The Erste Group boss Bernd Spalt and the CFO Stefan Dörfler were optimistic about the coming year at the annual press conference today and are already focusing on the time after the crisis. For 2021, the bank expects an economic recovery in its core regions. After the crisis, it will be particularly important that companies are better equipped with equity.
“This crisis is tough, but it’s over,” said Spalt on Monday. Therefore, one has to prepare now for the time afterwards so that the coming upswing can then be taken along. The lockdown is unpleasant for everyone, but a tried and tested means to reduce the infection rate again, said Spalt. They therefore support the measures and want to accompany this difficult economic phase “as part of the solution”. So far, the bank has mobilized a total of EUR 18.4 billion in volume as part of the implementation of government measures – primarily in the form of credit moratoriums and state-guaranteed loans. Furthermore, the deposits at the bank have risen by 6.3 percent since the beginning of the year.
For domestic companies traditionally poorly equipped with equity, it is now particularly important to quickly get rid of their dependency on outside capital. “The economy also needs a vaccine,” said Spalt. More equity for the companies would represent a real “turbo for the recovery of the domestic economy”.
Erste Group is already planning a project for this. A fund for small and medium-sized enterprises is to be presented in spring 2021. Here, the bank is primarily concerned with providing start-up capital and its own network. The fact that a bank (or the state) should own long-term and broad companies is not desirable, according to Spalt.
In addition to the capital itself, Spalt also lacks political incentives for more equity – and not only in Austria. “The European economy is far too dependent on outside financing; there is far too little incentive for equity capital,” said Spalt. From his point of view, tax incentives would make sense – interest on borrowed capital can be deducted from tax as operating costs, but equity cannot. The introduction of a holding period for shares would also be easily feasible and would already be part of the government program, according to the bank chief. But you also have to implement the proposed changes.
In any case, the bank has made sufficient provisions for itself for the expected challenging winter. “We dressed very warmly for the Corona winter,” said Dörfler on Monday. High risk provisions – 614 million euros – were already made in the second quarter in order to be well prepared. In the third quarter, the bank set aside EUR 195 million for any loan defaults.
This will depress profit this year – the bank has almost halved its profit after nine months and is also anticipating a significant year-on-year decline in profit for the year as a whole – the bank bosses are making drastic precautionary measures and hoping for an economic recovery in the coming year but confident that risk costs will decrease somewhat again in 2021. “So far, we have not seen the slightest increase in bankruptcy rates or overdue loans in our entire region,” said Spalt. Even after the credit moratoriums have expired, Spalt does not see any “cliff effect” coming.
This year’s economic downturn will probably be reflected in the coming year in slightly higher unemployment and also in slightly higher default rates, but Spalt does not expect a sharp increase in the rate of non-performing loans either. In any case, the bank will remain below a quota of 4 percent. The rate is currently 2.4 percent. With a core capital ratio of 14.1 percent, the bank is also in a solid position when it comes to the bank’s equity situation.
After nine months, the bank achieved a net profit of 637.1 million euros, compared to 1,233 million euros in the same period last year. In operational terms, however, the corona crisis was reflected in slight credit growth (customer loans plus 2.6 percent to 164.5 billion euros). In addition, net interest income rose by 2.0 percent to around EUR 3.6 billion. In contrast, net commission income fell by 2.4 percent to EUR 1.45 billion. The expense ratio improved slightly to 59.1 percent.
bel / tsk
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