Strong Q1 result of ProCredit underlines the group’s positive medium-term outlook

• Result of EUR 29.5 million corresponds to a strong RoE of 13.3%, and thus in the area of the group's medium-term guidance
• Good development of net interest margin to 3.4% and moderate cost of risk at 12 basis points as key result drivers
• ProCredit Bank Ukraine makes moderate contribution to group result, demonstrating its structural strength despite a difficult environment; RoE excluding Ukraine at good level of 11.6%
• Cost-income ratio adjusted for non-recurring effects at 57.0% and thus 2.5 percentage points below the level of the previous year
• Deposit growth of 0.6%; loan portfolio declines slightly by 0.8%, with further improvement in portfolio quality
• Continued focus on green loans; current share of 20.2% in total loan portfolio targeted to grow to 25% in the medium term
• CET1 ratio at 14.1%; significant increase of 0.7 pp in Q1 driven by further growth in RWA efficiency

Frankfurt am Main, 15 May 2023 - The ProCredit group, which is mainly active in South Eastern and Eastern Europe, recorded a significantly improved financial result of EUR 29.5 million for the first quarter. The return on equity was thus at a much improved level of 13.3% and in the area of the group’s medium-term guidance. At 59.7%, the cost-income ratio remained roughly at the previous year's level, but improved significantly by 2.5 percentage points to 57.0% after adjusting for non-recurring effects. The result was mainly driven by the ongoing positive net interest margin momentum and stable credit risk indicators, which contributed to a low overall cost of risk of 12 basis points. In addition, ProCredit Bank Ukraine made a moderate contribution to earnings, although the return on equity excluding the result contribution from Ukraine was also at a good level of 11.6%. The loan portfolio declined slightly by 0.8%, whereas deposits continued the positive trend from previous years and showed growth of 0.6%. The CET1 ratio stood at 14.1%, 0.7 percentage points above the year-end level for 2022, which is partly driven by a further increase in RWA efficiency.

The loan portfolio declined by EUR 47 million or 0.8% (Q1 2022: +EUR 105 million or 1.8%), mainly due to currency effects and a further targeted portfolio reduction in Ukraine. Deposits increased by EUR 35 million or 0.6% (Q1 2022: EUR 25 million or 0.4%), attributable in particular to private clients. Compared to the previous year period, the deposit-to-loan ratio increased significantly by almost 13 percentage points to a good level of 104.3% (Q1 2022: 91.5%), especially on account of the strong growth dynamics in deposits over the last twelve months.

Strong profitability in the area of the medium-term guidance underscores the group's good earning potential and the sustainability of the business model

The group's quarterly result of EUR 29.5 million was significantly higher than in the previous year (Q1 2022: EUR -1.4 million) and corresponds to a strong return on equity of 13.3%. Operating income increased by EUR 16.1 million or 20.7% to EUR 93.7 million (Q1 2022: EUR 77.7 million), driven by higher net interest income as well as higher net fee and commission income. All ProCredit banks, including ProCredit Bank Ukraine, contributed positively to the result.

Net interest income grew by EUR 15.3 million or 25.3% to EUR 75.4 million (Q1 2022: EUR 60.2 million). The net interest margin widened by approximately 50 basis points compared to the same period of the previous year, growing to 3.4% (Q1 2022: 2.9%) as a result of stable lending margins and higher key interest rates.

At EUR 14.0 million, net fee and commission income was 10.9% above the level recorded in the previous year (Q1 2022: EUR 12.6 million). Income from transaction and card business developed particularly positively. Net other operating income decreased by EUR 0.5 million due to non-recurring positive effects in the previous year’s period, contributing EUR 4.3 million to total earnings (Q1 2022: EUR 4.9 million).

Personnel and administrative expenses increased by EUR 10.0 million, resulting in a slight increase in the cost-income ratio by 0.5 percentage points to 59.7% (Q1 2022: 59.1%). The increase in personnel and administrative expenses was mainly due to higher costs for staff, IT, marketing and travel, as well as extraordinary advisory expenses related to the planned conversion of the legal form. Excluding non-recurring effects, the cost-income ratio improved by 2.5 percentage points to 57.0% (Q1 2022: 59.5%).

Loss allowances were at a low level of EUR 1.9 million (Q1 2022: EUR 35.6 million), which is due to the good and stable portfolio quality of the banks. This corresponds to a cost of risk of 12 basis points, which is roughly in line with the average level of the past six years (excluding the allowances for Ukraine in 2022). The management overlays booked in the previous year have been completely maintained in the first quarter of 2023. At group level, the share of defaulted loans decreased slightly from 3.3% to 3.2%. Outside Ukraine, this indicator also decreased from 2.4% to 2.3%.

ProCredit Bank Ukraine starts financial year with positive result contribution

ProCredit Bank Ukraine contributed EUR 3.1 million (Q1 2022: EUR -23.4 million) to the group's overall result. In this context, loss allowances totalling EUR 3.1 million (Q1 2022: EUR 35.3 million) were recognised; this comprised updated model parameters and further stage transfers on the one hand, and repayments of defaulted loans on the other. The share of defaulted loans rose slightly since the start of the year, increasing by 0.6 percentage points to 12.5%.

Capital add-on from annual Supervisory Review Process (SREP); CET1 ratio increased to 14.1% due to further increase in RWA efficiency

It is expected that through the annual Supervisory Review Process (SREP), the Pillar 2 add-on will increase by 1.5 percentage points to 3.5% as of June 2023. CET1 requirement would increase from 8.4% to 9.2%.

The CET1 ratio stood at 14.1% as of 31 March 2023, which is 0.7 percentage points above year end 2022 and 4.8 percentage points above the new requirement. The total capital ratio grew by 1.1 percentage points to 15.4%. This increase is mainly attributable to the recognition of two-thirds of the consolidated result for FY 2022 in the group's regulatory capital as well as to further RWA efficiency measures implemented in the first quarter. In this context, particular mention is made of the expansion of the framework agreement with the Multilateral Investment Guarantee Agency (MIGA), which belongs to the World Bank Group, by more than EUR 200 million, resulting in a structural reduction in RWAs from central bank balances.

Quarterly result underlines the group’s earning potential in line with the published guidance

With the very positive development so far in 2023, the Management Board feels reaffirmed in the group's medium-term outlook. In the medium-term, the return on equity is expected to be structurally at a level of around 12%, and the cost-income ratio (excluding non-recurring effects) at around 57%. The customer loan portfolio of the group is expected to show annual growth in the medium- to high-single-digit percentage range in the coming years, with green loans expected to reach a share of 25% of the total portfolio. This guidance does not take into account any significant upside potential in Ukraine.

At this year's Annual General Meeting on 5 June 2023, the Management Board will submit a proposal to the shareholders for a vote regarding the conversion of the legal form of ProCredit Holding from a partnership limited by shares into a stock corporation. Accordingly, it is possible that the change in legal form could be completed in the 2023 financial year and thus earlier than originally planned.

The ProCredit group’s quarterly financial report for Q1 2023 is available as of today on the ProCredit Holding website under Investor Relations at https://www.procredit-holding.com/investor-relations/reports-and-publications/financial-reports/

Q1 2023 results at a glance

Contact:

Andrea Kaufmann, Group Communications, ProCredit Holding, Tel.: +49 69 951 437 138,
E-mail: Andrea.Kaufmann@procredit-group.com

About ProCredit Holding AG & Co. KGaA

ProCredit Holding AG & Co. KGaA, based in Frankfurt am Main, Germany, is the parent company of the development-oriented ProCredit group, which consists of commercial banks for small and medium enterprises (SMEs). In addition to its operational focus on South Eastern and Eastern Europe, the ProCredit group is also active in South America and Germany. The company’s shares are traded on the Prime Standard segment of the Frankfurt Stock Exchange. As the superordinated company in accordance with the German Banking Act and as parent financial holding company of the ProCredit financial holding group, ProCredit Holding AG & Co. KGaA is supervised on a consolidated level by the German Federal Financial Supervisory Authority (BaFin) and the Deutsche Bundesbank. For additional information, visit: www.procredit-holding.com.

Forward-looking statements

This press release contains statements relating to our future business development and financial performance, as well as statements relating to future actions or developments affecting ProCredit Holding which may constitute forward-looking statements. Such statements are based on the management of ProCredit Holding’s current expectations and specific assumptions, many of which are beyond the control of ProCredit Holding. They are therefore subject to a multitude of risks, uncertainties and factors. Should one or more of these risks or uncertainties materialise, or should underlying expectations or assumptions prove incorrect, then the actual results, performance and achievements (both negative and positive) of ProCredit Holding may differ significantly from those expressed or implied in the forward-looking statement. Beyond the legal requirements, ProCredit Holding does not undertake any obligation to update these forward-looking statements or to correct them in the event of deviations from the expected development.