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ProCredit group with robust financial result and good operating profitability in 2022

The ProCredit group, which is mainly active in South Eastern and Eastern Europe, closed the 2022 financial year with a solid financial result of EUR 16.5 million. This represents a return on equity of 1.9%. Excluding ProCredit Bank Ukraine, the group achieved a return on equity of 7.8%. Operating income increased by 21% year-on-year due to positive developments in all income streams and improved results of ProCredit banks outside Ukraine. The cost-income ratio improved slightly to 64.0%; however, adjusted for one-time effects from the Ukraine war, it is with 60.8% in the range of the medium-term target of around 60%. The result includes loss allowances of EUR 104.6 million built in 2022, mostly for the Ukrainian loan portfolio. Green loans accounted for more than 50% of total portfolio growth and now represent a share of over 20% of the total portfolio. Deposit business showed strong growth of EUR 748 million or 13.5%, underlining the further increasing success of ProCredit Direct in the markets of South Eastern and Eastern Europe. Based on these fundamentally positive developments, the Management Board raised the medium-term RoE target to around 12% and sees potential for a cost-income ratio of around 57%. For 2023, RoE is expected to improve to 6-8%, even under adverse macroeconomic conditions.

The group's loan portfolio grew by EUR 183 million or 3.1% (2021: EUR +670 million or 12.8%). Green loans accounted for more than 50% of this growth. In 2022, the group was thus able to achieve its medium-term target of a 20% share of green loans in the total portfolio. The overall reported loan growth includes a decline of EUR 174 million in the loan portfolio in Ukraine, without which the growth rate would be 6.9%. Deposits grew by EUR 748 million or 13.5% (2021: EUR +643 million or 13.1%), driven by both SMEs and private clients.

Further, the ProCredit group made significant achievements in the implementation of its sustainability strategy, demonstrated by a reduction of the group's own CO2 emissions (Scope 1 and Scope 2) by a total of 44% since 2018.

Strong operating income growth based on positive development of all income streams and all ProCredit banks outside Ukraine

The group's operating income increased by a marked EUR 58.0 million or 20.6% to EUR 339.8 million (2021: EUR 281.9 million) driven by higher net interest income, net fee and commission income, and other operating income. Apart from ProCredit Bank Ukraine, all ProCredit banks reported positive results, with most showing a significant improvement in profitability and cost efficiency compared to the previous year.

Net interest income grew by EUR 42.6 million or 19.2% to EUR 264.6 million (2021: EUR 222.0 million). The net interest margin widened by 25 basis points to 3.1% as a result of largely stable lending margins and higher key interest rates. In Q4 2022, the net interest margin amounted to 3.3%.

At EUR 54.7 million, net fee and commission income was 7.6% above the level recorded in the previous year (2021: EUR 50.9 million). Income from transaction and card business developed particularly positively. Net other operating income contributed EUR 20.5 million to the overall result, up by EUR 11.5 million over the previous year (2021: EUR 9.0 million). The result from foreign exchange transactions showed a particularly strong increase of EUR 5.6 million or 30.4%.

Personnel and administrative expenses grew by EUR 36.6 million. The increase in personnel and administrative expenses was mainly due to higher costs for staff, IT, marketing and travel, as well as extraordinary expenses predominantly related to the war in Ukraine. Net extraordinary items totalled minus EUR 10.2 million. This mainly includes non-recurring legal, consulting and audit expenses, depreciation of property, plant and equipment in Ukraine, impairment of goodwill and a positive effect from the revaluation of derivatives.

The cost-income ratio improved slightly to 64.0% (2021: 64.2%). However, excluding the positive and negative extraordinary items noted above, the cost-income ratio was 60.8%.

Stable portfolio quality outside Ukraine; loss allowances across banks further strengthened in Q4

The share of defaulted loans outside Ukraine remained stable year-on-year at a very good level of 2.4% (2021: 2.4%). In Ukraine, this indicator increased by over 10 percentage points to 11.9%, mainly due to stage transfers for loans to customers in currently occupied territories. Loss allowances for the financial year totalled EUR 104.6 million (2021: EUR 6.5 million), of which EUR 86.7 million is attributable to the Ukrainian portfolio. Furthermore, for the banks outside Ukraine, additional allowances (management overlays) amounting to EUR 28.9 million were booked in the financial year to account for possible adverse macroeconomic scenarios, particularly with regard to inflation and increased energy prices. At the same time, the management overlays booked in COVID year 2020 were reversed in the financial year as the identified risks did not materialise, resulting in a release of EUR 16.4 million. The cost of risk for the banks outside Ukraine totalled EUR 17.8 million, which corresponds to 33 basis points.

The operations of ProCredit Bank Ukraine continue largely undisturbed, thanks to the digitalisation and process centralisation already implemented. The bank's capitalisation and financial position remain solid. Although damage to loan collateral or other operating assets of ProCredit clients is relatively limited at present, the ongoing war and especially the destruction of energy supply and other infrastructure present ongoing difficulties for local people and businesses.

Management Board announces outlook for FY 2023 and the medium-term 

The Management Board considers the business conditions for the 2023 financial year as fundamentally good, even if the war of aggression against Ukraine continues. Assuming continued adverse macroeconomic conditions, the Management Board expects the loan portfolio to grow in the mid-single-digit percentage range. Due to the overall framework shaped by the Ukraine war, cost of risk is cautiously estimated at up to 70 basis points, with a return on equity expected in the range of 6-8%. The cost-income ratio is expected to be at the level reported for 2022. The CET1 capital ratio is expected to be at a solid level of over 13% at year-end 2023, with a leverage ratio of around 9%.

Based on the overall good performance of the ProCredit banks and the assessment of the situation in Ukraine, the Management of the ProCredit group raised the medium-term target for return on equity from around 10% to around 12%. This guidance does not take into account any significant upside potential in Ukraine. The medium-term ambition for the cost-income ratio has been set at around 57% (excluding one-time effects). The customer loan portfolio of the group is expected to grow in the mid- to high-single-digit percentage range per annum in the coming years, whilst green loans in the medium-term should achieve a share of 25% of the total portfolio.

The ProCredit group’s Annual Report 2022 and the Impact Report 2022 are available as of today in the Investor Relations section of the ProCredit Holding website at . The Impact Report Package 2022 consists of two parts. The Impact Report itself provides a detailed overview of ProCredit Holding's sustainability strategy as well as its sustainability performance, initiatives and goals for the future. The Impact Report is supplemented by a data sheet that aims to continually improve reporting quality and enhance its comparability.