> erste bank - strategy and execution · 5 morgan stanley pan european banks conference london,...

> Erste Bank- Strategy and execution

> Morgan Stanley - Pan European Banks ConferenceLondon, 21–24 March 2006

> Andreas Treichl, CEO

2

Morgan Stanley Pan European Banks ConferenceLondon, 21-24 March 2006

> Presentation topics

1. Consistent strategy

2. Strong execution track record

3. Growth drivers

4. Financial targets

5. Appendix

3


> Consistent strategy since 1997 IPO

Value creation for shareholders

Success factors of the “Erste Bank model”

» Exploiting corebusiness potentials

» Growth drivers:Loans & wealthmanagement

» Targeting a coherenthome market of 70mpeople

» Developing group-wideinitiatives to gain fromsynergies

Business focus:Retail banking

Geographic focus:Central and Eastern

Europe

Efficiency focus:New Group

Architecture

4





3. Growth drivers


5. Appendix

5


Turning around the Austrian Retail & Mortgage business

2003

264.1

653.0

175.4

280.4634.8

200.6

314.5

624.1

240.5

Commissionincome (EUR m)

Administrativeexpenses (EUR m)

2003 2004 2005

ROE 2.7% 5.0% 10.1%

CIR 78.8% 76.0% 72.2%CAGR: +9.1%

> Business focus - Exploiting core business potentials

20052004 2003 20052004

CAGR: -2.2%

Operating result(EUR m)

Net profit(EUR m)

19.841.1

93.2

2003 20052004 2003 20052004

CAGR: +17.1%

CAGR: +>100%

» Focusing on….…. profitability…. strict cost management.… growth opportunities

(wealth management,mortgage lending etc)

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> We managed transformational acquisitions…

….through stringent execution of our transition model» Complete restructuring within 18 months» Instant upgrade of key functions to Erste Bank Group standards» Keep local character to maximize market potential

2000 2005 2001 2005Net profit (m EUR) 1.2 � 306.0 26.5 � 92.5ROE 0.2% � 22.3% 10.1% � 20.7%

Cost/income ratio 70.7% � 56.9% 78.5% � 55.4%

Total assets (EUR bn) 12.5 � 22.5 4.6 � 6.8

Clients (m) 3.5 � 5.3 1.8 � 2.5Branches 804 � 646 542 � 302

Employees 15,742 � 10,755 6,275 � 4,836

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> Our group has developed rapidly

Cost/income ratio ROE

Net profit (in EUR m) Customers (m)

2.6 2.7

6.1

9.110.6

11.9 11.9

15.2

FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05*

133 165192 223 255

353

521

712

FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05

*incl. BCR

11.2%

13.0%14.3% 14.5%

15.3%

17.0%

19.0%

16.6%


71.8%70.1%

67.9%67.1%

67.9%

64.1%

61.8%

64.2%


8


> Geographic focus – Central and Eastern Europe

302Branches32%; #1Retail deposits2.5m; #1Customers


390Branches30%; #1Retail deposits2.8m(1); #1Customers


711Branches2.0mCustomers

276(2)Branches24%; #2Retail deposits0.8mCustomers


66Branches2%Retail deposits0.3mCustomers

Note: Market share based on number of clients and retail deposits as per end of 20051) Approximately 5 million account holders, translating into an estimated 2.8 million customers2) Including branches of majority owned regional savings banks

Erste Bank customers (million)

Population in extendedhome market (million)

+22%

Erste Bank branches

+14%

+48%46

68

Erste BankGroup

With BCR

12.515.2

Erste BankGroup

With BCR

2,2832,673

Erste BankGroup

With BCR

9


After closing of the acquisitionin Q2 2006

Pre closingDec. 2005 & Q1 2006

» Transition ConsultancyCommittee (“TCC”)consisting of 10 EB seniormanagers has full accessto BCR since January 2006

» Two TCC team membersattend meetings of theExecutive Board

» TCC team is assisted by 14Romanian professionalswho have been trained atErste Bank since summer2004

» Transition programme consisting of more than 20 teamscovering all business functions of BCR will be headedby Erste Bank CEO

» Full focus on realising BCR‘s revenue potential

» Centralisation of back office functions

» Optimisation of branch network and workforce

» New BCR management team headed by present CEOwill be in place by September 2006

» Update on transition programme will be given inQ3 2006

Integration procedures started with signing of SPA

> BCR - expanding our future growth potential

10


2004 20092004 2009

> EB has defined clear financial targets for BCR

Cost/income ratio Return on equity after tax

(1) Based on a Tier 1 ratio of 9%(2) RoI defined as 62% of BCR net income divided by purchase price for the 62% stake in BCR; RoI calculation excludes funding costs

54%<48%

(1)

17%

>35%

Erste Bank targets a return on investment (RoI)of around 10% for BCR by 2009(2)

11


NGA initiatives create synergies across the group

Targets announced at Erste Bank CMD in September 2005

New

reve

nues

Cos

t re

duct

ion

> Efficiency focus - New Group Architecture (NGA)

~ EUR +210m~ EUR +53m

EUR +39m

2008E2005Group Large Corporates

NGA projects

Group Cards Synergy Project

Retail 2008Sale of structured investment products EUR +14m

Information Technology

Group ProcurementProcurement cost savings

Positive pretax P&L effect:

EUR +45m

EUR +25m

EUR +55m

EUR +40m

EUR +45m

» Group Performance Model is the strategic backbone of the NGA programme» Almost equal contribution to profit growth from revenue enhancement and efficiency improvement

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3. Growth drivers


5. Appendix

13


> Growth drivers – Loan growth

Quality growth in Central Europe» Attractive margins» Good repayment record» Benign risk environment

Strong product demand» Mortgages and home improvement loans» Consumer finance» Car leasing

Product penetration still very low» Loan stock/capita shows significant

potential» Developed CEE: gathering momentum» Early stage CEE: just starting

Long growth path ahead» In early stage CEE markets, eg Romania,

Serbia and Ukraine as well as in developedCEE economies

As per end of 2005 - Source: Local central banks. Austria: domestic loans only.

Retail loan growth in EB CEE subsidiaries (EUR bn)

2.0

3.3

4.9

6.9

9.8

49%

2001 2002 2003 2004 2005

Customer loans/capita in CEE (EUR 1,000)

30.6

4.7 4.6 4.1 2.70.5 0.8

Austria Croatia Hungary Czech R Slovakia Serbia Romania

Developingtransformation

economies Emergingtransformation

economies

41% 42%

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> Growth drivers – Wealth management

Fund management» FUM/capita indicates huge opportunity» Strong growth in CE, but from low base» Markets will reach scale in the medium

term

Life insurance» Same scenario as with fund management» Premiums/capita show gap to EU levels» Growth is steadier, tied to state regulations

Leading market positions» 24.3% FUM share in Central Europe» 18.0% FUM share in Austria» Life shares range from 2% - 15%

Beneficiary from catch-up process» Leveraging existing client base» Launch of new, more sophisticated

products» Increased fee contribution

FUM/Capita in Central Europe (in EUR) *

757 743 606380

4

18,921

11,709

Czech R Hungary Slovakia Croatia Romania Austria Germany

2001 2005

EB fund management market shares

6.6%

25.0%

37.3%

17.3%

24.5%

35.8%

18.0%

24.3%

Czech R Croatia CEE Total Austria

2004 2005

1998

27.9%28.8%

Slovakia

9.5%10.2%

Hungary

15





3. Growth drivers


5. Appendix

16


New TargetOld Target

Net profit growth

Return on equity(1)

15% p.a. averagefor 2005-2008

57% in 2008

More than 20% p.a. averagefor 2005-2009

Below 55% in 2009

The acquisition of BCR significantly increases Erste Bank’slong-term earnings growth potential

(1) Based on a Tier 1 ratio of at least 7%

Cost/income ratio

20% in 2008 18-20% in 2009

> Erste Bank Group’s new targets

17





3. Growth drivers


5. Appendix

18


> Group income statement (IFRS)

Strong operating performance continues to drive net profit growth

EUR m FY 2005 FY 2004 % ChangeNet interest income 2,794.2 2,660.3 5.0Risk provisions for loans and advances (421.6) (406.2) 3.8Net commission income 1,256.8 1,135.4 10.7Net trading result 241.7 216.5 11.6General administrative expenses (2,676.9) (2,594.9) 3.2Result from insurance business 36.7 36.8 (0.3)Other operating result (16.1) (51.3) (68.6)Pre-tax profit 1,214.8 996.6 21.9Taxes on income (300.0) (277.9) 8.0Minority interests (203.1) (197.9) 2.6Net profit after minority interests 711.7 520.8 36.7

Operating income 4,329.4 4,049.0 6.9Operating expenses (2,676.9) (2,594.9) 3.2Operating result 1,652.5 1,454.1 13.6

Cost/Income ratio 61.8% 64.1%ROE 19.0% 17.0%

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> Group balance sheet (IFRS)

Assets – CE loan business drives asset growth

EUR m 31-Dec-05 31-Dec-04 % ChangeCash and balances with central banks 2,728 2,723 0.2Loans and advances to credit institutions 16,858 15,684 7.5Loans and advances to customers 80,419 72,843 10.4Risk provisions for loans and advances (2,817) (2,804) 0.5Trading assets 5,426 4,628 17.2AfS and assets through profit and loss 18,644 15,967 16.8Financial investments 23,611 21,926 7.7Intangible assets 1,911 1,823 4.8Tangible assets 1,688 1,723 (2.0)Other assets 4,192 5,299 (20.9)Total assets 152,660 139,812 9.2

Risk weighted assets 75,078 65,384 14.8

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EUR m 31-Dec-05 31-Dec-04 % ChangeAmounts owed to credit institutions 33,911 28,551 18.8Amounts owed to customers 72,793 68,213 6.7Debts evidenced by certificates 21,291 19,710 8.0Provisions 8,635 7,500 15.1Other liabilities 5,279 6,179 (14.6)Subordinated capital 4,290 3,706 15.8Total equity 6,461 5,953 8.5thereof: shareholders' equity 4,129 3,424 20.6thereof: minority interests 2,332 2,529 (7.8)

Total Liabilities 152,660 139,812 9.2

Tier 1 ratio 6.8% 6.7%Solvency ratio 11.0% 10.7%

> Group balance sheet (IFRS)

Liabilities – moderate growth in retail funding

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> Current shareholder structure

By Investor Type

Austria57.9%

Continental Europe6.4%

UK & Ireland17.2%

North America17.6%

Others0.9%

By Region

Total numbers of shares: 308,032,560*

* February 2006

Private investors7.2%

Savings banks6.9%

30.5%

Employees1.5%

Other institutionalinvestors43.8% Free Float

64.5%

Austria Verein5.0%Capital Research

& Management5.1%

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> Disclaimer

THE INFORMATION CONTAINED IN THIS DOCUMENT HAS NOT BEEN INDEPENDENTLY VERIFIEDAND NO REPRESENTATION OR WARRANTY EXPRESSED OR IMPLIED IS MADE AS TO, AND NORELIANCE SHOULD BE PLACED ON, THE FAIRNESS, ACCURACY, COMPLETENESS ORCORRECTNESS OF THS INFORMATION OR OPINIONS CONTAINED HEREIN.

CERTAIN OF THE STATEMENTS CONTAINED IN THIS DOCUMENT MY 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 OR EVENTSTO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN SUCH STATEMENTS.

NONE OF ERSTE BANK OR ANY OF ITS AFFILIATES, ADVISORS OR REPRESENTATIVES SHALL HAVEANY LIABILITY WHATSOEVER (IN NEGLIGENCE OR OTHERWISE) FOR ANY LOSS HOWSOEVERARISING FROM ANY USE OF THIS DOCUMENT OR ITS CONTENT OR OTHERWISE ARISING INCONNECTION 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 BASIS OFOR BE RELIED UPON IN CONNECTION WITH ANY CONTRACT OR COMMITMENT WHATSOEVER.

Cautionary note regarding forward-looking statements

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Fax +43 (0)5 0100-13112E-mail: [email protected]: www.erstebank.com

Reuters: ERST.VI Bloomberg: EBS AVDatastream: O:ERS ISIN: AT0000652011

* The new EB shares out of the capital increase in January 2006 are listed on the Vienna and Prague StockExchange - ISIN AT0000506217, Security Symbol EBSN.

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

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

Josef KerekesTel: +43 (0)5 0100-16878 E-Mail: [email protected]

> Investor relations contacts

Investor relations

Erste Bank, Graben 21, 1010 Vienna

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