Komercni Banka, A.s. · PSECZ:KOMB
Komercni Banka, A.s — FY2019 Earnings Presentation
43 slides from Komercni Banka, A.s's earnings presentation, Feb 6, 2020
Slide 1: Komerční banka Group Results, Full year and fourth quarter 2019
PRAGUE, 6 FEBRUARY 2020 KOMERČNÍ BANKA GROUP RESULTS Full year and fourth quarter 2019 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 Summary of KB’s 4Q 2019 results Macroeconomic environment Pursuing the strategic transformation Business performance Financial performance Asset quality & cost of risk Capital, dividends & outlook for 2020 Appendix KB GROUP AS OF 31 DECEMBER 2019│ 6 FEBRUARY 2020 │ 3
Slide 4: Highlights as of 31 December 2019
EXECUTIVE SUMMARY HIGHLIGHTS AS OF 31 DECEMBER 2019 • The number of clients with KB Mobile Banking leapt by 175,000 year on year to 786,000, representing 47% Rapid rollout of digital of all KB’s 1,664,000 customers. channels • The new KB Klíč (KB Key) authentication application used by 477,000 clien
Slide 5: Contents
CONTENTS Summary of KB’s 4Q 2019 results Macroeconomic environment Pursuing the strategic transformation Business performance Financial performance Asset quality & cost of risk Capital, dividends & outlook for 2020 Appendix KB GROUP AS OF 31 DECEMBER 2019│ 6 FEBRUARY 2020 │ 5
Slide 6: Czech economy braced for a slight moderation
CZECH ECONOMY CZECH ECONOMY BRACED FOR A SLIGHT MODERATION • GDP in 3Q19 up +2.5% YoY, +0.4% QoQ. The growth in Q3 was Czech GDP growth (%, yoy)3 driven by investments in residential property and government consumption. A sectorial perspective shows GDP was driven by ICT, administration and real est
Slide 7: Contents
CONTENTS Summary of KB’s 4Q 2019 results Macroeconomic environment Pursuing the strategic transformation Business performance Financial performance Asset quality & cost of risk Capital, dividends & outlook for 2020 Appendix KB GROUP AS OF 31 DECEMBER 2019│ 6 FEBRUARY 2020 │ 7
Slide 8: On the path to meeting KB Change 2020 targets
KB CHANGE ON THE PATH TO MEETING KB CHANGE 2020 TARGETS 2017 2018 2019 2020 ambition Comments Affluent 17 16 32 Reinforcing client satisfaction gradually during 2019 individuals Small 16 20 32 Significant improvement year on year businesses Leading position NPS among peer banks SMEs 24 34 35 E
Slide 9: Selected business achievements of the fourth quarter
BUSINESS ACHIEVEMENTS SELECTED BUSINESS ACHIEVEMENTS OF THE FOURTH QUARTER Upgraded and award-winning Best cash management Easier access to ESSOX Mobilní banka KB wins the Market services • Sing up to Android version of the app Leader in Czechia title • Clients of ESSOX can sign the loan via facial
Slide 10: Selected responsible banking initiatives in 4Q 2019
CORPORATE SOCIAL RESPONSIBILITY SELECTED RESPONSIBLE BANKING INITIATIVES IN 4Q 2019 GREEN AND RESPONSIBLE FINANCING KB JISTOTA FOUNDATION • Market leadership ambition in financing projects with • Supported five projects on improving employment and integration sustainable positive impact opportunitie
Slide 11: Rebalancing of branch & digital banking
RETAIL BANKING REBALANCING OF BRANCH & DIGITAL BANKING Share of sales by channel Net promoter score Share of direct banking clients (selected product categories, %) 2,000 1,664,000 Mass retail 33 Positive trend of End-to-end digital NPS. Clients highly 1,500 Affluent retail 32 appreciate quality of
Slide 12: Focus on client satisfaction, full scope services, and sustainable development
FOCUS ON CLIENT SATISFACTION, CORPORATE & INVESTMENT BANKING FULL SCOPE SERVICES, AND SUSTAINABLE DEVELOPMENT Selected deals of 4Q 2019 Set up of Corporate & Investment Banking unit servicing medium- sized and large corporate clients completed PUBLIC MACHINERY New business solutions developed in
Slide 13: Fundamental cultural & digital transformation
FUNDAMENTAL CULTURAL & DIGITAL TRANSFORMATION Developing culture that facilitates change Implementation of key business changes delivering already significant improvements in KB’s service to • Cross-functional teams, learning Cooperative from failure clients, including differentiating position in
Slide 14: Contents
CONTENTS Summary of KB’s 4Q 2019 results Macroeconomic environment Pursuing the strategic transformation Business performance Financial performance Asset quality & cost of risk Capital, dividends & outlook for 2020 Appendix KB GROUP AS OF 31 DECEMBER 2019│ 6 FEBRUARY 2020 │ 14
Slide 15: Gross lending excluding repo up 3.1% YoY
LOANS TO CLIENTS GROSS LENDING EXCLUDING REPO UP 3.1% YOY Group lending (w/o repo, but incl. client bonds) CZK billion Group business and other loans CZK billion +3.1% (w/o repo, but incl. client bonds) 0.0% +2.4% YoY -1.2% 628.6 634.6 637.3 644.8 654.0 654.0 49.0 50.7 52.1 53.5 54.9 56.2 +10.8% YoY
Slide 16: Client deposits rose by 2.6% YoY
DEPOSITS AND OTHER AUM CLIENT DEPOSITS ROSE BY 2.6% YOY Group deposits (w/o repo operations) CZK billion Deposit product structure CZK billion +2.6% (w/o repo operations) -5.1% YoY YoY 809.5 795.6 826.0 838.6 860.2 816.3 809.5 826.1 838.6 860.2 816.3 795.5 61.2 61.1 61.5 61.6 61.8 +0.1% 61.8 565.7 5
Slide 17: Contents
CONTENTS Summary of KB’s 4Q 2019 results Macroeconomic environment Pursuing the strategic transformation Business performance Financial performance Asset quality & cost of risk Capital, dividends & outlook for 2020 Appendix KB GROUP AS OF 31 DECEMBER 2019│ 6 FEBRUARY 2020 │ 17
Slide 18: Stable net income and gross operating income
R E C O N C I L I A T IPORNO O F IFT I & N CLO OMSE S STABLE NET INCOME AND GROSS OPERATING INCOME Drivers for year on year change in attributable net income (as of 31 December 2019) +0.4% +0.0 -41 -477 887 14,846 14,845 -397 151 14,846 14,901 -1 55 -71 -51 Reported One-offs in Recurring NII NFC NPF
Slide 19: Balance sheet growth driven by client and interbank deposits
BALANCE SHEET GROWTH DRIVEN BY STATEMENT OF FINANCIAL POSITION CLIENT AND INTERBANK DEPOSITS Assets Liabilities and Equity CZK billion 1.6% CZK billion 1.6% 1,060 1,077 YoY 1,060 1,077 YoY 92 94 +1.4% 262 -6.7% 281 812 822 +1.1% 625 647 +3.6% 47 3 3 47 3 4 118 131 +11.4% 36 37 103 109 +5.1% 31 Dec 2
Slide 20: Interest income influenced by lower rates in H2
NET INTEREST AND SIMILAR INCOME INTEREST INCOME INFLUENCED BY LOWER RATES IN H2 -1.8% Net interest margin (%) QtD NII +0.2% YtD 2.35% 5,787 6,030 5,892 5,867 5,911 5,921 2.34% 2.35% 385 2.28% 2.28% 2.23% 431 346 383 356 357 2.19% 2.22% 2.19% 2.19% 2.15% 2.08% 2,618 2,891 2,901 2,888 2,926 2,882 3Q 2
Slide 21: Growth in fees from services with higher added value
NET FEES AND COMMISSIONS GROWTH IN FEES FROM SERVICES WITH HIGHER ADDED VALUE NFC -2.3% Deposit product fees – stable number of accounts, clients +4.3% upgrading to packages with a wider range of services included 1,579 1,533 1,543 Transaction fees – growing number of transactions offset by 1,46
Slide 22: Volatility of result linked to large transactions
NET PROFIT FROM FINANCIAL OPERATIONS VOLATILITY OF RESULT LINKED TO LARGE TRANSACTIONS FY 2019 result lower YoY influenced by some extraordinarily large NPFO -20.6% hedging transactions developed for clients in 2018 1,013 -25.3% Limited number of bigger transactions in Q4, but solid smaller-tick
Slide 23: Cost growth below inflation
OPERATING EXPENDITURES COST GROWTH BELOW INFLATION Average number of employees (quarterly) +2.5% OPEX YoY +5.6% 8,355 8,339 8,168 8,121 8,170 8,204 -1.6% -1,932 -1,896 -1,905 -1,939 -1,978 -1,958 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 -1,008 -1,224 -841 -994 -910 -1,094 -3 -1 -3 Effect of
Slide 24: Contents
CONTENTS Summary of KB’s 4Q 2019 results Macroeconomic environment Pursuing the strategic transformation Business performance Financial performance Asset quality & cost of risk Capital, dividends & outlook for 2020 Appendix KB GROUP AS OF 31 DECEMBER 2019│ 6 FEBRUARY 2020 │ 24
Slide 25: Sound asset quality
LOAN PORTFOLIO QUALITY SOUND ASSET QUALITY Gross lending CZK billion 640.7 636.6 640.5 651.7 657.1 656.6 Loan exposure up by 3.1% YoY (stable QoQ) NPL exposure ratio YoY down to 2.1% (vs. 2.7% in 4Q 601.2 585.8 590.6 604.5 609.5 609.0 2018) driven by low default rates, strong recovery performanc
Slide 26: Low cost of risk
COST OF RISK LOW COST OF RISK (Year-to-date, in basis points) Total Cost of Risk FY 2019 CoR net release at CZK 571 million (vs. CZK -2 -2 -5 -5 -4 642 million in FY 2018) -11 -7 -10 -9 -11 -11 -12 -14 -15 CoR on corporate loan portfolio at -15 bps for FY 2019 -18 -19 -19 -20 (vs. -20 bps for FY
Slide 27: Contents
CONTENTS Summary of KB’s 4Q 2019 results Macroeconomic environment Pursuing the strategic transformation Business performance Financial performance Asset quality & cost of risk Capital, dividends & outlook for 2020 Appendix KB GROUP AS OF 31 DECEMBER 2019│ 6 FEBRUARY 2020 │ 27
Slide 28: Strong organic equity generation
CAPITAL, RWA STRONG ORGANIC EQUITY GENERATION Contributions to capital adequacy ratio in 2019 (%) Contributions to equity in 2019 (CZK million) +124 bps 3.30 -9,632 14,901 340 108,635 19.72 103,329 -304 18.48 0.34 0.18 -2.15 -0.30 -0.14 31 Dec RWA RWA Other Interim Provision Exceptional OCI & 31 Dec
Slide 29: Proposed payout 74% from 2019 net profit, intention to pay 65% from 2020
PROPOSED PAYOUT 74% FROM 2019 NET PROFIT DIVIDENDS INTENTION TO PAY 65% FROM 2020 In view of KB’s 2019 result, strong capital position at the upper end Dividend history (Dividend per share, in CZK) of the target range, and outlook for growth in risk-weighted assets 62 62 and capital requirements,
Slide 30: Baseline outlook for 2020
OUTLOOK FOR 2020 BASELINE OUTLOOK FOR 2020 Macroeconomic • Czech economy to slow down its growth toward 2%. Households to remain main engine of the assumptions growth, fixed investments to increase lightly. • Inflation to stay around 3%. Monetary policy 2W repo rate to remain on hold Banking market
Slide 31: Contents
CONTENTS Summary of KB’s 4Q 2019 results Macroeconomic environment Pursuing the strategic transformation Business performance Financial performance Asset quality & cost of risk Capital, dividends & outlook for 2020 Appendix KB GROUP AS OF 31 DECEMBER 2019│ 6 FEBRUARY 2020 │ 31
Slide 32: Number of clients and distribution network
KB GROUP CLIENTS AND DISTRIBUTION NETWORK NUMBER OF CLIENTS AND DISTRIBUTION NETWORK FY 2018 FY 2019 YoY Number of clients Number of bank clients (thousands, CZ) 1,664 1,668 1,664 * KB Group's clients 2,391,000 2,365,000 -26,000 1,647 1,654 Komerční banka 1,668,000 1,664,000 -4,000* 1,626 – individu
Slide 33: Year-to-date income statement
CONSOLIDATED INCOME STATEMENT YEAR-TO-DATE INCOME STATEMENT Profit and Loss Statement Reported* Recurring Items excluded in “recurring”: Change Change FY 2018 FY 2019 FY 2018 FY 2019 (CZK million, unaudited) YoY YoY FY 2018: Net interest income and similar income 22,704 23,591 3.9% 22,704 23,591 3.9
Slide 34: 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 4Q 2018 3Q 2019 4Q 2019 (CZK million, unaudited) YoY QoQ Net interest income and similar income 6,030 5,911 5,921 -1.8% 0.2% Net fee & commission inco
Slide 35: Balance sheet
CONSOLIDATED STATEMENT OF FINANCIAL POSITION BALANCE SHEET Balance Sheet 31 Dec 31 Dec YoY YoY (CZK million, unaudited) 2018 2019 rel. abs. Assets 1,059,932 1,077,334 1.6% 17,402 Cash and current balances with central bank 24,851 17,744 -28.6% -7,107 Loans and advances to banks 256,268 244,561 -4.6%
Slide 36: Capital & profitability indicators
FINANCIAL RATIOS CAPITAL & PROFITABILITY INDICATORS Reported Recurring* (year-to-date, IFRS 9) 31/12/2018 31/12/2019 31/12/2018 31/12/2019 Capital adequacy 18.5% 19.7% Tier 1 ratio = Core Tier 1 ratio 17.9% 19.1% Risk weighted assets for credit risk (CZK billion) 375.4 367.6 Net interest margin, ann
Slide 37: Decreasing NPL exposure
LOAN PORTFOLIO QUALITY DECREASING NPL EXPOSURE NPL Evolution CZK MILLION Retail Retail NPL exposure contraction reflecting net outflows from default classification and portfolio sales Corporate NPL exposure evolution driven by 2 main factors: concentrated and limited inflow into default, concent
Slide 38: Business performance of subsidiaries 1/2
OVERVIEW OF KB SUBSIDIARIES BUSINESS PERFORMANCE OF SUBSIDIARIES 1/2 FY 2018 FY 2019 YoY Modrá pyramida (100%), #2 building savings & loans company Volume of new loans (CZK million) 14,230 10,110 -29% Volume of total loans (gross, CZK million) 50,688 56,247 11% Volume of deposits (CZK million) 61,77
Slide 39: Business performance of subsidiaries 2/2
OVERVIEW OF KB SUBSIDIARIES BUSINESS PERFORMANCE OF SUBSIDIARIES 2/2 FY 2018 FY 2019 YoY Factoring KB (100%), #1 on the Czech factoring market Factoring turnover (CZK million) 50,168 54,020 8% Volume of total financing (gross, CZK million) 8,965 9,360 4% Average number of FTEs 44 44 0% Komerční poji
Slide 40: Macroeconomic environment – Czechia
MACROECONOMIC ENVIRONMENT – CZECHIA Macroeconomic Indicators 2016 2017 2018 2019 2020* 2021* Real GDP (%, average) 2.4 4.5 2.8 2.4 2.0 1.9 Inflation (%, average) 0.7 2.5 2.1 2.8 3.0 2.0 Household consumption (%, average) 3.5 4.4 3.2 2.8 2.0 2.1 Unemployment (%, av., MLSA meth.) 5.4 4.1 3.1 2.8 3.0 3
Slide 41: Interest rates evolution
INTEREST RATES EVOLUTION For the period 1 Jan 2006 – 31 January 2020 KB GROUP AS OF 31 DECEMBER 2019│ 6 FEBRUARY 2020 │ 41
Slide 42: KB #1 listed Czech bank
KB #1 LISTED CZECH BANK Development of KB share price and PX index (1 January 2001 – 31 January 2020) Shareholder structure Free-float 39.6% Société Générale 60.4% • The number of shareholders comprised 50,462 corporate entities and private individuals. • Of the Bank’s total share capital of CZK 19,
Slide 43: 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 31 DECEMBER 2019│ 6 FEBRUARY 2020