Slide 1: Komerční banka Group Results
PRAGUE, 3 AUGUST 2020 KOMERČNÍ BANKA GROUP RESULTS First half and second quarter 2020 According to IFRS, Consolidated, Unaudited
Slide 2: Disclaimer
DISCLAIMER This document contains a number of forward-looking statements relating to the targets and strategies of the Komerční banka Group. These statements are based on a series of assumptions, both general and specific. As a result, there is a risk that these projections will not be met. Readers
Slide 3: Contents
CONTENTS KB’s performance summary and crisis response Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Mid-year update of outlook for 2020 Appendix KB GROUP AS OF 30 JUNE 2020│ 3 AUGUST 2020 │ 3
Slide 4: Strong position vis-à-vis the major shock
STRONG POSITION VIS-À-VIS THE MAJOR SHOCK POSITIVE DEVELOPMENT OF THE MAIN ATTRIBUTES Robust capital base Total capital adequacy at 21.9%, not including current year profit, significantly above the applicable regulatory minimum of 16.2%. Ample liquidity based KB does not rely upon wholesale funding.
Slide 5: KB contributing to solution of the crisis, continuing to build a sustainable future
RESPONSIBLE CORPORATE CITIZENSHIP KB CONTRIBUTING TO SOLUTION OF THE CRISIS, CONTINUING TO BUILD A SUSTAINABLE FUTURE CONTRIBUTING TO THE SUPPORTING ECONOMIC PROTECTING CLIENT PROMOTING DIGITAL COUNTRY’S FISCAL RECOVERY FINANCIAL WELL-BEING TRANSFORMATION CAPACITY Continued lending to all client No
Slide 6: Accelerated transformation
ACCELERATED TRANSFORMATION QUICK ADJUSTMENT OF OPERATIONAL SETUP SMART OFFICE FLEXIBLE AND AGILE REMOTE WORKING REINFORCEMENT OF CYBER FOR 2/3 EMPLOYEES SECURITY CAPACITY WORKPLACE CONCEPT FULL SUPPORT FOR WORKING FROM HOME TACTICAL DIGITIZATION TO GAIN NEW PARTNERSHIPS WITH FINTECH EDGE IN AREAS OF
Slide 7: Contents
CONTENTS KB’s performance summary and crisis response Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Mid-year update of outlook for 2020 Appendix KB GROUP AS OF 30 JUNE 2020│ 3 AUGUST 2020 │ 7
Slide 8: Solid pre-crisis fundamentals to lay base for the recovery
SOLID PRE-CRISIS FUNDAMENTALS CZECH ECONOMY TO LAY BASE FOR THE RECOVERY • GDP in 2Q 2020 -10.7% YoY, -8.4% QoQ. GDP in 2020 expected to Czech GDP growth (%, yoy)3 drop by 5.0% mainly due to falling investments and export and stagnating consumption. To be followed by a recovery (+6%) in 2021. • Czec
Slide 9: Economy supported from multiple sources
STIMULI TO THE CZECH ECONOMY ECONOMY SUPPORTED FROM MULTIPLE SOURCES Bank guaranteed lending and loan moratoria Interest rates (until 24 July 2020) Covid programs • As of 10 July, Czech banks approved CZK 14 billion in loans guaranteed in the Covid programmes, of which Covid III CZK 2.8 billion, Cov
Slide 10: Contents
CONTENTS KB’s performance summary and crisis response Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Mid-year update of outlook for 2020 Appendix KB GROUP AS OF 30 JUNE 2020│ 3 AUGUST 2020 │ 10
Slide 11: Fast client uptake of digital tools
DIGITAL BANKING FAST CLIENT UPTAKE OF DIGITAL TOOLS EXPANDING SOLUTION ECOSYSTEM DIGITAL ACCESS DIGITAL SALES Fostering partnerships on the Mobile banking penetration Share of sales by channel* KB Smart Solutions platform 1,000 868,000 (selected product categories, %) 0% 6% 6% 800 1% 52.4% of 2% 600
Slide 12: Gross lending excluding repo up 4.9% YoY
LOANS TO CLIENTS GROSS LENDING EXCLUDING REPO UP 4.9% YOY Group lending (w/o repo, but incl. client bonds) CZK billion Group business and other loans CZK billion +4.9% (w/o repo, but incl. client bonds) +1.2% +4.3% YoY +0.6% 644.8 654.0 654.0 668.2 676.3 637.3 53.5 54.9 56.2 57.6 59.4 +10.9% YoY 52.
Slide 13: Selected deals of the second quarter of 2020
SELECTED DEALS SELECTED DEALS OF THE SECOND QUARTER OF 2020 ELECTRICITY PRODUCTION MEDIA AND TELECOMMUNICATION REAL ESTATE AND OFFICE SERVICES IT Green Gas DPB, a.s. O2 Czech Republic a.s. CARPET INVEST s.r.o. ED SYSTEM a.s. Comprehensive Financing Club Financing Financing Revolving Credit Facility
Slide 14: Client deposits rose by 7.1% YoY
DEPOSITS AND OTHER AUM CLIENT DEPOSITS ROSE BY 7.1% YOY Group deposits (w/o repo operations) CZK billion Deposit product structure CZK billion +7.1% (w/o repo operations) +0.4% YoY YoY 826.0 838.6 860.2 894.9 898.3 816.3 860.2 894.9 898.4 826.1 838.6 816.3 61.2 60.8 60.3 -2.1% 61.5 61.6 61.8 562.7 5
Slide 15: Contents
CONTENTS KB’s performance summary and crisis response Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Mid-year update of outlook for 2020 Appendix KB GROUP AS OF 30 JUNE 2020│ 3 AUGUST 2020 │ 15
Slide 16: Unquestioned profitability
R E C O N C I L I A T IPORNO O F IFT I & N CL O OMSS E UNQUESTIONED PROFITABILITY Drivers for year on year change in attributable net income (as of 30 June 2020) -38.5% -37.0% 7,213 7,158 -55 160 -915 -336 -87 -56 560 4,513 4,437 112 -76 -2,083 Reported One-offs Recurring NII NFC NPFO Regulatory OPE
Slide 17: Balance sheet growth driven by client deposits
STATEMENT OF FINANCIAL POSITION BALANCE SHEET GROWTH DRIVEN BY CLIENT DEPOSITS Assets 5.1% Liabilities and Equity CZK billion CZK billion 5.1% 15.7% 15.7% YoY YoY 1,247 1,186 1,247 1,077 1,186 1,077 122 -2.3% 347 -6.7% 125 372 94 262 +4.6% 893 934 672 +4.7% 822 642 647 3 3 134 131 178 +33.3% 3 60 5
Slide 18: Regulatory capital well above current 16.2% minimum
REGULATORY CAPITAL WELL ABOVE CAPITAL, RWA CURRENT 16.2% MINIMUM Contributions to capital adequacy ratio in 2020 (%) Contributions to equity in 2020 (CZK million) +219 bps 49 112,810 2.51 21.91 -310 0.00 0.01 4,437 19.72 -0.07 -0.26 108,635 31 Dec RWA RWA Retained Interim OCI & 30 Jun 1 Jan YtD prof
Slide 19: Interest income hit by fall in rates
NET INTEREST AND SIMILAR INCOME INTEREST INCOME HIT BY FALL IN RATES -14.8% Net interest margin (%) QtD NII -14.5% YtD 5,892 5,867 5,911 5,921 5,845 2.28% 2.28% 2.15% 2.23% 2.08% 2.19% 2.19% 2.35% 2.17% 2.17% 346 356 357 1.73% 2.00% 383 343 4,999 339 2,901 2,888 2,926 2,882 2,870 1Q 2019 2Q 2019 3Q
Slide 20: Fees income faced drop in activity and regulation of SEPA payments
FEES INCOME FACED DROP IN ACTIVITY NET FEES AND COMMISSIONS AND REGULATION OF SEPA PAYMENTS NFC Transaction fees – in H1, cash transactions sunk by more than a -17.0% third, non-cash transactions stable, card transactions +5% YoY. -5.9% 1,533 1,480 1,543 Further hit from regulation of fees for pay
Slide 21: Good result on elevated market volatility
NET PROFIT FROM FINANCIAL OPERATIONS GOOD RESULT ON ELEVATED MARKET VOLATILITY +19.7% NPFO Clients’ demand for hedging of financial risks boosted by the +56.0% uncertainty and volatility of interest and exchange rates, partly 919 offset by lower underlying activity and beginning of the seasonal 83
Slide 22: Costs flattening
OPERATING EXPENDITURES COSTS FLATTENING +0.6% Average number of employees (quarterly) OPEX -19.6% YoY 9 8,167 8,121 8,170 8,204 8,173 8,128 +0.1% -1,905 -1,939 -1,978 -1,958 -1,940 -1,947 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 -841 -994 -910 -1,094 -892 -952 Personnel costs reflecting cha
Slide 23: Contents
CONTENTS KB’s performance summary and crisis response Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Mid-year update of outlook for 2020 Appendix KB GROUP AS OF 30 JUNE 2020│ 3 AUGUST 2020 │ 23
Slide 24: 2Q 2020 asset quality
LOAN PORTFOLIO QUALITY 2Q 2020 ASSET QUALITY Gross lending CZK billion 651.7 657.1 656.6 671.1 680.4 640.5 Loan exposure up by 4.4 % YoY, by 1.4% QoQ 590.6 604.5 609.5 609.0 620.2 628.4 NPL exposure slightly up to 2.2% QoQ, reflecting the inflow 33.7 32.2 32.7 33.7 37.0 37.1 16.2 15.0 14.9 14.0
Slide 25: 2Q 2020 cost of risk
COST OF RISK 2Q 2020 COST OF RISK Total Cost of Risk (Year-to-date, in basis points) 71 52 2Q 2020 CoR net creation at CZK 1,576 million (vs. net 10 38 release at CZK 178 million in 2Q 2019) or 52 bps YTD -5 -5 -2 -4 9 -11 -7 -9 9 High impact from the quarterly statutory recalibration of -19 -11
Slide 26: Key features of credit risk setup
CREDIT RISK SETUP KEY FEATURES OF CREDIT RISK SETUP Credit policies Expected benefits from historically prudent underwriting standards Support to Czech economy (Loan Instalment Moratorium law, active participation to Czech State guaranteed-loan schemes, smart adjustments of credit policies, et
Slide 27: 2020-2021 cost of risk outlook
COST OF RISK 2020-2021 COST OF RISK OUTLOOK KB Q2 IFRS 9 macroeconomic scenario with persisting high level of uncertainty IFRS 9 macroeconomic forecast defined as the weighted average of “rebound”, “base line” and “stressed” scenarios 7% GDP contraction assumed for 2020 7% GDP recovery assum
Slide 28: Contents
CONTENTS KB’s performance summary and crisis response Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Mid-year update of outlook for 2020 Appendix KB GROUP AS OF 30 JUNE 2020│ 3 AUGUST 2020 │ 28
Slide 29: Baseline outlook for 2020 as of June
MID-YEAR UPDATE OF OUTLOOK FOR 2020 BASELINE OUTLOOK FOR 2020 AS OF JUNE This is updating the outlook presented on 6 May 2020, according to recent data. Investors are advised to consider higher than usual level of uncertainty and risks Macroeconomic • Czech economy should record a full-year GDP decl
Slide 30: Contents
CONTENTS KB’s performance summary and crisis response Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Mid-year update of outlook for 2020 Appendix KB GROUP AS OF 30 JUNE 2020│ 3 AUGUST 2020 │ 30
Slide 31: Number of clients and distribution network
KB GROUP CLIENTS AND DISTRIBUTION NETWORK NUMBER OF CLIENTS AND DISTRIBUTION NETWORK 1H 2019 1H 2020 YoY Number of bank clients (thousands, CZ) Number of clients 1,668 1,664 1,664 KB Group's clients 2,376,000 2,315,000 -61,000* 1,654 1,657 Komerční banka 1,662,000 1,657,000 -5,000 1,647 – individual
Slide 32: Income statement
CONSOLIDATED INCOME STATEMENT INCOME STATEMENT Profit and Loss Statement Reported Recurring 1H 2019 1H 2020 Change 1H 2019 1H 2020 Change Items excluded in “recurring”: (CZK million, unaudited) YoY YoY Net interest income and similar income 11,759 10,844 -7.8% 11,759 10,844 -7.8% 1H 2019 Net fee & c
Slide 33: Quarterly income statement (including one-off items)
QUARTERLY INCOME STATEMENT CONSOLIDATED INCOME STATEMENT – QUARTERLY VIEW (INCLUDING ONE-OFF ITEMS) Profit and Loss Statement Reported Change Change 2Q 2019 1Q 2020 2Q 2020 (CZK million, unaudited) YoY QoQ Net interest income and similar income 5,867 5,845 4,999 -14.8% -14.5% Net fee & commission in
Slide 34: Quarterly income statement (excluding one-off items)
QUARTERLY INCOME STATEMENT CONSOLIDATED INCOME STATEMENT – QUARTERLY VIEW (EXCLUDING ONE-OFF ITEMS) Profit and Loss Statement Recurring Change Change (CZK million, unaudited) 2Q 2019 1Q 2020 2Q 2020 YoY QoQ Net interest income and similar income 5,867 5,845 4,999 -14.8% -14.5% Net fee & commission i
Slide 35: Balance sheet
CONSOLIDATED STATEMENT OF FINANCIAL POSITION BALANCE SHEET Balance Sheet YoY YoY Ytd Ytd (CZK million, unaudited) 30 Jun 2019 31 Dec 2019 30 Jun 2020 rel. abs. rel. abs. Assets 1,185,993 1,077,334 1,246,614 5.1% 60,621 15.7% 169,280 Cash and current balances with central bank 22,425 17,744 27,510 22
Slide 36: Capital & profitability indicators
FINANCIAL RATIOS CAPITAL & PROFITABILITY INDICATORS Adjusted for restructuring Reported reserve and IFRIC 21 linearisation* (year-to-date, IFRS 9) 30/06/2019 31/12/2019 30/06/2020 30/06/2019 30/06/2020 Capital adequacy 19.0% 19.7% 21.9% Tier 1 ratio = Core Tier 1 ratio 18.4% 19.1% 21.3% Risk weighte
Slide 37: Loan repayment holidays and lending with state Covid guarantee
LOAN REPAYMENT HOLIDAYS CREDIT MORATORIUM LENDING WITH STATE COVID GUARANTEE LENDING WITH GUARANTEES As of 22 July 2020 LOAN MORATORIA Exposure No. of clients (CZK million) Individuals 35,480 30,871 Mortgages 18,780 27,755 Consumer loans 16,700 3,116 Small businesses 6,118 5,774 Corporations 4,766 2
Slide 38: Business performance of subsidiaries 1/2
BUSINESS PERFORMANCE OF SUBSIDIARIES OVERVIEW OF KB SUBSIDIARIES 1/2 1H 2019 1H 2020 YoY Modrá pyramida (100%), #2 building savings & loans company Volume of new loans (CZK million) 4,527 8,318 84% Volume of total loans (gross, CZK million) 53,522 59,374 11% Volume of deposits (CZK million) 61,632 6
Slide 39: Business performance of subsidiaries 2/2
BUSINESS PERFORMANCE OF SUBSIDIARIES OVERVIEW OF KB SUBSIDIARIES 2/2 1H 2019 1H 2020 YoY Factoring KB (100%), #1 on the Czech factoring market Factoring turnover (CZK million) 25,913 23,436 -10% Volume of total financing (gross, CZK million) 8,820 7,011 -21% Average number of FTEs 44 42 -4% Komerční
Slide 40: Debt securities portfolio in the banking book
SECURITIES DEBT SECURITIES PORTFOLIO IN THE BANKING BOOK CZK billion 127.9 103.7 83.4 Romania 1.7 68.0 109.9 15.6 7.7 Poland 6.2 Slovakia 0.1 2.4 44.5 35.7 31/12/2019 30/06/2020 Debt securities at amortized cost Czech government bonds Debt securities at FV through OCI Foreign government bonds Bonds
Slide 41: Macroeconomic environment – Czechia
MACROECONOMIC ENVIRONMENT – CZECHIA Macroeconomic Indicators 2016 2017 2018 2019 2020* 2021* Real GDP (%, average) 2.4 4.5 2.8 2.5 -5.0 6.0 Inflation (%, average) 0.7 2.5 2.1 2.8 3.0 1.7 Household consumption (%, average) 3.7 4.0 3.3 2.9 -3.5 2.5 Unemployment (%, av., ILO meth.) 4.0 2.9 2.2 2.0 2.9
Slide 42: Interest rates evolution
INTEREST RATES EVOLUTION For the period 1 Jan 2006 – 24 July 2020 KB GROUP AS OF 30 JUNE 2020│ 3 AUGUST 2020 │ 42
Slide 43: KB #1 listed Czech bank
KB #1 LISTED CZECH BANK Development of KB share price and PX index (1 January 2001 – 24 July 2020) Shareholder structure Free-float 39.6% Société Générale 60.4% • The number of shareholders comprised 56,187 corporate entities and private individuals. • Of the Bank’s total share capital of CZK 19,004
Slide 44: Investor Relations
INVESTOR RELATIONS Komerční banka, a.s. Na Příkopě 33, 114 07 Prague 1 Email: investor_relations@kb.cz Tel.: +420 955 532 156, +420 955 532 155, +420 955 532 734 Internet: www.kb.cz/investors Twitter: @KB_investors Reuters: BKOM.PR Bloomberg: KOMB CP KB GROUP AS OF 30 JUNE 2020│ 3 AUGUST 2020 │ 44