Erste Group Bank AG — Earnings Release 1999

Mar 23, 2000

News Details

Ad-hoc | 23 March 2000 09:22

Ad hoc-Service: Erste Bank Öst. Spark. Prelim

Ad-hoc Mitteilung übermittelt durch die DGAP. Für den Inhalt der Mitteilung ist allein der Emittent verantwortlich. —————————————————————————— Erste Bank is very satisfied with 1999 preliminary results -Preliminary net profit increased 23.4% under IAS -Substantial progress in implementing the three core strategies -Comprehensive e-business strategy -Customer base grew to 6 million in 3 years since IPO -RoE target for 2000 achieved in 1999 The financial year 1999 was a success for the Erste Bank Group. Major progress was made with the 3 core strategies: exploiting core business potentials, expansion based on the role as the central institution of the savings bank sector, and the establishment of a new core market in Central Europe. The company also reported strong earnings figures. Both the 1998 and 1999 figures referred to in this announcement are stated according to IAS. Erste Bank’s results for last year were the best in the company’s history and also exceeded the performance of its predecessor institutions Die Erste and GiroCredit. Erste Bank’s total assets increased by 0.9% year on year to reach EUR 52.4 billion at end 1999, despite the sale of assets in the amount of around EUR 1 billion. The operating result increased by 6.1% and Group net profit after minorities by 23.4% comp. with prior year figures. The degree of success in 1999 was in particular evidenced by the achievement of a return on equity of 12% one year ahead of schedule. This target had been set for 2000 at the time of the IPO in 1997. The bank also moved closer to a second goal set for 2000, a Cost/Income ratio of 67%. Erste Bank’s Cost/Income ratio dropped from 72% in 1998 to 70% in 1999. Highlights of 1999: (all figures have been adjusted for the sale of selected regional branches) -Administrative expenses down 2.4 % to EUR 821.7 million -Commission and fee income up 5.2% to EUR 322.4 million -Operating result up 6.1% to EUR 350.7 million -Group net profit up 23.4% to EUR 164.6 million -C/I ratio 70.1% compared to 71.8% a year earlier -RoE 12.1% compared to 10.5 % in 1998 -Tier 1 ratio 6.3% Ceska Sporitelna: the quantum leap and how to be financed The acquisition of Ceska Sporitelna (CS), the Czech Republic’s second largest bank, constituted a quantum leap in the implementation of Erste Bank’s Central Europe strategy. CS, soon to be integrated into the Erste Bank Group, has a market share of over 30% in the Czech Republic and is the clear market leader in retail business with a market share of over 35%. The successful implementation of both the savings bank and Central European strategies has boosted the Erste Bank Group’s customer base to six million clients. The link-up unlocks enormous cross-selling potential for all products of savings bank sector companies as well as scope for leveraging investments in new technologies across a much larger organisation with a lower cost per customer. Financing the acquisition Erste Bank will not issue equities to finance the CS trans- action. It will take three capital market actions expected to yield proceeds of just under EUR 300 million. International financial investors are expected to provide a third of the amount, with negotiations currently in the final phase. As indicated at end February 2000, these partners are to acquire a stake of no more than 10 percent of Ceska Sporitelna’s equity capital. An additional third is to be raised through the issue of a hybrid tier-one instrument, to take place in the first half of 2000. The remaining third will be raised through securitisation of selected parts of the loan portfolio, while ensuring that Erste Bank’s Tier 1 ratio remains above 6%. OUTLOOK – NEW TARGETS FOR THE ERSTE BANK GROUP Following the acquisition of Ceska Sporitelna, which raised the Erste Bank Group’s customer base above the six million mark, new financial goals have been set. By the year 2002 the C/I ratio is to be lowered to 66%, while the RoE is to be raised to at least 14%. Erste Bank also expects that, after allowing for a year of restructuring at Ceska Sporitelna in fiscal 2000, beginning in 2001 net profit will grow by an annual rate of 15-20%. “new.com” is part of Erste Bank’s fourth core strategy Erste Bank is supplementing the 3 core strategies, that it has implemented with great success so far, with a new strategy. In order to capitalise on newly emerging business opportunities in its home market, Erste Bank will utilise the potential of the internet in all areas of activity and will pursue a clear focus on e-business products as its fourth core strategy. A significant part of this strategy is a company provi- sionally named “new.com”, which is in the process of being founded. This new Erste Bank subsidiary will introduce an online brokerage for the central European market later this year. Initially targeted at the Central European markets of the Erste Bank Group (Austria, Czech Republic, Hungary, and Poland), new.com is a virtual meeting place and will offer a multilingual Internet platform. ____________________________________________________________ Requests: Department for Press Relations 1010 Wien, Graben 21 Fax: +43 (1) 531 00 / 9849 MICHAEL MAURITZ, Tel. +43 (1) 531 00 / 9603 e-mail: michael.mauritz@erstebank.at KARIN HACKER, Tel. +43 (1) 531 00 / 7629 e-mail: karin.hacker@erstebank.at Detailed preliminary results will be published at 11:00 a.m. CET during a press conference and in the internet (www.erstebank.at/ir). Ende der Mitteilung