Q3 2020 Business Update amid Covid-19
Conclusion
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Key takeaways and outlook for 2020/21
Operating
environment
Business
performance
Credit risk
Capital position
Profitability
Risk factors to
guidance
•
•
Q3 20 key takeaways
After initial Covid-19 shock, adoption of more
pragmatic approaches, aiming to keep industry open
Early warning signs as positive tests start to mount
Authorities aiming for flexible, regional approaches
NII and fees recovered well
Good performance of trading/FV result
Flat costs due to reduced other admin expenses
Following spike in provisioning in Q2 20, reflecting
macro deterioration and vulnerable industries overlays,
significantly lower FLI and overlay impact in Q3 20
Asset quality remains strong, due to lack of defaults
Fully loaded CET 1 ratio remained strong at 14.1%,
as 50% of 2019 dividend accrual added back to capital
Q3 profit not included in capital
Profitability improved significantly, resulting in double-
digit return on tangible equity (10.5%)
•
2020/21 outlook
Real GDP decline of between 4-9% expected in
2020, Q4 restrictions not yet incorporated
Non-linear economic recovery in 2021
CEE-wide concerted fiscal mitigation efforts
Challenged revenue outlook amid economic downturn,
rate cuts & market volatility, costs to decline in 2020
Lower organic growth, protected growth (guarantees)
and freezing of good portfolio through moratoria
2020e risk costs confirmed at approx. 65-80bps (of
average gross customer loans)
2021e risk charge expected to be below 2020 level
CET1 ratio is expected to remain strong with significant
cushion in case of worse than expected economic
performance
CET1 target of 13.5% unchanged
2020e net result to be meaningfully lower than in 2019
Management intends to pay cash dividend both for
2019 and 2020, subject to business conditions and no
regulatory or legal restrictions being in force
Longer than expected duration of Covid-19 crisis
Political or regulatory measures against banks
Geopolitical, global economic and global health risks
Economic downturn may put goodwill at risk
ERSTEŚ
Group
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