email protected]
Eva Culikova
Tel: +420 956 712 011
E-mail: [email protected]
Josef Bocek
Tel: +420 956 712 461
E-mail: [email protected]
Erste Group Thomas Sommerauer, Head of Group Investor Relations
Tel: +43 50100 17326
E-Mail: [email protected]
Peter Makray, Investor Relations Manager
Tel: +43 50100 16878
E-Mail: [email protected]