An impact-oriented group of commercial banks with a focus on SMEs in Eastern and South Eastern Europe - Company presentation, November 2020 ...
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An impact-oriented group of commercial banks
with a focus on SMEs in Eastern and South Eastern Europe
Company presentation, November 2020
Our mission
Be the leading “Hausbank” for SMEs
in Eastern and South Eastern Europe
- with a sustainable approach
1
Group overview & strategy
2
ProCredit – a unique approach to banking
ProCredit at a glance
► A profitable, development-oriented commercial group of
banks for SMEs with focus on Eastern and South Eastern
Hausbank ProCredit Direct
Europe
for SMEs for Private Clients
► “Hausbank” for SMEs complemented by “ProCredit Direct” Impact and development orientation
for Private Clients
ProCredit Banks Loan portfolio Loan growth (‘20)
► Headquartered in Frankfurt and supervised by BaFin and
Bundesbank 12 EUR 5,205.2m 8.5%
CET1 ratio(1) Rating (Fitch)(2) RoAE(3) (‘20)
► Strong regional focus on SEE/EE
14.1% BBB (stable) 5.6%
► Track record of high-quality loan portfolio based on
prudent risk management and focus on long-term
business relationships
38.7% 17.0%
► Profitable every year since creation as a banking group
13.2%
► Listed on the Frankfurt Stock Exchange since Dec-16
8.6%
10.0% 12.5%
Notes: See page 28 of this presentation
3
Strong regional footprint in Eastern and
South Eastern Europe
Regional presence in SEE/EE COVID-19 pandemic and governmental response
► The state of emergency and lockdown measures have been
largely cancelled since end of May/early June; borders are
mostly re-opened
► The initially lower infection and death rates in Eastern Europe
are now converging with the higher numbers of Western
Europe
► New lockdown measures are generally targeted at smaller
geographic areas, pending current infection rates
► Legislative moratoria on debts now expiring in most of our
countries of operations
Expected GDP development in SEE/EE(1)
Macroeconomic impact
► Substantial decline of real GDP in ProCredit SEE/EE markets
expected for 2020 along with marked recovery in 2021
► GDP estimates as per October slightly below previous
estimates with degree of rebound in 2021E depending on
e.g. further lockdown measures
► Industrial Production Index indicates macroeconomic recovery
Notes: See page 28 of this presentation in Q3, yet output remains subdued with respect to 2019
Source: IMF World Economic Outlook (2020)
4
We partner with SMEs –
the ProCredit “Hausbank” principle
Target SME clients
► Growing, stable businesses
► Forward-looking SMEs investing in innovation and green technology
► SMEs which bank fully with ProCredit: e.g. loans, cards, transactions, deposits
Our approach
► Comprehensive loan and electronic account facilities
► Business Client Advisers’ focus: client and risk
► Trustful long-term relationships and true understanding of clients’ needs and risks
Strong SME 94% €1.6bn 2.3% 18.3%
market positions of loan portfolio financing backed by credit impaired loans, green loan portfolio
e.g. ranked #1 in to SMEs EIF as part of InnovFin significantly better than in % of total
Kosovo by loan size to initiative for market, reflecting strong
corporate customers innovative SMEs customer relationships
incl. SMEs
Growth. Impact. Low credit risk.
5
ProCredit Direct –
an entirely digital offer for Private Clients
Target private clients
► Middle income and higher earners
► Associated with SME owners
► Looking for modern, transparent and reliable banking services
Our approach
► All-in digital offer – digital banking concept consequentially executed
► Low complexity – one account for all products
► High price transparency – standard monthly fee with no hidden costs
Total staff No of branches No of cash desk
11,514 645 28% transactions
€4.7bn
of total deposits,
strong growth of 3,246
+14% YOY 56
1%
Dec-13 Sep-20 Dec-13 Sep-20 Dec-13 Sep-20
Notes: See page 28 of this presentation Transparency. Efficiency. Scalability.
6
Prudent risk management as the key pillar
of our business model and impact approach
High quality loan portfolio built around
► Careful client selection and strong client relationships
► Well trained staff
► Effective group credit risk assessment and monitoring
► Solid risk profile with consistently low net write offs
► Loan portfolio quality consistently better than market
Consistently low net write-offs Non-performing loans of ProCredit significantly below
local banking sectors(1)
4% 60
20%%
Country NPL (Dec 2019) 50.0%
3% PCB NPL (Dec 2019)
15%
Average net write-offs: 0.7%
2% 9.8%
10% 7.7% 8.5%
1% 4.8% 4.1%
5% 3.9%
0.7% 3.0% 2.7% 2.2%
0%
2008 2011 2014 2017 Sep-20 0%
Bosnia and Bulgaria N. Moldova Ukraine
Herzegovina Macedonia
Notes: See page 28 of this presentation
7
Strong impact orientation is an
essential part of our identity
Responsible banking Environmental responsibility Investments in staff development
► No focus on consumer lending, ► Focus on promotion of ► Unique approach to staff recruitment and
no complex products “green” investments development
► Promotion of price and ► Strict exclusion lists ► Continuous training in own academy
banking sector transparency
► Mid-term target for green loans of ► Value-based training, with salary linked
► Commitment to SDGs and MSCI ESG 20% of overall loan portfolio to training level
signatory to UNEP FI(1) rating: AA
43% 34% 146 47% / 53%
of loan portfolio annual growth rate of annual training hours diversity of women /
related to local green loan portfolio per employee (‘19) men in management
production and (‘16-’19) boards
agriculture sectors
Notes: See page 28 of this presentation
8
Track record of profitability through the economic cycle,
successful group restructuring to become visible
Long-term financial stability and attractive profitability
15%
75
Average RoAE: >9%
10%
50 61 61
54 54
47 50 48 5%
44 46
36 39
25 30
in EUR m
28 0%
12 13
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Profit RoAE
Successful conclusion of group restructuring in 2019, resulting in no further effects on net income
Net income from continued vs discontinued operations
► 2018/19 results significantly impacted by discontinued
69.7% 70.5% 66.5%
operations
61.6 61.5
► Group restructuring successfully concluded in 2019 resulting
33.4 in increased visibility of the group’s strengthened earnings
in EUR m
generation
-7.1 -7.2
► 2020 profitability affected by COVID-19; improved underlying
2018 2019 Sep-20 profitability underlined by lower cost-income ratio
Continued operations Discontinued operations Cost-Income-Ratio
Notes: See page 28 of this presentation
9Loan portfolio
10Loan portfolio focused on SEE/EE and loans to SMEs,
strong regional footprint and diversification
Loan portfolio by geographical segments Loan portfolio by sector
Investment and
Ecuador Germany Housing other loans
1% 1%
Moldova 6% 5%
3% Bulgaria Wholesale and
21% retail trade
Georgia
7% Other economic 26%
activities
20%
Ukraine
11%
Transportation
Bosnia Serbia and storage
4% 18% 5%
Albania
4% Agriculture,
forestry and
Romania fishing
7% Production 20%
Kosovo
North Macedonia 10% 23%
8%
Total South Eastern Europe: 72% Total Business Loans: 94%
Total Eastern Europe: 21% Total Private Loans: 6%
Notes: See page 28 of this presentation
11Strong credit risk management with
particular focus on high quality collateral
Consistently high loan portfolio quality High quality collateral with strict requirements
IFRS 9
Net write- 0.3% 0.2% 0.1%
20%
offs(1)
Coverage
impaired 89.1% 93.6% 98.5%
portfolio(2)
6.6%
13%
5.3%
65%
3.4% 2%
2.5% 2.5% 2.3%
Total: EUR 3.8 bn
Mortgages Cash collateral
Dec-19 Jun-20 Sep-20 Financial guarantees Other
Stage 2 Stage 3 ► Majority of collateral consists of mortgages
► Growing share of financial guarantees (e.g. InnovFin)
► Clear, strict requirements for acceptable collateral, legal
aspects and insurance of collateral items
Notes: See page 28 of this presentation
12Environmental responsibility is central to
the group’s impact approach
Strong growth of green loan portfolio, attractive risk parameters
9.1% 12.6% 15.4% 16.6% 18.3%
954
18
795
678 17
15
489
14 936
331
779
662
(in EUR m)
15
475
316
Dec-16 Dec-17 Dec-18 Dec-19 Sep-20
Business clients Private clients % of total loan portfolio
2006 60% 0.3% $90m
first green loans of green loan portfolio credit impaired loans, green bond placed
granted for energy relating to investments significantly lower than with IFC,
efficiency and in energy efficiency overall portfolio demonstrating
renewable energy innovation in green
investments bond market
Notes: See page 28 of this presentation
13Capital, liquidity and funding
14Comfortable capital and liquidity positions
Steady capital and liquidity base
► All Tier 1 capital consists of CET1 capital
► Very comfortable leverage ratio
► LCR comfortably above the regulatory minimum (100%)
► Stable amount of highly liquid assets, HLA ratio amounting to 28%
► No visible deterioration of liquidity observable following the outbreak of COVID-19
Capitalisation overview (fully loaded)
14.1% 9.8%
CET1 ratio leverage ratio
(fully loaded)
149% €1.3bn
LCR highly liquid
assets (HLA)
15Well diversified funding structure with
strong focus on customer deposits
Steady funding base
► Highly diversified both funding structure and counterparties
► Customer deposits are the main funding source (74% of total), supplemented by long-term funding from IFIs and
institutional investors
► Solid deposit development through digital banking channels, both from SME and private clients
► Good funding relations to IFIs (e.g. $90m Green Bond in 2019; $100m financing for SME support during COVID-19 pandemic)
► BBB rating by Fitch affirmed in April for PCH and many PCB banks, Outlook confirmed “stable”
Funding sources overview
5% 1% 1%
3%
Customer deposits
16%
Liabilities to IFIs
Liabilities to banks
14% 91%
growth in deposits deposit-to-loan
Debt securities in YOY to € 4.7bn ratio
Subordinated debt
Other liabilities
74%
16Financials
17Financial highlights (Sep 2020)
Net interest margin Cost of risk (bps) Cost-income ratio Return on equity
3.1% 2.9%
56 68.4% 66.5% 7.5% 5.6%
7
Sep/19 Sep/20 Sep-19 Sep-20 Sep-19 Sep-20 Sep-19 Sep-20
► Increase in net interest income driven by growth in loan portfolio
► Increase in cost of risk in line with expectations, mainly related to updated macroeconomic assumptions in the credit risk model
as consequence of Covid-19 and increase in stage 2 loans
► CIR improvement driven by stable cost base and increased pre-provision income
► Return on equity affected by higher cost of risk in connection with Covid-19
Net interest income Operating income Operating expenses Profit after tax
Sep-20: € 150.7m Sep-20: € 167.0m Sep-20: € 125.1m Sep-20: € 33.4m
YoY: +4.9% YoY: -8.3% YoY: -0.8% YoY: -24.0%
Notes: See page 28 of this presentation
18Summary of key financial indicators
(Q3 2020)
In EUR m Q3-2019 Q3-2020 9M-2019 9M-2020 y-o-y
Net interest income 51.0 50.8 143.6 150.7 7.1
Provision expenses -1.7 5.4 2.4 21.1 18.7
Net fee and commission income 13.1 12.1 38.9 34.7 -4.2
Net result of other operating income 2.4 0.6 2.0 2.6 0.6
Operating income 68.1 58.1 182.1 167.0 -15.1
Operating expenses 42.7 42.3 126.1 125.1 -1.0
Operating results 25.5 15.8 56.0 41.9 -14.1
Tax expenses 3.9 4.1 10.1 8.5 -1.6
Profit of the period from continuing operations 21.5 11.7 45.9 33.4 -12.5
Profit of the period from discontinued operations -0.5 0.0 -1.9 0.0 1.9
Profit after tax 21.1 11.7 44.0 33.4 -10.6
Change in customer loan portfolio(1) 3.1% 3.0% 8.3% 8.5% 0.2pp
Cost-income ratio 64.2% 66.7% 68.4% 66.5% -1.8pp
(2)
Return on equity 10.7% 5.9% 7.5% 5.6% -1.8pp
CET1 ratio (fully loaded) 14.3% 14.1% 14.3% 14.1% -0.2pp
Net interest margin(2) 3.2% 2.9% 3.1% 2.9% -0.2pp
(2)(3)
Net write-off ratio 0.5% 0.0% 0.2% 0.1% -0.1pp
Credit impaired loans (Stage 3) 2.7% 2.3% 2.7% 2.3% -0.4pp
Coverage impaired portfolio (Stage 3) 93.1% 98.5% 93.1% 98.5% 5.5pp
Book value per share 13.3 13.3 13.3 13.3 0.1
Notes: See page 28 of this presentation
19Strong track record of delivering on guidance
On track Confirmed
FY 2020 Medium term
guidance targets
8% - 10%(1) 10% loan
portfolio growth
positive RoAE,
but lower
compared to FY
2019 ~10% RoAE
FY 2017 FY 2018 FY 2019
guidance guidance guidance c.70% CIR
>13% CET1Q&A 21
Appendix
229M 2020 results versus guidance
Guidance Actual
FY 2020 9M 2020
(1)
► Growth of the loan portfolio 8% – 10% 8.5%
(2)
► Return on average equity (RoAE) positive, but lower compared to FY 2019 5.6%
► Cost-income ratio (CIR) c 70% 66.5%
► CET1 ratio > 13% 14.1%
► Dividend payout ratio 1/3 of profits 1/3 of profits
Medium term:
In the medium term, assuming a stable political, economic and operating environment, we see potential for around 10% p.a. growth in the total
loan portfolio, a cost-income ratio (CIR) of < 60%, and a return on average equity (RoAE) of about 10%.
Risk factors to guidance:
Include negative economic effects from further spreading of COVID-19, major disruptions in the Eurozone, a significant change in foreign trade
or monetary policy, a worsening of the interest rate margin, and pronounced exchange rate fluctuations.
Notes: (1) Assuming no significant FX volatility; (2) Annualised
23FY 2019 results at a glance
In EUR m FY 2018 FY 2019 y-o-y
Net interest income 186.2 194.5 8.3
Provision expenses -4.7 -3.3 1.4
Net fee and commission income 52.2 52.0 -0.2
Net result of other operating income 2.3 2.8 0.5
Operating income 245.4 252.6 7.2
Income
Operating expenses 167.9 175.7 7.9
statement
Operating results 77.5 76.9 -0.7
Tax expenses 15.9 15.3 -0.6
Profit of the period from continuing operations 61.6 61.5 -0.1
Profit of the period from discontinued operations -7.1 -7.2 -0.1
Profit after tax 54.5 54.3 -0.2
Change in customer loan portfolio 12.5% 10.3% -2.2pp
Key performance Cost-income ratio 69.7% 70.5% 0.8pp
indicators Return on Average Equity(1) 7.6% 6.9% -0.7pp
CET1 ratio (fully loaded) 14.4% 14.1% -0.3pp
Net interest margin(1) 3.3% 3.1% -0.2pp
Net write-off ratio(1)(2) 0.4% 0.3% -0.2pp
Additional Leverage Ratio 11.0% 10.8% -0.2pp
indicators Credit impaired loans (Stage 3)(3) 3.1% 2.5% -0.6pp
Coverage of Credit impaired portfolio (Stage 3)(3) 90.8% 89.1% -1.6pp
Book value per share (EUR) 12.5 13.5 1.0
Notes: See page 28 of this presentation
24Sustainability within ProCredit
KEY HISTORIC MILESTONES
INSTITUTIONAL DEVELOPMENT
ORIGIN BANKING SME FINANCE
Origin of GROUP In 2008, move from
ProCredit with In 2003, creation of a product-oriented
IPC: ProCredit microfinance
as a banking group PROCREDIT
Consulting of provider to
with key shareholders DIRECT
financial positioning as SUPERVISION Digital banking
institutions in IPC (investment arm has the “Hausbank” for by German approach for
developing been transferred to SMEs banking LISTING private clients fully
countries Zeitinger Invest), PROCREDIT
authority of ProCredit Holding implemented
DOEN, KfW, IFC and HOLDING
First (BaFin and shares (PCZ) on
ProCredit Staff Invest consolidation of
microfinance Deutsche Prime Standard of
PROCREDIT ownership in
bank Bundesbank) Frankfurt Stock
ACADEMY ProCredit Holding FIRST
in Bosnia and Exchange CAPITAL
In 2006 and subsequent
Herzegovina establishment of investment grade BANKING CHANGE INCREASE
founded as the ProCredit rating since 2004 LICENCE IN THE GROUP CODE as a listed
a greenfield Academies in IN GERMANY LEGAL FORM OF CONDUCT company
bank Foundation In 2009, of ProCredit Introduction of replaces local (10% of share
recognition of the
of IMI implementation Holding group-wide banks’ versions capital)
need to develop
(now of German from AG to APPROACH
and integrate
ProCredit regulatory AG & Co. TO HR
local middle and
Holding) senior managers standards KGaA in 2011
1980 1997-1998 2003 - 2006 2008 - 2011 2012 - 2014 2015 - 2017 2018 2019
ENVIRONMENTAL Start of semi-annual GREEN FINANCE Publication
FIRST GREEN
MANAGEMENT (EM) group-wide APPROACH FULLY of first group
LOANS
Introduction of GREEN SEMINARS IMPLEMENTED IMPACT
granted for energy
All ProCredit banks
ENVIRONMENTAL efficiency and group-wide
apply the entire green
REPORT
renewable energy comprehensive First Group following GRI
MANAGEMENT Investments in 2006 3-pillar approach to EM Environmental lending and environ- ESG RATING Standards
mental and social risk Positive ESG
AND GREEN LENDING Steering
management concept rating by MSCI FIRST GREEN
EM policy and EM Unit Committee BOND
ENVIRONMENTAL at each bank meeting and oekom
research Placement for
EXCLUSION LIST All ProCredit
acknowledging emerging countries
introduced group-wide In 2010, first institutions certified
our high with IFC for green
in the banks’ Codes of environmental courses at under ISO 14001 or
standards investments by
Conduct in 2006 the ProCredit Academies EMAS
SMEs
25Long-standing and well-interconnected
management teams at group and local level
Experienced management collaborating at Holding and local level
Sandrine Massiani 17 Dr Gabriel Schor
► AML and compliance ► Accounting and taxes
► Audit ► Administration and translation
► Human resources ► Communications
► Legal ► Funding and treasury
► Risk management ► Investor relations
► Reporting and controlling
► Supervisory reporting and capital planning
Gian Marco Felice Christian Edgardo Dagrosa
► Business support ► Investor relations
► Environmental management and impact reporting ► Reporting and controlling
► IT
Local ProCredit banks
32 key management members On average 15 years of experience with ProCredit | 15 female/17 male
Collective training… …as catalyst for a shared vision and teamwork… …supported by clear framework
► Central training in Fürth ► Common set of values ► Strict common operating standards and
policy guidelines
► English as lingua franca ► Closely-knit network
► Strong, standardised MIS reporting
► Regular specialist events and regional ► Rapid diffusion of best practices
meetings ► Holding management with supervisory
board seats at local banks involved in
strategic business processes
26ProCredit bank management board teams
32 management board members of the ProCredit banks
Albania Albania BiH BiH BiH Bulgaria Bulgaria Bulgaria Bulgaria Ecuador Ecuador
Georgia Georgia Georgia Kosovo Kosovo Kosovo Macedonia Macedonia Macedonia Moldova Moldova
► 15 female (47%) / 17 male (53%)
Romania Romania Romania Serbia Serbia Serbia
► Average age: 41
► Average years with ProCredit: 15
► 32 ProCredit Management Academy graduates
Ukraine Ukraine Ukraine Ukraine
South Eastern Europe Eastern Europe South America
27Notes
Slide 3
(1) Fully loaded Slide 12
(2) Re-affirmed on April 2 2020 (1) Net write-offs to customer loan portfolio
(3) Annualised (2) Allowances for loan losses on loans and advances divided by credit impaired
Note: Shareholder structure according to the voting right notifications and portfolio
voluntary disclosure of voting rights as published on our website www.procredit-
holding.com
Slide 13
Slide 4 Note: Previous periods have been adjusted according to the scope of continuing
(1) Median real GDP growth; includes PCH countries of operation in SEE/EE, i.e. operations as of September 2020
Albania, Bosnia and Herzegovina, Bulgaria, Georgia, Kosovo, Moldova, North
Macedonia, Romania, Serbia, Ukraine Slide 18
Note: Net interest margin, cost of risk and return on average equity are
Slide 6 annualised
Note: All related figures and ratios for Dec-13 relate to the subsidiaries as shown
in the consolidated financial statement as of 2013 Slide 20
(1) Assuming no significant FX volatility
Slide 7 Notes: Risk factors to guidance: Include negative economic effects from further
(1) NPL figures for banking sectors are derived from respective central or national spreading of COVID-19, major disruptions in the Eurozone, a significant change
banks, as per Dec-19. Country NPL for Bosnia and Herzegovina is as of Sep-19. in foreign trade or monetary policy, a worsening of the interest rate margin,
pronounced exchange rate fluctuations.
Slide 8 Medium term: In the medium term, assuming a stable political, economic and
(1) ProCredit Holding AG & Co. KGaA is a signatory to the Principles for operating environment, we see potential for around 10% p.a. growth in the total
Responsible Banking and is a member of the UN Environment Programme loan portfolio, a cost-income ratio (CIR) of < 60%, and a return on average equity
Finance Initiative (UNEP FI) (RoAE) of about 10%.
Slide 9 Slide 24
Note: RoAE since 2005 as publicly available in “Bundesanzeiger” Note: Return on average equity and CET1 ratio include discontinued operations;
Previous period has been adjusted according to the new scope of continued
operations
Slide 11
(1) Annualised
Notes: Loan portfolio by geographical segments and by sector in % of gross loan
portfolio (EUR 5,205m as per 30-September-20) (2) Net write-offs to customer loan portfolio
(3) Credit impaired portfolio under IFRS 9
28Disclaimer
The material in this presentation and further supporting documents have This presentation and further supporting documents may contain forward-
been prepared by ProCredit Holding AG & Co. KGaA, Frankfurt am Main, looking statements including statements regarding our intent, belief or
Federal Republic of Germany (“ProCredit Holding”) and are general current expectations with respect to the ProCredit group’s businesses and
background information about the ProCredit group’s activities current as operations, market conditions, results of operation and financial condition,
at the date of this presentation. This information is given in summary form capital adequacy, specific provisions and risk management practices.
and does not purport to be complete. Information in this presentation and Readers are cautioned not to place undue reliance on these forward-
further supporting documents, including forecast financial information, looking statements. ProCredit Holding does not undertake any obligation
should not be considered as advice or a recommendation to investors or to publicly release the result of any revisions to these forward-looking
potential investors in relation to holding, purchasing or selling securities or statements to reflect events or circumstances after the date hereof to
other financial products or instruments and does not take into account reflect the occurrence of unanticipated events. While due care has been
your particular investment objectives, financial situation or needs. Before used in the preparation of forecast information, actual results may vary in
acting on any information you should consider the appropriateness of the a materially positive or negative manner. Forecasts and hypothetical
information having regard to these matters, any relevant offer document examples are subject to uncertainty and contingencies outside ProCredit
and in particular, you should seek independent financial advice. All Holding’s control. Past performance is not a reliable indication of future
securities and financial product or instrument transactions involve risks, performance.
which include (among others) the risk of adverse or unanticipated market,
financial or political developments and, in international transactions,
currency risk.
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