Slide 1: Flash Report presentation 1H 2019 MKB Group
Flash Report presentation 1H 2019 MKB Group 29. August 2019
Slide 2: Executive summary
Executive summary Business environment and Competitor comparison Macroeconomic indicators Competitor comparison Financials at a glance MKB Group Adjusted Profit After Tax, Total Comprehensive Income Profit and Loss, KPIs Capital position General administrative expenses Portfolio quality Business seg
Slide 3: Profitable operation 2019 half-year results
Following the 2015 reorganization MKB Gorup had been successfully transformed into profit generating banking group. Besides meeting EU commitments, management is focusing on cost-effective operation and digitalisation. Profitable operation EU commitments** define the fundamental aspects of MKB Group
Slide 4: Key factors – 1H19
Key factors affecting MKB Group’s 1H 2019 results: • Yield environment: the yield environment evolved differently than it was expected in 1H 2018, it continued to decline in 1H 2019, and had a negative impact on after-tax profit and a positive impact on total other comprehensive income (TOCI); • Div
Slide 5: Business environment and Competitor comparison
Business environment • Macroeconomic indicators and Competitor • Competitor comparison comparison
Slide 6: Macroeconomic indicators
Executive summary Business environment and Competitor comparison Macroeconomic indicators Competitor comparison Financials at a glance MKB Group Adjusted Profit After Tax, Total Comprehensive Income Profit and Loss, KPIs Capital position General administrative expenses Portfolio quality Business seg
Slide 7: A different than previously expected macroeconomic environment
4 5 6 7 8 9 0,0 1,0 2,0 3,0 4,0 5,0 -2,0 -1,0 10 11 12 13 14 15 2015.01.02 2015.01.02 2016.01.02 2016.01.02 2017.01.02 2017.01.02 Average inflation (y/y %) 2018.01.02 2018.01.02 Average wage growth (y/y %) 2019.01.02 2019.01.02 10,2% 2,7% + 1,3% Infláció Átlag bér + 0,7% 11,5% 3,4% 2019.07.02 2019.0
Slide 8: Competitor comparison
Executive summary Business environment and Competitor comparison Macroeconomic indicators Competitor comparison Financials at a glance MKB Group Adjusted Profit After Tax, Total Comprehensive Income Profit and Loss, KPIs Capital position General administrative expenses Portfolio quality Business seg
Slide 9: Competitor comparison of profitability, cost and capital
Adjusted profit after tax Total comprehensive income Adjusted ROAE (%) (HUF bln) (adj, HUF bln) 80 • MKB Group's adjusted, consolidated after-tax profit 60 40% was positive from 2016 and 23.73% 60 35.37 18.64% 30% 14.41% 14.28% 40 25.18 40 quadrupled by 2018, with 22.11 20.94 16.66 17.39 17.35 20% 1
Slide 10: Competitor comparison of assets, loans and deposits
Total assets (HUF thousand bln) Net loan portfolio Deposits (HUF thousand bln) (HUF thousand bln) • Focus on NPL portfolio build- 3.5 down: NPL ratio declined from 2.5 3.0 1.5 25.8% to 8.4% in 2015-2018 and 2.0 reach a level of 4.4% after a 2.5 2.10 further 400bp decrease in 1H 1.54 2.04 1.52 1.95 1
Slide 11: Financials at a glance MKB Group
Financials at a glance • Adjusted Profit After Tax MKB Group • Total Comprehensive Income • Profit and Loss • KPIs
Slide 12: Adjusted Profit After Tax, Total Comprehensive Income
Executive summary Business environment and Competitor comparison Macroeconomic indicators Competitor comparison Financials at a glance MKB Group Adjusted Profit After Tax, Total Comprehensive Income Profit and Loss, KPIs Capital position General administrative expenses Portfolio quality Business seg
Slide 13: Positive PAT since 2016
Profit after tax (HUF bln) and ROAE (%) 1H 2019 adjusted Profit After Tax breakdown (HUF bln) 25.1 80% 0.04 11.86 19.2 0.32 60% 18.0 4.05 9.5 40% 8.17 8.2 20% +15% 7.1 0% -20% -40% -60% PAT Banking tax Dividend income IFRS16 effect Adjusted PAT -76.4 2015 2016 2017 2018 2019H1 ROAE H1 H2 Adjusted pr
Slide 14: Stabilized total comprehensive income
Profit After Tax (HUF bln) Adjusted Profit After Tax (HUF bln) • Stabilized TOCI: adjusted Total Comprehensive Income increased by 19.5 25.5 HUF 1.5 bln compared to 2H 2018, and 18.0 24.6 HUF 11.1 bln compared to the same +19.99% +14.59% period last year* • The IFRS impact of IRS transactions 8.2 11
Slide 15: Profit and Loss, KPIs
Executive summary Business environment and Competitor comparison Macroeconomic indicators Competitor comparison Financials at a glance MKB Group Adjusted Profit After Tax, Total Comprehensive Income Profit and Loss, KPIs Capital position General administrative expenses Portfolio quality Business seg
Slide 16: Profitability propels fast capital accumulation; decrease in administration expenses
2018/2017 1H 2019/H2 2018 1H 2019/1H 2018 P&L (HUF bln) 2017 1H 2018 2H 2018 2018 1Q 2019 2Q 2019 1H 2019 % % % Net operating income* 36.6 25.4 7.7 33.1 1.5 6.7 8.3 -9.6% 7.8% -67.6% Gross operating income* 81.4 46.6 31.4 78.0 11.1 15.5 26.6 -4.2% -15.3% -43.0% Net interest income 39.6 20.3 20.2 40.
Slide 17: Extended other income and net interest/fee income
+6.5% • Increasing net interest income: securities and IRS net interest Net interest 21.5 income increase offsets the negative impact of turbulent market income 20.3 20.2 19.8 19.8 conditions and RWA commitments on customer income and portfolio growth; 2017H1 2017H2 2018H1 2018H2 2019H1 • Stable net
Slide 18: Balance sheet dynamics determined by EU commitments
2018/2017 1H 2019/H2 2018 1H 2019/1H 2018 Balance sheet (HUF bln) 2H 2017 1H 2018 2H 2018 1Q 2019 1H 2019 % % % Financial assets 109.6 95.3 82.9 85.7 147.4 -24.4% 77.9% 54.6% Trading portfolios 72.3 100.7 79.3 85.5 40.6 9.7% -48.8% -59.7% Securities 902.7 793.1 710.7 733.9 618.9 -21.3% -12.9% -22.0%
Slide 19: Stable business margin (NII+NFI+FX) around 4.0%
KPIs 2018 - 1H 2019 - 1H 2019 - 2017 1H 2018 2H 2018 2018 1H 2019 based on adjusted PAT (%) 2017 2H 2018 1H 2018 Profitability TRM - Total revenue margin 3.8% 4.6% 3.1% 3.9% 2.8% 0.1%-pt -0.3%-pt -1.8%-pt NIM - Net interest margin 1.9% 2.0% 2.0% 2.0% 2.3% 0.2%-pt 0.3%-pt 0.3%-pt NFM - Net fee margin
Slide 20: Better than peer average RWA/Total Asset ratio
2018 - 1H 2019 - 1H 2019 - KPIs 2017 1H 2018 2H 2018 2018 1H 2019 2017 2H 2018 1H 2018 Volume KPIs LTD - Loan to deposit ratio 61,0% 83,8% 70,4% 70,4% 72,8% 9,4%-pt 2,4%-pt -11,0%-pt Securities ratio 44,1% 42,5% 41,6% 41,6% 35,1% -2,6%-pt -6,5%-pt -7,4%-pt Provision to total assets 3,9% 4,5% 3,8% 3,
Slide 21: Capital position
Capital position • Capital accumulation • Capital adequacy
Slide 22: Intensive capital accumulation, dividend payment, ESOP effect
Shareholders' Equity (HUF bln) • Intensive capital accumulation: HUF +58.62% 63.1bln, 58.6% increase in equity 171.3 compared to 2015. 158.2 8.2 8.2 2.0 • Dividend payment: MKB Bank's General 5.5 meeting decided to pay dividend of HUF -4.7 4.1 4.8bln (HUF 4.7bln including ESOP effect). 25.1 125.4 14
Slide 23: 19.3% CAR in 1H 2019
Total RWA (HUF bln), CAR (%) Development of regulatory capital (HUF bln) 888.2 936.8 930.8 920.8 907.8 175.3 164.9 9.5 19.3% 0.0 0.3 -4.8 5.5 17.9% 37.5 Tier2 4.1% 146.4 28.0 15.7% 3.0% 2.4% 22.3 12.0% 11.3% 12.0% 13.3% 14.9% 15.2% 112.8 136.9 137.9 Tier1 100.2 124.1 112.8 11.3% 100.2 2015 2016 2017
Slide 24: General administrative expenses
General administrative • Cost structure expenses • Cost efficiency
Slide 25: Operating costs kept in line with set level
Cost level on 2015 basis(HUF bln) Number of branches and headcount Cost efficiency 2.24% 2.11% 73 69 51 51 1.95% 30.7 1.79% 29.3 29.9 -5.4 22.9 22.9 24.7 -87 19.6 23.7 18.3 20.4 20.1 21.0 21.2 21.8 1,982 1,953 1,958 20.0 18.6 18.3 1,871 17.7 -3.4 1,498 1,752 1,759 1,763 230 373 2016H1 2016H2 2017H1
Slide 26: Portfolio quality
Portfolio quality • Portfolio quality • Break-down history of portfolio cleansing
Slide 27: DPD90+ rate
NPL and DPD90+ portfolio (HUF bln) NPL coverage and NPL rate (IFRS*) DPD90+ coverage and DPD90+ rate 99.5% 263.2 30.0% 148.9% NPL rate 142.1% 25.0% DPDP90+ rate 14.5 25.8% 86.9% 78.2% 128.7% 25.0% 19.4% 20.0% 186.7 64.2% 65.7% 173.4 17.5% 20.0% 3.3 15.0% 85.5% 15.0% 146.0 76.6% 15.0% 248.7 103.1 10.
Slide 28: Historic build down of problematic assets
Non-performing portfolio build-down (NPE*) (HUF bln) NPL rate 25.8% 4.4% 263.2 1.2 Off-balance 14.5 19.0 43.2 25.3 • Portfolio cleaning: between 2015 - 1H 2019, MKB 17.9* Bank undertook a large-scale multi-step NPE portfolio 20.0 reduction, with the NPE portfolio declining by HUF 219.8 bln . 70.4 -1
Slide 29: Business segments results
Business segments • Corporate segment results • Retail segment • Leasing • Investments , Private Bank and Treasury Market share figures and sector data based on MNB reports for comparability purposes.
Slide 30: Stable customer count
Breakdown of gross customer loans Breakdown of deposits* Number of customers (HUF bln) (HUF bln) (thousand pcs) +2.4 1,539.1 270.4 41.5 1,518.1 260.7 266.5 261.8 969.8 938.4 965.3 967.7 1,372.0 41.8 43.2 43.3 36.9 1,330.2 4.6 1,281.3 1,293.4 1,094.2 1,041.3 59.9 64.5 535.7 574.0 582.2 179.3 183.5 17
Slide 31: Corporate segment
Executive summary Business environment and Competitor comparison Macroeconomic indicators Competitor comparison Financials at a glance MKB Group Adjusted Profit After Tax, Total Comprehensive Income Profit and Loss, KPIs Capital position General administrative expenses Portfolio quality Business seg
Slide 32: Increasing loan portfolio and outstanding disbursement
Gross corporate loans* breakdown (HUF bln) and Corporate deposit* (HUF bln) and market Corporate client numbers (in thousands) market share (%) share (%) 7.96% 10.59% 7.23% 6.10% 5.67% 9.19% 472.5 469.6 454.7 458.4 26.8 29.2 7.24% 43.2 43.3 29.4 22.2 6.62% 41.8 41.5 700.4 692.8 625.5 552.6 307.6 341
Slide 33: Investment loans
Volumes (HUF bln) New disbursement (HUF bln) +10.68% 40.0 • Investment loans growth by 10.7% (CAGR): 112.1 110.7 36.0 closing volumes amounted HUF 112.1 bln, 97.2 27.5 making up 24.5% of the corporate loans. 82.7 27.1 Investment loans* 28.0 18.9 • Disbursement of HUF 19.6 bln in 1H 2019: a significa
Slide 34: Leasing
Executive summary Business environment and Competitor comparison Macroeconomic indicators Competitor comparison Financials at a glance MKB Group Adjusted Profit After Tax, Total Comprehensive Income Profit and Loss, KPIs Capital position General administrative expenses Portfolio quality Business seg
Slide 35: MKB Group's leasing business ranked TOP3 in Hungary
New disbursements (HUF bln) +63.68% • MKB Group’s leasing business is ranked in TOP3 in Hungary 58.0 (according to Hungarian Leasing Association publications). 41.1 29.7 40.4 • MKB Group doubled its leasing portfolio since 2015. Establishing 37.0 35.8 itself on stock- and equipment financing markets
Slide 36: Customer base shifted from retail to SME customers
Gross volumes by customers (HUF bln) Active customers (in thousands) +60.8% 43.8 43.7 39.7 40.7 163.8 151.1 25.5 20.8 19.8 23.8 16.3 127.1 23.7 21.3 101.9 21.3 115.4 127.4 97.9 22.9 23.8 24.2 15.9 74.4 6.2 7.9 11.9 11.0 0.1 0.1 0.1 0.1 2016 2017 2018 2019H1 2016 2017 2018 2019H1 Retail customers SME
Slide 37: Retail segment
Executive summary Business environment and Competitor comparison Macroeconomic indicators Competitor comparison Financials at a glance MKB Group Adjusted Profit After Tax, Total Comprehensive Income Profit and Loss, KPIs Capital position General administrative expenses Portfolio quality Business seg
Slide 38: Retail loans, deposits and client numbers
Retail gross loans* (HUF bln) and market share** Deposits* (HUF bln) and market share** Retail client number (%) (%) (in thousands) 5.38% 5.39% 3.99% 3.75% 313.5 313.1 3.19% 3.15% 3.13% 3.21% 288.9 179.3 183.5 179.5 179.7 277.8 245.5 236.8 245.8 239.3 261.6 297.8 294.1 231.4 160.4 201.1 244.5 223.9
Slide 39: Consumer loans
Volume (HUF bln) and market share (%) New disbursement(HUF bln) and market share (%) 6.84% 6.98% 5.30% 4.81% 3.27% • In 1H 2019 the secured loan volume was HUF 5.03% 297.8 2.72% 34.0 2.11% 223.9 bln . 294.1 231.4 30.0 • HUF 10.3 bln disbursements in 1H 2019. 223.9 178.9 185.9 20.5 12.2 • The crowdin
Slide 40: Investments, Private Bank and Treasury activities
Executive summary Business environment and Competitor comparison Macroeconomic indicators Competitor comparison Financials at a glance MKB Group Adjusted Profit After Tax, Total Comprehensive Income Profit and Loss, KPIs Capital position General administrative expenses Portfolio quality Business seg
Slide 41: Increase in highly profitable private banking portfolio
Corporate* savings (HUF bln) Retail savings (HUF bln) and market share** (%) • Focus on wealth management: in order to support balance sheet adjustment the aim is to increase the weight of the securities; 1,672.6 1,745.9 4.76% 4.49% 4.24% • Inflow to funds has been subdued by the crowding-out effect
Slide 42: Annexes
Annexes • Strategic Partners’ Performances • Abbreviations • Peer group and market data sources
Slide 43: Strategic Partners' Performances
Executive summary Business environment and Competitor comparison Macroeconomic indicators Competitor comparison Financials at a glance MKB Group Adjusted Profit After Tax, Total Comprehensive Income Profit and Loss, KPIs Capital position General administrative expenses Portfolio quality Business seg
Slide 44: Moderately growing investment portfolio
Breakdown of investment funds (HUF bln ) 4.7% • Stagnant investment portfolio: 0.5% p / p stock increase in 1H 2019 but decrease in Q2 4.4% 4.4% 2019. • MÁP+ crowd-out effect: the background of the outflow from open-ended funds is the +0.5% appearance of Hungarian Venture Capital Plus (in HUN: Magya
Slide 45: MKB Pension and Health Fund
Breakdown of fund assets (HUF bln) Number of members (thousand pax) 88.1 87.5 • Number of members: stable private 151.6 149.4 148.2 86.7 pension fund, decreasing number of 145.1 85.0 voluntary pension fund members (3rd 130.0 129.4 131.9 place based on membership number) 84.2 83.7 82.9 126.3 • In ter
Slide 46: Abbreviations, peer group and market data sources
Executive summary Business environment and Competitor comparison Macroeconomic indicators Competitor comparison Financials at a glance MKB Group Adjusted Profit After Tax, Total Comprehensive Income Profit and Loss, KPIs Capital position General administrative expenses Portfolio quality Business seg
Slide 47: Abbreviations
MKB, MKB Bank, MKB Group MKB Group EU commitments Required range of certain EU Commitments marked in brackets, as defined in the follow ing public document: https://ec.europa.eu/competition/state_aid/cases/261437/261437_1721348_166_2.pdf Please note that specific targets w ere set w ithin the displa
Slide 48: Peer group and market data sources
MNB https://www.mnb.hu/en/statistics/statistical-data-and-information/statistical-time-series K&H (KBC) https://www.kbc.com/en/quarterly-reports#tab Unicredit https://www.unicreditgroup.eu/en/investors/group-results.html Divisional Database Erste Bank https://www.erstegroup.com/en/investors/reports/
Slide 49: Disclaimer
Executive summary Business environment and Competitor comparison Macroeconomic indicators Competitor comparison Financials at a glance MKB Group Adjusted Profit After Tax, Total Comprehensive Income Profit and Loss, KPIs Capital position General administrative expenses Portfolio quality Business seg
Slide 50: Disclaimer
DISCLAIMER This presentation contains statements that are, or maybe deemed to be, “forward-looking statements” which are Investor Relations prospective in nature. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding Email: investorrelations@mkb.hu futur