Komercní Banka Group, in its earnings name on August 1, 2024, reported a strong monetary efficiency for the primary half and second quarter of 2024. The financial institution introduced a complete capital ratio of 18.95%, liquidity protection ratio of 170%, and a web earnings of CZK6.3 billion for the primary half of the 12 months. Progress in deposits and belongings below administration had been key highlights, alongside a deal with environmental, social, and governance (ESG) initiatives.
Regardless of a decline in web curiosity earnings and monetary operations, the financial institution maintained robust asset high quality and revised its full-year value of danger steering downward to 10 foundation factors.
Key Takeaways
- Komercní Banka reported a web earnings of CZK6.3 billion for H1 and CZK3.5 billion for Q2 2024.
- The financial institution’s whole capital ratio stood at 18.95%, with a liquidity protection ratio of 170%.
- Deposits grew by 6.5%, and belongings below administration elevated by 26.2%.
- ESG initiatives had been emphasised, together with eco-mortgages and companies associated to acquiring EU subsidies.
- Web curiosity earnings declined by 2.4% year-on-year, whereas charges and commissions elevated.
- The price of danger for the 12 months is revised to round 10 foundation factors.
- The financial institution expects a big income improve in 2025 because of digital gross sales and retail transformation.
Firm Outlook
- Mid-single-digit mortgage and deposit progress anticipated within the banking market.
- Income projected to develop low-to-mid single-digit; OpEx to have low-single-digit progress.
- Constructive impression anticipated from the sale of a subsidiary, with web proceeds between CZK2.4 billion and CZK2.5 billion in Q3.
- Steerage for 2025 to be up to date within the subsequent earnings name, with a big bounce in revenues.
Bearish Highlights
- Web curiosity earnings and monetary operations declined, with the latter reducing by round 18%.
- The macroeconomic outlook has been downgraded, with greater key coverage charges anticipated.
Bullish Highlights
- Robust progress in deposits and belongings below administration.
- Profitable migration of shoppers to a brand new digital financial institution platform.
- Anticipated progress in web curiosity earnings within the second half of the 12 months because of mortgage acceleration and improved deposit construction.
Misses
- Backside line was down 21% because of weaker web curiosity earnings and monetary operations.
- The price of danger elevated because of greater provisions, though it was revised downward for the total 12 months.
Q&A Highlights
- Administration mentioned the impression of market rates of interest on web curiosity earnings, stating that hedging operations offset sensitivity to short-term charges.
- The shift from present accounts to interest-paying deposits is anticipated to proceed, contributing to deposit progress.
- The financial institution plans to take care of its dividend payout ratio, with a robust capital degree supporting this technique.
Komercní Banka (ticker not offered), in its latest earnings name, introduced a combined but optimistic monetary image for the primary half of 2024. The financial institution’s stable asset high quality and strategic deal with ESG initiatives, coupled with progress in key monetary areas, counsel a steady basis for future progress. Whereas going through challenges resembling a lower in web curiosity earnings, the financial institution is adapting to market situations and leveraging digital transformation to reinforce its income streams. The administration’s forward-looking statements on the anticipated improve in revenues and value discount in 2025, as a result of completion of retail transformation and elevated digital gross sales, replicate confidence within the financial institution’s strategic route. Shareholders and shoppers might stay up for extra detailed updates within the upcoming earnings name, as Komercní Banka continues to navigate the evolving banking panorama.
Full transcript – None (KMERF) Q2 2024:
Jakub Cerný: Whats up and good afternoon. Good morning, girls and gents. Welcome from Komercní banka and thanks for sharing your summertime with us as we speak. It’s the 1st of August 2024 as we speak and we’re going to focus on the outcomes of Komercní banka Group for the First Half and Second Quarter of 2024. Please be aware that this name is being recorded. Our audio system as we speak might be Jan Juchelka, Chairman of the Board and CEO of Komercní banka; Jitka Haubova, Chief Working Officer; Jiri Sperl, Chief Monetary Officer; and Didier Colin, Chief Danger Officer. Standing by in case of questions for them are Miroslav Hiršl, Head of Retail Banking; David Formánek, Head of Company Funding Banking; and Margus Simson, Chief Digitalization Officer. As at all times, we are going to start with the presentation of outcomes. This might be adopted by questions-and-answer session. In the course of the presentation half, all members might be on listen-only mode. We might admire when you may maintain your microphones muted throughout that point. So, now I want to ask the CEO, Jan Juchelka, at hand over. Thanks.
Jan Juchelka: Thanks, Jakub. Thanks very a lot for being with us. Good morning or good afternoon to everybody. It’s my pleasure to stroll you thru with my colleagues Jitka Haubova, Jiri Sperl and Didier Colin via the presentation of second quarter of 2024 and first half of 2024. Komercní banka remained very robust in its capital base and its liquidity base. Our whole capital ratio totaled at a degree of 18.95%. Liquidity protection ratio, 170%. We’re maintaining wonderful degree of high quality of our belongings, which is translated into 13 bps of value of danger on a year-to-date foundation. Regardless of fairly dynamic progress of our mortgage e-book, we stay in very protected territory of 78.5% of loans to deposit ratio. The enterprise efficiency is framed in robust progress of deposits, each Retail and Company, by 6.5% on year-over-year comparability, with the very newest pattern of strengthening the present accounts, whereas the worldwide image was extra in favor of saving accounts and time period deposits. Property below administration, outdoors the stability sheet of the e-book, i.e., for us, answer delivered along with Amundi or our non-public banking options, grew by 26.2%, so very, very robust dynamism of progress. If you combine it along with pension schemes and subscribed investments in Komerční pojišťovna, KP Insurance coverage enterprise, the whole progress stays double-digit, near 14%. Shoppers’ loans, 3.7% total and we are going to go to the breakdown of this quantity. It’s extra pushed by Retail than Company, however it’s rising in each fundamental segments. All that was translated into first half monetary outcomes of CZK6.3 billion group web earnings, which is CZK33.6 per share, with double-digit ROE on the degree of 10.5%, and probably 11% if IFRIC 21 was linearized. Price-to-income ratio, 51.7%. The second quarter contributed into the primary half by CZK3.5 billion web earnings, ROE with 11.6% and cost-to-income under 50% on the degree of 49%. So, we are able to transfer to the macro echo, the place I’ll spend only some seconds. We’re nonetheless ready for the choice of the Czech Nationwide Financial institution Board as we speak on setting the brand new degree, probably the brand new degree of two weeks’ repo fee, presently at 40.75%. The GDP is rising in a really mediocre means within the Czech Republic. It was in second half of, sorry, in second quarter of 2024 by 0.3% on Q-on-Q foundation and 0.4% on year-over-year foundation. In truth, the primary, I’d say, if not the one well-working engine right here is the consumption of households. The tight — the labor market stays stretched with virtually non-existing unemployment fee, whereas the inflation is again to regular at 2%. What might be good to see is the evolution on Czech koruna, which landed at CZK25 per euro as of June 30, and we are going to see, as I stated, what the Czech Nationwide Financial institution will determine as we speak. The longer-term charges had been sloping barely, positively since January. Three months PRIBOR at 4.71%, which was down on year-over-year foundation by 242 bps. 10 years rates of interest had been at 3.89%, 5 years rates of interest had been at 3.85%, and 10 years GABI [ph] is at 4.24%. Subsequent web page goes to our enterprise efficiency on the aspect of financing. The loans grew by 3.7%. On the right-hand aspect, you see the breakdown between group lending. So it’s seen that what’s rising fairly properly is all the pieces that’s associated to housing. Both it goes from Modrá Pyramida Constructing Saving Firm or from Mortgages offered by the financial institution. Shopper loans are additionally fairly properly rising by 5.1%, whereas companies and different loans by 2.7%. If you break down these 2.7%, you see SGEF is among the fundamental con, let’s say, fundamental contributors within the sense of progress. It was our pleasure to indicate our signed Memorandum of Understanding with SGEF Worldwide and SG Group on shopping for the remaining 49.9% and changing into sole shareholder of this firm. We prefer it. We do consider that by changing into the only shareholder, we can cement our place as a number one financial institution in financing of Company shoppers. The housing loans grew by 42.3% on year-over-year foundation and by a really robust 60.2% on quarter-over-quarter foundation. So, lets say that, that is bouncing again with very robust energy and we consider that we can observe the market with out making any value — with out main any pricing race or no less than initiating them. So we are able to transfer to subsequent web page, which is the tombstones achieved by the transactions with our Company shoppers. Right here you see all the pieces the — all the pieces that’s framed in inexperienced is both ESG eligible or inexperienced bonds or inexperienced loans. It’s a pleasant combination once more between the general public sector and personal sector, between medium-sized corporations and huge corporations. We’re supporting our shoppers of their acquisitions and lots of others. So right here we stay very happy with being a robust supporter of Czech Company shoppers. We are able to transfer to subsequent web page. Deposits grew by 6.5%. I already commented these deposits or belongings below administration outdoors the financial institution. So our cooperation with Amundi is fairly easy and at the good thing about each side, which is translated into 26.2% progress along with the non-public banking, not solely Amundi however predominantly Amundi, 2% in life insurance coverage reserves and one other 2% within the discipline of pension schemes. The Group deposits in whole grew by 6.5%. If you break it down, it’s primarily pushed by enterprise deposits along with Retail deposits, and let’s say, anticipated drop in or steady slowdown in constructing saving. The combination, not a lot surprisingly, goes to remunerated deposits, so time period accounts, saving accounts, just a little bit much less however nonetheless rising in present accounts on year-over-year foundation. We are able to go to subsequent web page. Right here I’m handing over to Jitka. Thanks.
Jiri Sperl: Thanks very a lot, Jan. Simply earlier than I begin, I’m suggesting now to move phrase to Jitka, who will cowl for KB additionally essential space, i.e. ESG. So, Jitka, please, no less than briefly.
Jan Juchelka: Sorry, it was my communication mistake, Jitka. I ought to have given the phrase to you already at the start. Sorry for that, Jitka and ESG. Sorry.
Jitka Haubova: It’s very okay. Good afternoon. Within the following moments, as was stated, I want to discuss ESG as one of many notable consumer expertise enhancing philosophy, but in addition, let’s say, patiently debated and extremely regulated subject. To be particular, I’ve chosen one story, the story of ATMs sharing with different 4 Czech banks. ATM is an abbreviation for an automatic telemachine, which is a self-service banking terminal for withdrawing and depositing cash. I want to undergo all three ranges from G, governance perspective and primarily consumer satisfaction viewpoint. Our clients could make three withdrawals from 2,000 ATMs and make deposits in over 900 machines, which represents 40% of all ATMs within the Czech Republic. And it’s good to say that within the Czech Republic, over 60% of residents nonetheless want to pay by money. This service is our regulatory obligation and the costliest service additionally. So, logically, we attempt to cut back the price. Regarding S, social facet, shoppers now have higher entry to this 24×7 automated on-line service, due to shifting dozens of machines to villages the place there have been none ATMs earlier than and this has given to 150,000, 100,000 fellow residents ATM entry the place that they had none beforehand. Within the Czech Republic, we’ve got round 50% fewer ATMs than our typical telephones all through Western Europe and concentrated to the massive cities. And from the environmental facet, clients can see how we’re in a position to save vitality, how we are able to lower your expenses and the way we’re in a position to cut back our carbon footprint. Simply usually, we’ve got decreased our carbon footprint by 60% in comparison with 2019. Clearly, additionally it is a saving of cash, as a result of nearly all of saving is pushed by vitality financial savings. And this has been additionally positively assessed by score companies. As you possibly can see on the slide, all rankings of our ESG technique are at a excessive degree and we’re ranked among the many prime corporations all through the world. Lately, KB has obtained additionally many different awards, which will be seen within the slide within the right-hand nook. I want to spotlight that we received Financial institution of the 12 months in 2023, together with recognition for a financial institution with out boundaries. Essentially the most seen characteristic was the so-called Contact Playing cards to be used by blind shoppers. We had been additionally delighted to be granted the Inexperienced Crown Award in recognition of our Inexperienced Product, a mortgage for sustainable applied sciences. By the way in which, our share of latest Company funding loans with the ESG parameters is round 50%, 5-0, and we’ve got additionally a number of leasing, leasing for Company photovoltaic vegetation, and in addition we’re offering eco-mortgages, we’re offering additionally complete service and recommendation on getting ready ESG methods, acquiring EU subsidies for our shoppers and in addition offering the vitality audits. All of our ESG efficiency indicators will be seen right here on the left-hand nook. I already talked about the key ones. Lastly, the final field reveals the remaining regulatory actions. We introduced Double Materiality evaluation, which is essential from the CSRD perspective. We introduced so-called Business Atmosphere scan to ECB, the place we evaluated the local weather danger. And likewise, lastly, we’re assessing our shoppers and transactions making use of the ESG features, copying KYC process, as a result of it’s essentially very comparable. To conclude, we’re assured that ESG will be — can provide advantages not just for financial institution and our shareholders, but in addition shoppers. Jiri?
Jiri Sperl: Sure. Thanks, Jitka. Monetary outcomes. so, let me begin with the massive image, i.e. the primary drivers of profitability year-on-year, on the higher left a part of the slide. General, the bottomline is, as already talked about, by Jan, minus 21%, with weaker NII and monetary operations, however on the identical time with very stable charges and commissions. There’s additionally a visual constructive contribution of the regulatory funds on the degree of just about CZK500 million. In any other case, OpEx is rising, however nonetheless below management. And what makes the primary distinction year-on-year is the price of danger, the place this 12 months, in 2024, after heavy releases final 12 months, we created by virtually CZK1.5 billion extra provisions. So within the period of value of danger, it’s clearly the bottom impact. From the quarterly perspective, that’s the higher proper chart, there’s a bounce from CZK2.8 billion to CZK3.5 billion, influenced primarily by regulatory expenses, after all, already in Q1 this 12 months, as it’s the obligation. However even when we regulate by this impact, there’s a quarter-over-quarter progress, which is constructive. True, it’s influenced by constructive value of danger contribution. And nonetheless, it results in the double-digit profitability indicators, as talked about by Jan. To say her — right here, no less than, a return on Tier 1 capital on the degree of 13.3 IFRIC adjusted. Let’s transfer to the subsequent slide, please, which is about stability sheet. So the stability sheet slowed down a bit, rising 1.1% year-to-date. However nonetheless, there’s a stable progress year-over-year on the degree of 4.5%, i.e., roughly CZK70 billion in absolute phrases. On the legal responsibility aspect, nonetheless, the deposits are the primary driver of the expansion. On a year-on-year foundation, rising by a robust 10%, whereas each cash market operations and accounting capital went barely down. Decline of the capital pre-series solely as a cost of the dividends, final 12 months’s revenue dividends in Q2 this 12 months. On the asset aspect, half of the brand new sources have been positioned to the loans and the remaining half to the repo operations with the Central Financial institution. It’s seen that the liquidity stays nonetheless very excessive, very wonderful. Jan was mentioning LCR at degree of 170%, to enrich additionally just a little longer liquidity profile measured by NSFR can be at very protected degree, i.e., 140% plus, when the regulatory restrict is at 100%. Let’s transfer to the web curiosity earnings, please. Sure, thanks. And let’s begin with the year-over-year perspective. Right here, NII went nonetheless down by 2.4%, influenced primarily by, first, declining earnings from the deposits in nonetheless, I’d say, difficult setting. Second, elevated prices of senior and non-preferred loans. It’s, let’s say, a regulatory-wise hyperlink to the MREL. Final 12 months, we had been nonetheless on this period for constructing — within the constructing section of this regulatory obligation, whereas this 12 months, the impression is transposed into the P&L NII already absolutely. And third purpose, additionally the reason being the impression of minimal compulsory reserves, applied or cancellation applied as of October 1st final 12 months, can be not a negligible impression. If we focus, nonetheless, extra on the developments, i.e., the quarterly evolution, on the backside proper chart, we see that each earnings from deposits and loans have grown, not considerably, however the progress is there. And to say solely classes declining are two classes, different NII earnings, and that’s primarily, that’s the pink shade, that’s primarily as a result of we paid dividends in fifth Might. And the opposite one is NII from Funding Banking, which is, by definition, extra well-timed. So having stated this, I consider that I can say that fundamentals for the quarters to return are wholesome when it comes to core web curiosity earnings. This additionally transposed into web curiosity margin, as proven within the higher left chart, the place there’s a slight transfer up on a year-to-date foundation and we expect that the pattern is to proceed within the quarters to return. Let’s transfer to the charges and commissions. So that they have grown stable tempo, even, I’ve to say, a bit higher than we anticipated. There are two fundamental causes for this constructive evolution. First, it’s charges from cross-selling, rising year-on-year by a really robust 10%. And right here to say an essential driver of the cross-sell charges is a dynamic evolution within the insurance coverage enterprise, the place the gross premium written is rising on non-life plus virtually 18% year-on-year, and on life insurance coverage a bit much less, however it’s subcategory danger life insurance coverage by a really robust 12%. And the second purpose for such a constructive evolution of the charges and commissions is behind specialised monetary companies, the place thanks to raised earnings from non-public banking, bonds, insurance coverage, custody, depository companies, and in Q2 additionally mortgage syndications, it was rising by a brilliant robust 21%. And that is bringing me to the monetary operations. Thanks. So, right here to say after tremendous excessive lead to 2023, there’s a correction, a transparent correction down by roughly 18%. And this correction is solely influenced by decrease Funding Banking earnings. What’s behind primarily is a weak demand for rate of interest and FX hedging as a result of growth and expectations for verify rounds, charges, each FX and rate of interest. On a constructive, far more constructive be aware, a lot much less risky FX earnings from the structural e-book, the blue a part of the chart, is working nice, supported primarily by greater, a lot greater volumes of the transactions year-over-year, primarily playing cards funds, and in addition by some form of changes within the pricing. At this entrance, I imply the blue a part of the chart, we expect the developments to proceed no less than in Q3, however in all probability additionally in This autumn as a result of seasonality. Q3 is usually the best quarter, one of many highest quarters as a result of touring seasons. Final level earlier than passing phrases to Didier is in regards to the OpEx. So there are historically below management year-on-year flat and even a bit down minus 0.2. On the identical time, it needs to be reminded, and I used to be touching that already at the start of my speech, that this chapter has been very a lot supported by a lot decrease regulatory expenses. In order that’s the decision fund and deposit assure funds that decreased year-on-year. That’s the pink shade within the chart. On the underlying foundation, with out this constructive impact, the expansion of the price can be no matter between 5% and 6%. And I’ll get again to that in the course of the outlook for the total 12 months. For those who go briefly into the construction, private expense is rising by 7% year-on-year, affected, after all, primarily by the common annual improve of salaries and comparatively newly by one other aspect, which is form of profitable in sourcing actions in IT space. Undecided I used to be mentioning final time, however the financial institution may be very profitable in sourcing actions, i.e. changing externals or third events’ builders by the workers. And naturally, it has on one hand aspect, there may be growing HR value, after all. However, it’s deducting from that half and it’s proper a part of the chart, flat and even barely declining. So for, let’s say, comparability functions, these two classes needs to be taken in all probability collectively. And eventually, depreciation rising low-teens share factors as a mirrored image of digitization investments and activation of those investments as part of our transformation. Transposing to value earnings ratio, that’s the underside chart, IFRIC linearized, landed at 49.5% on year-to-date foundation. And now it’s time for Didier Colin specializing in belongings high quality and value of danger. Thanks.
Didier Colin: Thanks, Jiri. Good morning, good afternoon to all of you. Turning to the evolution of our asset high quality within the second quarter. I’ll briefly begin with providing you with an outline of our default fee evolution, not disclosed on this slide, however being a bit the anchor of our asset high quality in three factors. The primary level is that our SME portfolio, which began to document some default fee improve within the first quarter, within the second quarter, stabilized. So this can be a first piece of fine information. And nonetheless within the Company section, we proceed to document close to zero value of danger degree for the massive Company portfolio. The second level considerations the Shopper mortgage and Small Business portfolios. And I’ll briefly point out it as a result of, as you in all probability keep in mind, these two portfolios had been additionally just a little bit below some default fee hikes within the latest quarters. And this previous quarter, we continued to witness the stabilization of these two portfolios. And the final temporary remark goes for our Mortgage mortgage publicity, the place right here we proceed to see some ranges close to the 2022 traditionally low level of default fee. So, total, a great evolution within the second quarter. The interpretation of this into the IFRS 9 danger classification offers you what’s on this slide. Mainly, with our publicity labeled as to barely down, once more, being the reflection of a robust resilience of our mortgage publicity on the non-public particular person section, which greater than offsets some average danger score deterioration noticed for the small enterprise portfolio, in addition to a few watch itemizing conditions for our Company section. And what’s additionally a great persisting level is that the depth of migration that we repeatedly measure between S1 and S2 proceed to be within the second quarter at low degree. The publicity labeled default, the S3 a part of our portfolio, additionally barely decreased, merely being the direct impression of a constructive decision of the state of affairs of considered one of our massive Company shoppers, in addition to being the mechanical results of our recurring proper of campaigns, which we carry out on small ticket exposures with restricted restoration potential. So this provides you, as of the top of the second quarter, a steady S2 ratio at 15%, a steady NPL or S3 ratio at 2%, and a steady provision protection ratio for our defaulted portfolio. How this translated when it comes to value of danger is on the subsequent slide, the place you see that for the second quarter, we booked a a lot decrease degree of provision in comparison with the primary quarter, at solely CZK100 million in web creation of provisions, with the truth is two reverse photos between the 2 fundamental segments. Beginning with the Company section, we recorded CZK100 million in web reversal, like previously, focused on just a few consumer conditions, and total providing you with the affirmation of a continued good degree of our restoration efficiency for this Company section. Going the opposite means, for the Retail section, we booked just a little bit greater than CZK200 million in web provision creation, which is a degree that may be a bit greater in comparison with the degrees recorded within the earlier quarters. And right here, this CZK200 million is made from two parts. The primary one, at CZK100 million comes from what we name the core value of danger creation, being the truth is value of danger coming from the transition into default. And the second CZK100 million got here from our determination to additional construct up our IFRS 9 provisions. This being cut up between our inflation overlay and our forward-looking macroeconomic reserve. Speaking about these reserves, for the second quarter, we saved them flat on the degree of CZK2.3 billion. In truth, this steady degree is justified by the content material — the context of the latest default fee hikes on the Shopper loans, Small Business and SME portfolios. And this can be a stability for this reserve, which we anticipate to see till the top of 2024, given or considering the uncertainty of the macroeconomic setting. We additionally introduced for the primary time the construction of our year-to-date value of danger at 13 foundation factors, which you’ve gotten on the underside proper of this slide. I can’t touch upon it intimately, however what it tells you can be three factors. The primary one is the reconfirmation of the resilience of our credit score danger profile, regardless of these latest default fee hikes on a few of our portfolios. The second aspect that or second message that it conveys is the robust restoration efficiency, totally on the Company, however to some extent additionally coming from the Retail portfolio. And the final level is our prudent method to portfolio provisioning utilized to the non-defaulted publicity. Now, taking into consideration, and this would be the finish of this temporary overview, taking into consideration the content material evolution of our danger credit score danger profile within the second quarter, we’ve determined to revise downward our steering for the total 12 months from its earlier degree within the vary of 15 foundation factors to twenty foundation factors to the brand new degree of 10 foundation factors. And this decrease degree, the truth is, depends on three fundamental expectations. The primary one being the anticipated improved outlook for considered one of our, name it, massive Company shoppers by the top of the 12 months, for which there’s a big quantity of provision. The second is the reducing of our default fee assumption for the massive Company portfolio, taking into consideration what we noticed within the first semester. And the third assumption is the continued stabilization of the chance profile for these three portfolios that went via some default fee hike within the latest quarters, being Shopper loans, Small Business loans and SME. And on this, I’ll hand over again to you, Jiri. Thanks.
Jiri Sperl: Thanks, Didier. So, let’s proceed with the capital. As Jan already talked about at the start, the capital reclass remains to be very robust, even if we’re accruing 100% of the revenue for this 12 months’s revenue dividend. And it even barely elevated within the first six months of the 12 months, primarily as a result of slowdown of the mortgage progress within the Company. Presently, it’s on the degree of 18.95%, which is roughly 2.45 share factors above the minimal necessities and even a bit above the administration buffer for the capital reclass. It’s in all probability value to say right here now that there have been some modifications within the minimal capital necessities lately. First one, the lower of the countercyclical buffer by 58 foundation factors from July the first this 12 months. And the opposite one, improve of systemic danger buffer by the identical 50 foundation factors, however as of January 1, 2025. So, principally, these two modifications are offsetting one another. There’s additionally, let’s say, shift within the time. Which is bringing me to the final slide of the presentation. So, that’s outlook for 2024. It’s normally up to date and there are some modifications. I’d say each instructions, in comparison with the three months previous steering. Let’s begin with the macro-eco. So, our skilled downgraded a bit the GDP progress from, I keep in mind, 1.4% three months in the past to 0.7%. Now, Jan, was already commenting on that, so no extra feedback right here. The important thing coverage charges by CNB are anticipated to land on the finish of the 12 months a bit greater than we thought three months in the past. At the moment, it was 3.5%. Now, our macroeconomists anticipate 3.75%. And sure, within the meantime, I see that CNB Board already determined as we speak. So, the choice is minimize by 25 foundation factors, which is in step with our macroeconomists. So, that’s macro-eco entrance. When it comes to banking market, there are not any modifications on this outlook, i.e., each loans and deposits are anticipated to develop mid-single-digit. For KB enterprise outlook, we’re confirming the outlook for the expansion of the loans, i.e., mid-single-digit. Most likely after a little bit of a slowdown in H1, primarily in CIB loans manufacturing, I’d add the decrease finish of mid-single-digit, however nonetheless mid-single-digit. On the flip aspect, we’re upgrading the expansion of the deposits from mid-single-digit to mid- o-high single-digit, due to the profitable first half of the 12 months at this entrance. The revenues, on the income aspect, we additionally affirm principally our steering, i.e., revenues are going to develop low-to-mid single-digit, primarily supported by the rising enterprise and enhancements within the stability sheet construction. Nonetheless, the identical like for loans progress, the steering has a bit modified to the additionally decrease edge or decrease finish of the low-to-mid progress because of some components noticed in H1, primarily slowdown of Company loans and in addition slower shift within the deposit construction in favor of unpaid deposits than anticipated. No modifications on the OpEx aspect, so we’re confirming low-single-digit progress. And to be full, we’re bettering the steering for value of danger, as already commented by Didier, so it’s from 15 foundation factors to twenty foundation factors, three months in the past, to 10 — round 10 foundation factors. And eventually, there may be one constructive FX impression into our P&L, which is extraordinary earnings from sale of Václavské náměstí 42 subsidiary, which goes to be booked in Q3 this 12 months, because the closing was at the start of July. And when it comes to the quantification, we nonetheless have no idea precise impression, however will probably be no matter between CZK2.4 billion and CZK2.5 billion. So, to be booked, you will note that within the figures in three months’ time. So, that’s it and I’m passing the phrase to Jakub.
A – Jakub Cerný: Due to all of the presenters. Now, we might be comfortable to reply your questions. Girls and gents, let me remind you that this assembly is being recorded. When you’ve got a query, please click on on the icon with raised hand on the higher a part of your display, after which please wait to be known as. In case you are linked via a phone, please watch for me to ask you to ask questions later within the name. So, it appears Mehmet Sevim from JPMorgan, which is to ask the primary query. Mehmet, please go on.
Mehmet Sevim: Good afternoon. Thanks very a lot for the presentation and for taking my query. I’ve three questions, if I’ll. One, mortgage progress clearly monitoring a bit behind your preliminary expectations and in addition decrease than the sector pattern. However clearly, as you additionally steered, that is coming from the enterprise section extra visibly. So, can I simply ask, what’s driving that? Is it a shock to you or was it in step with your expectations? And after we take into consideration the second half of the 12 months, are you actually comfy that you could attain the mid-single-digit goal? And possibly linked to this additionally NII, now given the quarterly drop pushed by all these different segments and the IB enterprise, seems like it should really want a giant restoration within the second half to achieve the steering. Once more, how comfy are you on that? And eventually, simply on the sale of the headquarters constructing and the upcoming web proceeds from it, can I affirm that the earnings from that might be accrued for dividends in step with this 12 months’s 100% coverage? Thanks very a lot.
Jan Juchelka: Thanks for the questions. I’ll begin and doubtless no less than for first query, my colleagues from enterprise strains will full me. So, when it comes to the mortgage progress and whether or not it was in step with our expectation or not. I’d say not absolutely when it comes to Retail loans and extra concretely Mortgage loans, it was in line. And even in case you have a glance on the gross sales aspect in Q2, it was an enormous restoration, which isn’t within the stability sheet but. So, it’s coming in second half of the 12 months. We had been anticipating a bit extra dynamic progress for Shopper loans, however evidently the market a bit slowed down versus our authentic expectation. So, on the finish of the 12 months, in all probability we’re going to develop a bit slower than anticipated three months or six months in the past. And I’d say the largest form of miss is coming from the CIB loans. We had been a bit declining and that’s one thing the place we have to get again to the dynamics. Perhaps to say what’s the expectation for the total 12 months. So, I used to be in all probability mentioning final time, however the progress needs to be usually pushed extra by Retail, as we’re already in some way benefiting from the virtually accomplished transformation. So, for Retail, it’s mid-single-digit plus and supported primarily by the restoration on mortgage loans. When it comes to Company, our steering is now reasonably, let’s say, low-to-mid. And that’s offset a spot from the primary half of the 12 months. I don’t know whether or not my colleagues, Mir and David, want to touch upon that.
Miroslav Hiršl: Sure. Only a brief remark from my aspect relating to the enterprise or Company financing. Typically talking, the sentiment of the Corporates, particularly the trade, is form of hesitant. And the businesses are reviewing their choices and being suspending some selections relating to additional investments. Additionally, given the financial state of affairs in Germany being the most important export marketplace for our corporations. Nonetheless, we document quite a lot of fairly fascinating initiatives within the pipeline, additionally on the aspect of the massive corporations. Not solely investments, but in addition within the space of acquisition, financing and actual property. So, principally, this provides us confidence for the second half of the 12 months to be stronger within the technology of latest loans, and particularly a technology of latest belongings.
David Formánek: And if I’ll, I’ll simply use one sentence to say that I share the optimism on Mortgages. I see the pipelines which can be fairly full. The market has been rising 80% in comparison with the final 12 months within the first six months and we needs to be quickly after the one mortgage manufacturing facility implementation in a form to take much more than we did within the first six months of the 12 months. So, a reasonably optimistic aspect there.
Jan Juchelka: Let me add one sentence, if I can, from my aspect on that entrance. We now have made an amazing transfer in migrating shoppers within the Retail a part of the New Digital Financial institution from the previous world to the brand new world, while onboarding new shoppers. So, we are actually having in {our relationships} 47,000 extra shoppers than we needed to. After which, we’d like to have them banking with us in bigger scope than solely with the preliminary checking account opening, and let’s say, debit card. So, we’re constructing one other a part of foundations for rising additional on the aspect of Retail. The tendency of promoting of latest — gross sales of latest mortgages is fairly promising. We are going to acquire additional on our aspect of processing them after constructing and setting up the brand new one mortgage manufacturing facility. And in parallel with that, and that is outdoors the NII, however extra on the aspect of charges and commissions, we do consider that we’ll proceed promoting the non-life half, in addition to life a part of our insurance coverage by double-digit, because it was the case on a year-to-date foundation. So, on each NII and charges and commissions, we see a reasonably promising horizon right here. And, let’s say, underlined in all probability by as we speak’s determination of the Czech Nationwide Financial institution.
Jiri Sperl: Sure. And I believe that’s the primary query. The second query was associated to; I need to refer extra that [ph] to the consolation of the administration to ship NII within the second half of the 12 months. Effectively, we aren’t saying it isn’t a difficult goal, however we strongly consider that will probably be delivered. And I can listing a number of explanation why we really feel so. So, first one is, and I used to be touching that even earlier than, it’s a form of acceleration of the loans in second half versus half one. So, that’s clear. The opposite purpose is that we expect that deposits, spreads are going to proceed barely up. Perhaps right here it’s value to say that Q2 this 12 months was the primary quarter after, I believe, six or seven, when the price of deposits went down and we expect this time to proceed. Third level can be again, and Jan was touching this level throughout this a part of the presentation. However, as a matter of reality, in the course of the Q2, the construction of the deposits improved, and after a while, present accounts, one of the worthwhile merchandise within the financial institution’s portfolio, was rising quicker than the pay deposits, no less than quarter-over-quarter and we consider that that is going to proceed even within the quarters to return. Perhaps right here, one technical element of the change of this, let’s say, structured pay versus unpaid has occurred reasonably on the finish of the quarter. So, you don’t see within the figures the impression but, which is growing our consolation for the quarters to return. Third, possibly it’s additionally form of a technical base impact. However it’s additionally essential to keep in mind that the primary three quarters of this 12 months, on a year-over-year foundation, was — had been hit by the cancelling of the minimal compulsory reserves. And yearly impression, as I keep in mind properly, was round CZK1.1 billion. And on a base impact, it is not going to be the case of This autumn this 12 months anymore, proper? So, as a result of this occurred with the validity October 1st final 12 months, so This autumn this 12 months might be, for the primary time on form of a really comparable like-for-like foundation. And a final level to say is, and once more, Jan was touching the purpose, however we’re rising variety of the shoppers considerably. And this pattern is anticipated to proceed even by the top of the 12 months. And naturally, the brand new shoppers, after all, with some delay, however are additionally, amongst others, bringing their deposits with them. In order that’s form of a listing of round 4 or 5 causes what’s behind our steering. Thanks. And there was nonetheless a 3rd query. Head workplace constructing, properly, to say the capital degree, as I used to be commenting on that, remains to be tremendous robust, even we’re accruing 100% of the revenue. So we don’t have a tendency to vary the dividend payout ratio. In different phrases, I don’t see any purpose to not pay it additionally as a dividend. In fact, I’ve to say topic to approval by the overall assembly. However once more, I don’t see any purpose why not. I believe we coated all three, proper?
Mehmet Sevim: Sure. Sure. Yeah. Thanks. I actually admire the excellent reply.
Jiri Sperl: Pleasure.
Jakub Cerný: Thanks. So let me remind you, when you want to ask a query, please increase the hand button. The subsequent query is coming from Michał Łoniewski from EnBank [ph]. Michał, please go forward.
Unidentified Analyst: Sure. Hello. Thanks a lot for taking my questions. I simply needed to verify. So it’s nonetheless doable that Komercní might pay out 100% subsequent 12 months if I heard appropriately. And secondly, possibly I want to as soon as once more ask about this web curiosity earnings steering. As a result of if I’m calculating appropriately, if we’d assume even that web curiosity earnings would develop by 1% year-on-year, this could imply that the present web curiosity earnings — quarterly web curiosity earnings run fee ought to improve about 9%. So this can be a lot, I’d say. So that is very, very optimistic steering, I’d say. And thirdly, I want to ask in case your assumptions relating to the bottom fee for the top of the 12 months will in some way assist this NII outlook. That is, I assume, sure, if I’m not mistaken, 25 bps greater proper now the bottom fee on the finish of the 12 months than you anticipated 1 / 4 in the past. Yeah, that’s all from me. Thanks. And possibly yet one more query, this one-off within the third quarter is CZK2.4 billion and CZK2.5 billion, that is gross or web quantity? Thanks.
Jiri Sperl: Okay. So query primary, the reply is, sure. That was about SGEF and SG dividends, confirmed, understood properly. Query quantity two, once more, touching the comparatively anticipated enormous and vital progress in our NII. You’re saying 9%, my determine is reasonably 7%. I’m confirming that that is our steering. I’m confirming it’s a difficult goal, however deliverable. And possibly so as to add yet one more, one final remark is that, that’s true that it’s reasonably delicate for some, let’s say, assumptions used. And doubtless an important assumption right here is many times. And we’re touching that three months in the past, six months in the past is the construction of the deposits. So as soon as this assumption is confirmed, will probably be there. And the third level is, I didn’t get it absolutely. So it was one thing about base fee was our expectation of base fee. I believe I used to be touching that in the course of the outlook half and the steering of the financial institution is 3.75% on the finish of the 12 months. I imply, the 2 weeks repo fee of the Czech Financial institution. Was this the query or?
Unidentified Analyst: Effectively, 1 / 4 in the past, there was a steering for 3.5% base fee. So the Central Financial institution will minimize the bottom fee to three.5% versus 3.75%. I do know this can be a very small distinction proper now, small change within the forecast. However I used to be questioning if it should impression web curiosity earnings in any means.
Jiri Sperl: Okay. Okay. Sorry, I’ve obtained it now. Effectively, not likely, as a result of the structural place of the financial institution hasn’t modified. Which means that the financial institution is principally impartial to no matter strikes of the market rate of interest. So, yeah, the shortest reply is not any.
Unidentified Analyst: Okay. And really a query about this one-off, if it’s gross or web, the impression you introduced. And yet one more query, possibly relating to the outlook for 2024. Let’s say that Komercní banka will be unable to ship NII progress for 2024. Let’s say will probably be flattish. Would you then attempt to make any effort to chop prices to take care of value to earnings steering? Sure.
Jiri Sperl: Sure. So two observe up questions. First one, one-off, whether or not it’s a gross impression or web impression. I’m undecided I perceive absolutely, however the impression — web impression into the P&L of the financial institution might be CZK2.5 billion. So in all probability in line with your definition, it’s web, proper? So it’s promoting value principally minus the e-book worth, so web. And outlook for 2025. Let me be much less concrete, as a result of we’re going again to the outlook for 2025 in the course of the subsequent earnings name. In fact, if the financial institution is just not delivering, let’s assume the outcome on the income aspect. We might do the very best or some corrections, changes additionally on the OpEx aspect. Sure. Go forward.
Jan Juchelka: I believe Jiri, Michal was extra in 2024 nonetheless.
Unidentified Analyst: Sure. That’s right.
Jan Juchelka: However the reply remained the identical.
Unidentified Analyst: Okay. Thanks a lot. Thanks.
Jakub Cerný: Thanks. So the subsequent query is coming from Vikram [ph]. Please go forward.
Unidentified Analyst: Hello. Thanks very a lot for the…
Jan Juchelka: Sorry, I can’t hear you no less than.
Unidentified Analyst: Hello. Sorry. Yeah. No. I obtained muted. I’m sorry about that. My query is on the impression of market rates of interest on NII. After we give it some thought, which fee issues to your NII profile extra? Does it — is the repo fee the important thing fee for you or is it the 10-year yields? And if this — these two diverge, that means the repo fee goes down, however 10-year yields don’t, because it oftentimes occurs. What can be the impression on NII profile from mortgage deposit or your hedges perspective?
Jan Juchelka: Effectively, naturally, the financial institution is extra delicate for the short-term rates of interest, as we’ve got actually enormous quantities invested into repo loans. On the identical time, hedging operations are roughly offsetting that roughly absolutely, i.e., if we — and I used to be commenting on that like six months or 9 months in the past. We adjusted our hedging coverage and centered extra on NIM hedging, web curiosity earnings, i.e., shorter impression, however solely partially. The impression of long term charges is decrease. But when I’m speaking about, let’s say, neutralization of the structural place when it comes to rate of interest danger, after all, yeah, I believe, we’re hedging each components, short- and long-term.
Unidentified Analyst: Understood. And my second query is on the combination of present accounts within the whole deposits. We see, after all, we noticed migration from present accounts to curiosity paying deposits because the charges rose. Now, on the charges happening, how do you see this combine evolving? Do you see the present accounts as a share of deposits going again to the place it was earlier than charges rose or do you suppose there may be purpose to consider that the client conduct has modified and possibly the shoppers may put cash in time period deposits or mutual funds, et cetera, and the automobile ratio can truly come down?
Jan Juchelka: Precisely. You might be completely proper. And this was already taking place over the past quarter. And we strongly consider that it’ll proceed.
Unidentified Analyst: Okay.
Jan Juchelka: In our projections, that, after all, we see and know the conduct of the shoppers from the previous via all completely different cycles. So we consider — we see and consider that these shifts are persevering with. On the identical time, we aren’t very aggressive on that entrance. What I imply is that our expectation within the planning paperwork is that this paid versus unpaid ratio is not going to get again to the unique ranges, as a result of presently, merely, the world is a bit completely different and with the persevering with digitization, after all, the shoppers handle their liquidity, i.e., let’s say, present accounts versus the paid deposits far more effectively. So there may be anticipated improve or enchancment in that regard, however not as quick and excessive as was the previous.
Unidentified Analyst: Yeah. Thanks. Perhaps one final fast query, if I’ll, on the New Digital Financial institution. As we see a really quick consumer progress, as soon as these accounts — are you able to touch upon how — what can be the deposit ticket dimension of those accounts in comparison with conventional Komercní banka shoppers? And do you anticipate, possibly in a single or two years’ time, a kicker to return within the type of deposit progress as these digital financial institution accounts get funded? What’s your expectations on these issues? Thanks.
Jan Juchelka: If I’ll take the primary a part of the reply, what we see on the influx, which is sort of excessive, is that the traits don’t look too completely different from the shoppers that we’ve got been buying, I’d say, earlier than this marketing campaign and earlier than NDB was launched. However, it’s in all probability rational to anticipate a bit greater churn after a while. We included the idea into the enterprise case, we are saying in all probability 20% of shoppers acquired this manner is not going to stick with us. We consider that for the remaining, they are going to begin behaving roughly the identical means as customary KB shoppers at all times are. However that is nonetheless to be examined as a result of it’s a bit too early to conclude. For the second, I’ve to say that what I see from the conduct of this pattern of shoppers, there are not any main deviations from what we anticipated. Does it make sense? Am I reacting to what you needed to know?
Unidentified Analyst: Sure. Sure. Thanks very a lot. Yeah. That’s useful.
Jan Juchelka: Thanks.
Jakub Cerný: Thanks. So, I want to invite members who’re linked via a phone. [Operator Instructions] And we’ve got one coming from Kamil Slovski or not [ph] [inaudible].
Unidentified Analyst: Sure, we’ve got. Sure. Sorry for that.
Jakub Cerný: Thanks loads, Kamil. Yeah.
Unidentified Analyst: I’ve only one query in regards to the 2025 steering and your targets of the technique. From what I understood, we had been imagined to see like this accelerated enchancment in value to earnings ranging from 2024 and going into 2025. This was imagined to be a results of this rollout of the New Digital Financial institution. My query can be, would we see one thing nonetheless this 12 months, is that this delayed or rolling out or is that this steering legitimate for the price to earnings?
Jan Juchelka: Okay. I’ll begin. The primary remark might be I touched it a few minutes in the past. Allow us to remark and replace — probably replace the steering for 2025 in the course of the subsequent earnings name, which would be the devoted session. Nonetheless, we’re sticking to the truth that in 2025, there needs to be reasonably vital bounce in revenues. Why? Due to benefiting from the finished Retail transformation and monetizing on that. Which within the mixture with the rise — considerably elevated variety of new shoppers and elevated digital gross sales will considerably enhance the image. On the OpEx aspect, I can in all probability point out already now that we expect even decline of the prices in 2025. One of many causes, on prime of the elevated effectivity, can be the regulatory-wise impression. I imply, additional lower of the decision fund expenses. That’s in all probability what I’d point out now and to cease now. And when you don’t thoughts, to provide you extra particulars in three months’ time.
Unidentified Analyst: Yeah.
Jiri Sperl: We will certainly — Kamil, we will certainly come again to you with extra detailed breakdown of how we’re doing within the discipline of implementation of the strategic plan. However please, only a small reminder that the truth that we’ve got within the first stage reshaped fairly massively the group of the headquarter right here in KB. Within the second step, we’ve got been investing into the brand new applied sciences. We expect that there might be twofold impact. The primary one is that we’re massively simplifying the consumer’s proposition and all the pieces what’s behind that. So, let’s say, all the pieces what is just not seen for the consumer. So, our inside processes, and therefore a better degree of end-to-end digitized gross sales. However, or let’s say as a consequence of that, we’d like much less branches, we’d like much less individuals contained in the financial institution. And right here we’ve got been delivering thus far what we promised so far as the variety of branches is worried and so far as the trajectory of FTE is worried. However we are going to come again to you with an in depth breakdown. For — the statistics aren’t full but as a result of we’ve got 0.5 million customers of the brand new financial institution software, out of which nearly 50,000 fully new shoppers. So, we consider that subsequent quarter we might be extra comfy to provide you extra like a 360 view.
Unidentified Analyst: Glorious. Thanks.
Jakub Cerný: Thanks, Jiri. As we don’t appear to have any query now within the queue, let’s wait just a few moments if one comes. It doesn’t appear so. So, I want to hand again to Jan for a conclusion.
Jan Juchelka: All proper. Thanks very a lot for being with us. Thanks additionally on your very concrete and straight to the purpose questions. We very a lot admire it. I want to thank all my colleagues who introduced or who answered your query. We do admire the braveness of KB share out of your aspect and we clearly keep at your disposal for any questions you might need in between, and we’re very a lot trying ahead for the subsequent quarter presentation with you, which might be enriched, as we’ve got simply ended with that, additionally by a bit deeper dive into the deliveries of our strategic plan. In between, take pleasure in the remainder of the summer season season and have a great afternoon. Thanks very a lot, everybody.
Jiri Sperl: Thanks. Bye.
Jakub Cerný: Thanks. This has concluded our assembly as we speak. Now you can disconnect. Thanks.
Didier Colin: Thanks. Bye-bye.
Jan Juchelka: Bye.
David Formánek: Bye.
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