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Introduction & Market Context
Erste Group Bank presented its Q1 2025 financial results on April 30, 2025, highlighting a "strong capital position, good growth & solid bottom line" despite facing mixed year-over-year performance metrics. The Vienna-based banking group, which operates primarily across Central and Eastern Europe, reported these results against a backdrop of its stock trading near 52-week highs, though shares had declined 2.42% to €340.90 in the trading session prior to the presentation.
The bank’s management team, led by CEO Peter Bosek, CFO Stefan Dörfler, and CRO Alexandra Habeler-Drabek, presented a quarter marked by sequential improvement but year-over-year challenges, particularly in profitability metrics.
Quarterly Performance Highlights
Erste Group reported a quarter-over-quarter net profit increase from €609 million in Q4 2024 to €743 million in Q1 2025. However, compared to the same period last year, net profit declined from €783 million in Q1 2024 to €743 million in Q1 2025. This mixed performance was driven by continued strength in top-line revenue, particularly from net interest income and record fees, offset by higher personnel expenses and increased banking levies.
As shown in the following chart detailing profit development:
The bank’s efficiency metrics showed improvement, with the cost-to-income ratio decreasing from 51.4% in Q4 2024 to 48.0% in Q1 2025, well below the bank’s 2025 goal of under 50%. Risk costs also declined, with the risk cost ratio decreasing from 18 basis points in Q1 2024 to 15 basis points in Q1 2025, significantly below the bank’s 2025 target of approximately 25 basis points.
However, banking levies increased substantially from €86 million in Q1 2024 to €121 million in Q1 2025, creating headwinds for profitability. This contributed to a decline in earnings per share from €1.87 in Q1 2024 to €1.82 in Q1 2025, and a decrease in return on tangible equity from 17.2% to 15.2% over the same period.
The following dashboard illustrates these key performance indicators:
Detailed Financial Analysis
Erste Group’s balance sheet showed moderate growth, with total assets increasing from €353.7 billion at year-end 2024 to €358.0 billion by March 31, 2025. Customer loans grew by 0.9% year-to-date, with stronger increases in the retail segment (+1.6%) and Central and Eastern European markets (+1.7%). Customer deposits increased by 1.9% year-to-date, primarily driven by inflows from financial institutions and the public sector.
The bank’s funding activities included the issuance of a €1 billion covered bond and two senior preferred notes of €750 million each during the quarter, reflecting regular funding operations.
The following chart details the balance sheet development:
Erste Group maintained a strong capital position, with reported capital ratios increasing from 19.2% in Q1 2024 to 20.7% in Q1 2025, providing substantial buffer above regulatory requirements. The loan-to-deposit ratio increased slightly from 88.4% to 89.4% year-over-year, indicating balanced growth in both lending and deposit-taking activities.
Key balance sheet metrics are illustrated here:
Strategic Initiatives
Erste Group continued to make progress on its digital transformation strategy, with its digital platform "George" now serving 11 million users across its markets. Digital sales now account for more than 60% of the bank’s total sales, highlighting the successful implementation of its digital-first approach.
The retail segment showed solid growth, with net customer loans increasing from €72.9 billion in Q1 2024 to €78.8 billion in Q1 2025. Securities savings plans also gained traction, growing from 1.39 million to 1.75 million accounts year-over-year.
The following chart shows the retail business growth:
In the corporate segment, loan momentum remained strong with net loan stock increasing from €76.8 billion in Q1 2024 to €81.1 billion in Q1 2025. The Group Markets business had a strong start to the year, though below the exceptional results seen in 2024. Asset management continued its growth trajectory, with assets under management reaching new all-time highs.
Corporate loan momentum is illustrated in this chart:
Forward-Looking Statements
Erste Group provided economic forecasts for its core markets in Central and Eastern Europe, projecting moderate GDP growth across the region for 2025 and 2026. These forecasts suggest a stable operating environment for the bank’s diverse geographic footprint.
The economic outlook for Erste Group’s markets is detailed in the following chart:
The bank reaffirmed its 2025 goals, including maintaining a cost-to-income ratio below 50%, a risk cost ratio of approximately 25 basis points, and a return on tangible equity of around 15%. With the current return on tangible equity at 15.2% and cost-to-income ratio at 48.0%, Erste Group appears well-positioned to meet these targets despite the challenging economic environment and increased regulatory costs.
While the bank faces headwinds from higher banking levies and some pressure on net interest margins, which declined from 2.49% to 2.33% year-over-year, its strong capital position and balanced growth in both lending and deposit-taking activities provide a solid foundation for navigating the current financial landscape.
Full presentation:
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