CEO Bernd Spalt assumes higher net income and announces possible acquisitions.
By Anita Kiefer Bernd Spalt, CEO of Austria's largest bank, was satisfied yesterday with the course of business of his listed Erste Group in 2020. The operating result fell slightly by 1.3 percent to 2.9 billion euros, while the net result slumped 46.7 percent to 783 million euros – which is primarily due to the high risk provisions. While this was 39 million euros in 2019, it was 1.3 billion euros for 2020. The Common Equity Tier 1 ratio rose from 13.7 to 14.2 percent.
A dividend of 50 cents will be proposed to the Annual General Meeting – in line with the recommendation of the ECB. In addition, precautions have been taken to be able to distribute an additional euro per share later if the ECB revokes its recommendations. The fact that “despite the crisis-ridden environment” one would be able to “present a stable operating result” was anything but certain in the “course of 2020”, said CFO Stefan Dörfler.
Forbearance volume is decreasing
As of January 31, 2021, the Erste Group has deferred loans of around EUR 2.3 billion. As of December 31, 2020 it was around 2.5 billion euros – the active moratoriums are therefore falling. The share of non-performing loans (NPL) was 2.7 percent in 2020 after 2.5 percent and will likely deteriorate further to three to four percent in 2021, according to Spalt's assessment. How high the risk costs for his bank will be this year after 1.3 billion euros in the previous year is difficult to estimate and depends on the course of the health crisis.
For 2021, Spalt was optimistic. The year will be that of the economic “rebound of an entire region”. Once the vaccines are well administered, people's need to consume, travel and meet people will “be great”.
Follow-up effects, no wave of bankruptcies
He does not anticipate a wave of bankruptcies in 2021. Of course, there will be “follow-up effects”, also because business models would change as a result of the pandemic. A few weeks ago, Spalt had assumed an increase in the insolvency rate of 15 to 20 percent compared to the ORF. For his bank there will be a “significantly better profit result” than in 2021. Spalt did not want to commit to one level.
AcquisitionsSpalt also expects further consolidation in the banking sector – and stated that it is looking at opportunities for acquisitions in all markets. “Also in Austria.” Details will be communicated as soon as a takeover is fixed. It will be “nothing big, transformative”, but “interesting possibilities that we are examining”. If it is possible, the Erste Group will seek “additional acquisitions”.
In addition to Austria, Erste Group's core markets are the Czech Republic, Slovakia, Hungary, Croatia, Romania and Serbia.
