Slovenská sporiteľňa, a. s. · 4 Slovakia – Economic Growth Accelerates, Driven by Domestic Demand Real GDP growth Components of GDP Private consumption growth Fixed capital

April 2016

Slovenská sporiteľňa, a. s.

Investor Presentation

Disclaimer – Cautionary Note Regarding Forward-Looking Statements

THE INFORMATION CONTAINED IN THIS DOCUMENT HAS NOT BEEN INDEPENDENTLY VERIFIED AND NO REPRESENTATION OR WARRANTY EXPRESSED OR IMPLIED IS MADE AS TO, AND NO RELIANCE SHOULD BE PLACED ON, THE FAIRNESS, ACCURACY, COMPLETENESS OR CORRECTNESS OF THIS INFORMATION OR OPINIONS CONTAINED HEREIN. CERTAIN STATEMENTS CONTAINED IN THIS DOCUMENT MAY BE STATEMENTS OF FUTURE EXPECTATIONS AND OTHER FORWARD-LOOKING STATEMENTS THAT ARE BASED ON MANAGEMENT’S CURRENT VIEWS AND ASSUMPTIONS AND INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS, PERFORMANCE OR EVENTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN SUCH STATEMENTS. NONE OF SLOVENSKÁ SPORITEĽŇA, ERSTE GROUP OR ANY OF ITS AFFILIATES, ADVISORS OR REPRESENTATIVES SHALL HAVE ANY LIABILITY WHATSOEVER (IN NEGLIGENCE OR OTHERWISE) FOR ANY LOSS HOWSOEVER ARISING FROM ANY USE OF THIS DOCUMENT OR ITS CONTENT OR OTHERWISE ARISING IN CONNECTION WITH THIS DOCUMENT. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR INVITATION TO PURCHASE OR SUBSCRIBE FOR ANY SHARES OR DEBT SECURITIES AND NEITHER IT NOR ANY PART OF IT SHALL FORM THE BASIS OF OR BE RELIED UPON IN CONNECTION WITH ANY CONTRACT OR COMMITMENT WHATSOEVER.

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3

Slovakia at a Glance

Territory: 49,035 km2

Population: 5.4 million

GDP per capita: approx. EUR 14,400 (2015)

Credit ratings: A2 (stable) / A+ (stable) / A+ (stable)

Capital: Bratislava

Participation in ESM

1993 2004 2009 1989 1995

End of the Communist regime

OECD membership

WTO membership

NATO and EU membership

EU accession referendum

Slovak Republic founded

2003 2000 2005

ERM-2 entry

Schengen area membership

2007

Euro adoption

2012

Members of the EU

4

Slovakia – Economic Growth Accelerates, Driven by Domestic Demand

Real GDP growth Components of GDP

Private consumption growth

Fixed capital formation growth

• Real economic growth accelerated to 3.6% y/y in 2015, the highest rate since 2011

• We expect growth to average 3.5% in both 2016 and 2017

• Mild risks to growth remain from geopolitical uncertainty and global economic slowdown

• Domestic demand surged in 2014-15, both due to growing household consumption and surging investments

• Households benefit from improving labour market

• Investments accelerated in 2015 mainly on public investments (drawing of EU funds)

• Although, investments of non-financial corporates picked up as well to 6.5% y/y

-0.4% -0.8%

2.4% 2.4% 2.9%

-9.2%

-1.1%

3.5%

14.0%

1.0%

2012 2013 2014 2015 2016e

1.6%1.4%

2.5%

3.6% 3.5%

2012 2013 2014 2015 2016e

Slovakia – Labour Market Improves, Fiscal Balance in Check

Unemployment and Inflation Public Debt and Government Balance

2012 2013 2014 2016e 2015

Consumer price inflation (average)

Unemployment rate (average)

2012 2013 2014 2016e 2015e

General government balance (share of GDP)

Public debt (share of GDP)

• Labor market improved significantly in the past 2 years

• Unemployment rate declined to 11.5% on average in 2015, a significant decrease from 13.2% in 2014

• Price development remains subdued, mild deflation at -0.3% y/y on average in 2015 amid low fuel and energy prices

• We expect inflation to be close to 0% on average in 2016, with very little supply or demand pressures seen so far

• Fiscal balances remain in check

• Fiscal deficits remain below 3% of GDP (in 2015, deficit expected at 2.7% of GDP, for 2016 deficit budgeted at 1.9% of GDP)

• Public debt fell by 1pp to 53.5% of GDP in 2014, comfortably under the key debt brake threshold (55%)

• Debt to decrease to 53% of GDP in 2015 and 52% in 2016

1.4%

14.2%

3.6%

14.0% 13.2% 11.5%

-0.1%

10.7%

-0.3%

0.2%

-2.6%

54.6%

-4.2%

51.9% 53.5% 52.8%

-2.8%

52.0%

-2.7% -2.0%

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Slovak Banking Market – Stable and Conservative Business Models

6

• Customer deposits fully cover customer loans

• Loans-to-deposits ratio (net) reached 87.8% as of December 2015

• Solid capital ratios of the banking sector (especially major banks)

• Top 3 banks have capital adequacy above 16%

• No state support needed after the crisis in 2007/2008

• No FX retail loan exposures

• After euro adoption in January 2009, almost no FX loans to households

• Only 4% of corporate loans are in FX

Slovak Banking Market – Growth of Retail Market with Space for Further Convergence, Corporate Loans Growing Mildly

Retail and Corporate Loans (EUR bn) Retail and Corporate Deposits (EUR bn)

Corporate loans

Retail loans

Corporate deposits

Retail deposits

• Growth of retail loans amid convergence

• Retail loans growing visibly in recent years (12% y/y in 2015)

• Retail loans as a share of GDP stands at approx. 33%

• As compared to EMU slightly above 50% of GDP, there is still space for convergence

• More modest medium-term growth of corporate loans

• Market has more deposits than loans, stable funding

• Market gross loans-to-deposits ratio stood at around 91% as of December 2015

• Pick-up of retail deposit inflow in 2014-15

• Amid low-interest-rate environment, higher sight and savings deposits in retail, decline of term deposits

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27.1 27.8 29.0 31.6

14.5 15.7 15.9 17.0

2012 2013 2014 2015

18.9 20.7

23.2 26.1

17.4 17.8 17.8 18.6

2012 2013 2014 2015

Slovak Banking Market – SLSP #1 in Total customer Loans and Deposits

Customer Loan Market Shares (September 2015; %) Customer Deposit Market Shares (September 2015; %)

• SLSP strengthened its leading position in 2014-2015, gaining market share in all key segments

• In total loans, SLSP market share increased by 2pp since end-2013 to 21.1% in September 2015

• Improvement in both retail and corporate segment

• In 2014-2015, SLSP strengthened its market leader position in customer deposits with market share at 21.4%

• This compares to 20.5% at the end of 2013

• In retail deposits SLSP market share was near-stable at 26.4%

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21.1

19.0 17.5

9.7

5.2

SLSP

21.4

17.0 16.5

9.7

7.1

SLSP

Slovenská sporiteľňa at a Glance

• Total Assets: EUR 14.0bn; Equity: EUR 1.5bn; Net profit: EUR 185m (2015YE)

• One of the most stable banks in the Eurozone – ECB Stress Test (Oct 2014) (banks with assets above EUR 10bn; 2013):

• No. 6 by CET1 Ratio – Adverse Scenario 2016

• No. 9 by CET1 Ratio – Baseline Scenario 2016

• Strong capital position: CET1 Ratio at 17.8%, Solvency Ratio at 21.9% (2015)

• SLSP was outperforming most of the competition in CIR, ROE, NIM in recent years

• Low dependence on external funding amid 87.8% (net) L/D ratio (2015)

• Rating (Fitch Ratings) Long-term foreign currency IDR: BBB+ Short-term foreign currency IDR: F2 Support Rating: 2

Viability Rating: bbb+ Outlook: Stable Covered Bonds Rating: A (stable)

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Strategic Positioning

• The leading bank in Slovakia in key retail segments (mortgage loans, consumer loans, retail deposits)

• Member of the Erste Group, one of the largest retail banking groups in Central Europe

• Focus primarily on retail mass market

• Largest distribution network in Slovakia (291 branches), it serves 2.3m clients

• Retail loans constitute about three quarters of total loans at SLSP

• Retail deposits constitute also about three quarters of total deposits at SLSP

• Medium sized bank in corporate market (number 3-4)

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Assets Liabilities

Market Shares Increased in both Retail and Corporate segments in 2015

• SLSP is the market leader in total assets and loans

• SLSP is retail oriented bank with stable retail deposit funding

• Shares increased in all key retail loan segments in 2014-2015

• In retail loans, SLSP market share increased by about 80bp in 2015

• Growth driven mainly by housing loans

• SLSP was also successful in corporate segment in 2015

• SLSP is the market leader also on the liability side; both in total and retail deposits

• Market share in retail deposits was broadly unchanged in 2014/2015

• Visible improvement in corporate deposit segment

20.2% 19.6% 20.6% 20.7%

26.5% 25.9% 26.9% 27.7%

10.9% 11.0% 10.9% 11.9%

2012 2013 2014 2015

Corporate loans

Retail loans

Total assets

Corporate deposits

Retail deposits

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25.7% 26.4% 26.4% 26.4%

9.7% 9.8% 10.6% 12.5%

2012 2013 2014 2015

Balance Sheet

• SLSP is the key market player by total assets

• Major changes in 2015:

• Total assets rose by EUR 1.0bn in 2015

• The increase was driven almost entirely by loans to customers (+15% y/y in 2015)

• Majority of SLSP financial assets are Slovak Government Bonds

Total Assets (EUR bn), market share

Structure of Assets Structure of Liabilities

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11.3 11.8 11.7 13.0 14.0

20.3% 20.2% 19.6%20.6% 20.7%

2011 2012 2013 2014 2015

Total assets Market share

55% 57% 61% 62% 67%

8% 6% 4% 5% 3%32% 33% 32% 30% 27%

Dec 11 Dec 12 Dec 13 Dec 14 Dec 15

Loans to customers (netto) Loans to banks, CB

Financial assets Tang & intang assets

Others

71% 71% 78% 75% 76%

13% 10% 4% 6% 3%5% 7% 6% 7% 8%

9% 10% 11% 10% 11%

Dec 11 Dec 12 Dec 13 Dec 14 Dec 15

Customer deposits Deposits from banks, CB Debt securities issued

Others Equity

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Key Balance Sheet Data

Net Loan to Deposit Ratio Solvency Ratio

Tier 1 Ratio

78.3% 79.8% 78.8% 83.6%

87.8%

2011 2012 2013 2014 2015

15.6%

20.1%

25.2%

19.9%21.9%

2011 2012 2013 2014 2015

11.6%

16.3%

20.8%

17.7%

20.3%

2011 2012 2013 2014 2015

NPL Ratio and NPL Coverage(1)

6.3%

2014 2013

5.5%

2012 2011

6.3% 7.6%

2015

65%

86%

85% 82%

(1) Increase in NPL rate (and decrease in coverage) in 2014 due to change of methodology. New methodology in line with EBA recommendations (cross-defaults in retail).

Tisíce

66%

5.6%

Operating Performance

• Net profit stable in recent years

• Net profit reached EUR 185m in 2015

• It was slightly higher than a year ago mostly due slightly higher net interest income, lower bank levy and lower contribution into Deposit Protection Fund in 2015

• In 2012, bank levy was introduced in Slovakia

• The rate decreased in 1Q 2015

Net Profit (EUR m)

Operating Income, Expenses, Result (EUR m) Operating Income Breakdown

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587 584 582 602 605

339 330 332 334 337

-234 -247 -249 -268 -268

2011 2012 2013 2014 2015

Operating income Operating profit Operating expenses

79% 77% 77% 77% 78%

21% 20% 20% 21% 20%

2011 2012 2013 2014 2015

NII NFCI NTI & other

195 189 185 183 185

2011 2012 2013 2014 2015

High Cost Efficiency and Solid Returns

Cost/Income Ratio Net Interest Margin ROE

• High cost efficiency

• One of the lowest CIR in Slovak banking market

• Increase in CIR in 2014 vis-à-vis 2013 due to renewed Deposit Protection Fund (similar is true for the decrease in 2013 vis-à-vis 2012)

• One of the highest ROE among top Slovak banks in the past years

• In 2014, SLSP ROE was the highest among banks at Slovak market

• Low interest rate environment puts pressure on the margins

• However, SLSP still maintains one of the highest NIM

• Both on Slovak market and compared to other euro area countries

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43.5% 43.0% 44.5% 44.3%

2012 2013 2014 2015

4.2% 4.1% 4.0% 3.7%

2012 2013 2014 2015

16.9% 15.1% 14.5% 13.8%

2012 2013 2014 2015

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Assets Encumbrance

Encumbered Assets Free assets eligible for Encumbrance

0%

5%

10%

15%

20%

25%

30%

Market SLSP

Loans Bonds Others

10.9% 8.5%

0%

5%

10%

15%

20%

25%

30%

Market SLSP

Bonds

• As of December 2015, only 8.5% of our assets weighted by total assets were encumbered. Asset encumbrance is lower than the average level of assets encumbrance in Slovakia

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Slovak Mortgage Bonds Legal Framework

Slovak Mortgage Bonds Act

Mortgage backed Cover Pool

Mortgage loans secured by residential or commercial properties

Max. LTV : 70%

Substitute Collateral

Geography for Pool

Substitute Collateral max. 10% of the Cover Pool

(government bonds, cash)

Only Slovakian mortgage property allowed

German Pfandbrief Act

Max. LTV : 60%

Substitute Collateral max. 10%

EEA +

USA, Canada, Japan

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Slovak Mortgage Bonds Legal Framework (cont.)

Slovak Mortgage Bonds Act

Protection Mortgage Administrator appointed by National Bank of Slovakia checks eligibility of the assets in the Cover Pool

OC and NPV Test

Insolvency provisions

No minimum over-collateralisation Coverage by nominal value

In bankruptcy the Mortgage Bonds could become due No special administrator will be appointed

The Cover Pool can be transferred to another credit institution

German Pfandbrief Act

Min. 2% OC

No acceleration Special

administrator appointed

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Cover Pool/Mortgage Loan Products Main Characteristics

• A (stable) rating by Fitch

• Stable and well diversified Cover Pool

• Currency: only Euros

• Only Slovak Residential Properties in the Cover Pool

• Loans in 30 days + arrears automatically excluded from the Cover Pool

• Substitute collateral – Slovak Government Bonds – currently EUR 90m)

• Interest rate swap(s) in the Cover Pool: no

• Currency swap(s) in the Cover Pool: no

Cover Pool Mortgage Loans

• Mortgage Loans as defined by Bank Act

• Loan Types Maturity: minimum 4 years

maximum 30 years

WAL: 17.8 years (including redemptions/repayments)

• Interest Rate: Fixed Rate loans of 96%

Floating Rate loans of 4%

• Amortization: 100% annuity

• Max. LTV: 70%

• Average monthly payment: below EUR 300

• Percentage of 500 largest loans: 5%

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Covered Bonds

Issuer: Slovenská sporiteľňa, a. s. Issuer’s Rating: (BBB+ (stable) Fitch)

Programme Limit: EUR 2,000,000,000

Covered Bond Rating: A (stable) (Fitch)

Bond Structures: Fix and Floating

Preferred Maturities: 3 – 6 years

Cover Pool: only Slovak residential assets

OC: required OC of 7.5% (Issuer’s commitment)

Governing Law: Slovak

Listing: Bratislava Stock Exchange

UCITS compliant: Yes

Eligibility: ECB Repo and CBPP3 eligible

Language: Slovak and English

Covered Bonds Maturity Profile Programme Summary

0 €

50,000,000 €

100,000,000 €

150,000,000 €

200,000,000 €

250,000,000 €

300,000,000 €

2016 2017 2018 2019 2020 2021 2022 2023+

SLSP Mortgage Covered Bonds Maturity Profile (March 2016)

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Cover Pool Structure per 31.3.2016

Mortgage Loans Mortgage Bonds

Regional Distribution Distribution by Property Type

Total volume 1,100.6 m €

Number of loans 33,755

Number of borrowers 33,728

Average LTV 49.2%

Average seasoning 3.8 yrs

Average remaining life 22.6 yrs

Issues Cover Pool

Total volume (m €) 936.1 1,190.6

Average maturity (yrs) 3.4 21.5

Over-collaterisation 27.2%

Covered Bond Rating (Fitch) A Stable

Notes:

- Total Cover Pool for all Covered Bonds (64 issues);

- Excluding non-eligible loans and loans in 30 days + arrears;

- Substitute collateral (€90 m) - Slovak Government Bonds;

- Average interest rate of loans: 3.61% p.a.

Old building

85.0%

New building

8.7%

Reconstr.

2.6%Other

3.7%

Banská Bystrica 9.4%

Bratislava

17.1%

Koš ice 11.4%

Nitra 9.7%Prešov 11.2%

Trenčín

12.3%

Trnava 12.3%

Ži l ina 12.8%Other 3.8%

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Cover Pool Structure per 31.3.2016 (cont.)

Distribution by Remaining Life

Distribution by LTV

Distribution by Volume

Distribution by Number of Loans

1.0% 3.4% 4.1%7.2%

12.6%

71.6%

up to 5 yrs

5 - 10 yrs

10 - 15 yrs

15 - 20 yrs

20 - 25 yrs

over 25 yrs

3.8%19.8%

71.2%

4.6% 0.6%

0.1%

up to €15,000

€15,001 - €30,000

€30,001 - €60,000

€60,001 - €100,000

€100,001 - €150,000

over €150,000

6.0%8.1%

5.7%

7.8%

11.5%

61.0% up to 5 yrs

5 - 10 yrs

10 - 15 yrs

15 - 20 yrs

20 - 25 yrs

over 25 yrs

15.3%

5.9%

7.5%

7.6%

7.9%

55.8% up to 40%

40% - 45%

45% - 50%

50% - 55%

55% - 60%

60% - 70%

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Investor Relations Details

Slovenská sporiteľňa, a. s.

Tomášikova 48, 832 37 Bratislava

Slovak Republic

www.slsp.sk

https://www.slsp.sk/sk/cover_pool_SK

E-mail: [email protected]

Investor Relations

Mária Valachyová

Tel: +421 2 4862 4185 E-mail: [email protected]

Marianna Červená


Balance Sheet Management

Vladimír Polhorský


Róbert Herbec


http://www.slsp.sk/

https://www.slsp.sk/sk/cover_pool_SK

mailto:[email protected]






Slovenská sporiteľňa, a. s. · 4 Slovakia – Economic Growth Accelerates, Driven by Domestic Demand Real GDP growth Components of GDP Private consumption growth Fixed capital

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