Komercni Banka, A.s. · PSECZ:KOMB

Komercni Banka, A.s — Q3 2020 Earnings Presentation

56 slides from Komercni Banka, A.s's earnings presentation, Nov 5, 2020

  1. Slide 1: KB Group Results as of 30 Sept 2020 and Strategic Update until 2025

    PRAGUE, 5 NOVEMBER 2020 KB GROUP RESULTS AS OF 30 SEPT 2020 AND STRATEGIC UPDATE UNTIL 2025 According to IFRS, Consolidated, Unaudited

  2. 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

  3. Slide 3: Contents

    CONTENTS Highlights of third quarter 2020 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Strategic update until 2025 Appendix KB GROUP AS OF 30 SEPTEMBER 2020│ 5 NOVEMBER 2020 │ 3

  4. Slide 4: Highlights of Third Quarter 2020

    HIGHLIGHTS OF THIRD QUARTER 2020 Robust capital base  With total capital adequacy at 21.6% and a Core Tier 1 ratio at 20.9% , Komerční banka maintains and ample liquidity a robust capital base.  Ample liquidity is based upon customer deposits, ratio of net loans to client deposits at 73.2%. KB Cha

  5. Slide 5: Contents

    CONTENTS Highlights of third quarter 2020 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Strategic update until 2025 Appendix KB GROUP AS OF 30 SEPTEMBER 2020│ 5 NOVEMBER 2020 │ 5

  6. Slide 6: Solid Economic Performance Amid the Pandemics

    CZECH ECONOMY SOLID ECONOMIC PERFORMANCE AMID THE PANDEMICS • GDP in 3Q 2020 –5.8% YoY, +6.2% QoQ. GDP in 2020 expected to Czech GDP growth (%, yoy)3 drop by 7.6% due to jointly all components, of which mainly net export. • Czech car production for 9M lost around 25% YoY, mitigating the spring losse

  7. Slide 7: Extended Support Measures

    STIMULI TO THE CZECH ECONOMY EXTENDED SUPPORT MEASURES Bank guaranteed lending and loan moratoria CNB lowered policy rates in March Covid programs • As of 23 October, Czech banks approved CZK 36.2 billion in loans guaranteed CZK interest rates (until 31 October 2020) in the Covid programmes, of whic

  8. Slide 8: Contents

    CONTENTS Highlights of third quarter 2020 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Strategic update until 2025 Appendix KB GROUP AS OF 30 SEPTEMBER 2020│ 5 NOVEMBER 2020 │ 8

  9. Slide 9: Fostering Digital Ecosystem

    DIGITAL BANKING FOSTERING DIGITAL ECOSYSTEM CONSUMER LOANS AS FLAGSHIP OF ENRICHING KB’S FINTECH WORLD CLIENTS SWITCH TO DIGITAL ACCESS DIGITAL SALES KB Smart Solutions partnerships Steady growth in mobile banking Share of sales by channel* penetration (selected product categories, %) 5% 5% 0% Numbe

  10. Slide 10: Moving Ahead Responsibly

    INNOVATIONS AND CSR MOVING AHEAD RESPONSIBLY NEW DIGITAL SOLUTIONS AWARDS RECEIVED IN Q3 The joint-venture Bankovní identita, a.s. will provide electronic • The Safest Bank in CEE for 2020 and The identification and signature services to public institutions as Safest Bank in the Czech Republic for 2

  11. Slide 11: Gross Lending Excluding Repo Up 5.9% YoY

    LOANS TO CLIENTS GROSS LENDING EXCLUDING REPO UP 5.9% YOY Group lending (w/o repo, but incl. client bonds) CZK billion Group business and other loans CZK billion +5.9% (w/o repo, but incl. client bonds) +2.4% +4.8% YoY +2.2% 668.2 676.3 692.3 644.8 654.0 654.0 57.6 59.4 61.7 +12.5% YoY 53.5 54.9 56.

  12. Slide 12: Client Deposits Rose by 8.2% YoY

    DEPOSITS AND OTHER AUM CLIENT DEPOSITS ROSE BY 8.2% YOY Group deposits (w/o repo operations) CZK billion Deposit product structure CZK billion +8.2% (w/o repo operations) +3.6% YoY YoY 860.2 894.9 898.3 930.4 930.4 838.6 816.3 860.2 894.9 898.4 838.6 816.3 60.0 -2.0% 61.2 60.8 60.3 +23.1% 61.6 61.8

  13. Slide 13: Contents

    CONTENTS Highlights of third quarter 2020 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Strategic update until 2025 Appendix KB GROUP AS OF 30 SEPTEMBER 2020│ 5 NOVEMBER 2020 │ 13

  14. Slide 14: Healthy Result Despite Major Pandemic Hit

    R E C O N C I L I A T IPORNO O F IFT I & N CLO OMSE S HEALTHY RESULT DESPITE MAJOR PANDEMIC HIT Drivers for year on year change in attributable net income (as of 30 September 2020) -45.0% -44.0% 11,061 11,006 -55 60 -1,572 -581 -87 -26 1,037 6,159 6,082 57 -77 -3,735 Reported One-offs Recurring NII

  15. Slide 15: Growing Deposits and Equity Reinvested in Loans and Securities

    GROWING DEPOSITS AND EQUITY STATEMENT OF FINANCIAL POSITION REINVESTED IN LOANS AND SECURITIES Assets 3.0% Liabilities and Equity CZK billion CZK billion 3.0% 17.3% 17.3% YoY YoY 1,227 1,264 1,227 1,264 1,077 106 -30.1% 362 -8.7% 151 1,077 397 262 94 +7.4% 900 966 684 +5.7% 822 647 647 3 1 143 131 1

  16. Slide 16: Capital Above Target Level Locked by Dividend Restrictions

    CAPITAL ABOVE TARGET LEVEL CAPITAL, RW A LOCKED BY DIVIDEND RESTRICTIONS Contributions to capital adequacy ratio in 2020 (%) Contributions to equity in 2020 (CZK million) +190 bps 104 114,680 2.51 21.62 -141 0.00 0.00 6,082 19.72 -0.36 -0.25 108,635 31 Dec RWA RWA Retained Interim OCI & 30 Sep 1 Jan

  17. Slide 17: Interest Income Affected by Fall in Rates

    NET INTEREST AND SIMILAR INCOME INTEREST INCOME AFFECTED BY FALL IN RATES Net interest margin (%) QtD NII -11.1% YtD +5.1% 5,867 5,911 5,921 5,845 2.15% 2.23% 2.08% 2.19% 2.19% 2.35% 2.17% 2.17% 383 356 357 343 1.73% 2.00% 1.80% 1.96% 4,999 5,254 307 339 2,888 2,926 2,882 2,870 2,285 2,474 2Q 2019 3

  18. Slide 18: Fees Absorbing Drop in Activity and Regulation of SEPA Payments

    FEES ABSORBING DROP IN ACTIVITY AND NET FEES AND COMMISSIONS REGULATION OF SEPA PAYMENTS  Transaction fees – significant drop in cash and at-branch NFC transactions, mildly growing number of non-cash transactions, -16.6% continuing solid growth in card transactions. The year 2020 takes 1,533 1,543

  19. Slide 19: Lower Activity Offset by Elevated Market Volatility

    NET PROFIT FROM FINANCIAL OPERATIONS LOWER ACTIVITY OFFSET BY ELEVATED MARKET VOLATILITY NPFO  Clients’ demand for hedging of financial risks supported by volatility -15.3% -22.6% of interest and FX rates, partly offset by lower underlying activity 919 839  Generally seasonally weaker activity in

  20. Slide 20: Operating Costs Flat

    OPERATING EXPENDITURES OPERATING COSTS FLAT Average number of employees (quarterly) -0.9% OPEX YoY -1.7% 8 8,121 8,170 8,204 8,173 8,128 7,997 -2.1% -1,939 -1,978 -1,958 -1,940 -1,947 -1,927 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 3Q 2020 -994 -910 -1,094 -892 -951 -878 -3  Personnel costs – lower

  21. Slide 21: Contents

    CONTENTS Highlights of third quarter 2020 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Strategic update until 2025 Appendix KB GROUP AS OF 30 SEPTEMBER 2020│ 5 NOVEMBER 2020 │ 21

  22. Slide 22: 3Q 2020 Asset Quality

    LOAN PORTFOLIO QUALITY 3Q 2020 ASSET QUALITY Gross lending CZK billion 671.1 680.4 695.3  Loan exposure up 5.8 % YoY, 2.2% QoQ 651.7 657.1 656.6  Material (35%) QoQ increase in stage 2 exposures 604.5 609.5 609.0 620.2 628.4 629.4 • In-depth assessment of loan moratorium portfolios 33.7 37.0 37.1

  23. Slide 23: Zoom on Portfolios under Moratorium

    LOAN PORTFOLIO QUALITY ZOOM ON PORTFOLIOS UNDER MORATORIUM Loan moratorium "Summer exits" o.w. Exposure o.w. Exposure CZK billion exposure exposure past due past due (%) Corporates 24.7 6.6 0.5 7.6% Mortgages 26.6 5.8 0.1 2.0% Consumer Lending 3.0 0.7 0.1 7.7% Small Business 4.1 1.9 0.0 0.9% KB Grou

  24. Slide 24: Zoom on 3Q 2020 Cost of Risk

    COST OF RISK ZOOM ON 3Q 2020 COST OF RISK Total Cost of Risk (Year-to-date, in basis points) 71 91 52 68 50  3Q 2020 CoR net creation at CZK 1.7 Bn 10 38 -5 -2 -4 9 -11  3 main risk drivers -19 -7 -12 -9 -15 9 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 3Q 2020 • In-depth assessment of SME and retail

  25. Slide 25: 3Q 2020 YTD Cost of Risk Structure

    COST OF RISK 3Q 2020 YTD COST OF RISK STRUCTURE Contribution to FY CoR Key components Timing Contribution to Q3 YtD CoR guidance 3Q macroeconomic scenario for IFRS 9 prov. models 2Q 26 bps 19 bps Review of retail & SME loan moratorium portfolios • Zoom on CZK 15.4 billion (26% of moratorium exposure

  26. Slide 26: 2020-2021 Cost of Risk Outlook

    COST OF RISK 2020-2021 COST OF RISK OUTLOOK  3Q 2020 IFRS 9 macroeconomic scenario  IFRS 9 macroeconomic forecast defined as the weighted average of “rebound”, “base line” and “stressed” scenarios  GDP and unemployment rates as key inputs into IFRS 9 macroeconomic scenario • Reflecting impacts fr

  27. Slide 27: Contents

    CONTENTS Highlights of third quarter 2020 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Strategic update until 2025 Appendix KB GROUP AS OF 30 SEPTEMBER 2020│ 5 NOVEMBER 2020 │ 27

  28. Slide 28: Baseline Outlook for 2020 as of October

    Q3 UPDATE OF OUTLOOK FOR 2020 BASELINE OUTLOOK FOR 2020 AS OF OCTOBER 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 decline

  29. Slide 29: Contents

    CONTENTS Highlights of third quarter 2020 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Strategic update until 2025 Appendix KB GROUP AS OF 30 SEPTEMBER 2020│ 5 NOVEMBER 2020 │ 29

  30. Slide 30: Strength of KB Supported by Successful Delivery of KB Change 2020 Plan

    STRENGTH OF KB SUPPORTED BY SUCCESSFUL DELIVERY OF KB CHANGE 2020 PLAN FULLY DELIVERED OPERATIONAL ACCELERATED TRANSFORMATION STRONG PERFORMANCE, TARGETS OF KB CHANGE 2020 PLAN IN COVID-19 CONTEXT MARKET & FINANCIAL POSITION Implementation of Agile@KB Digitization acceleration, incl. acquisition Exc

  31. Slide 31: Operating on Healthy Market with Solid Growth Potential

    OPERATING ON HEALTHY MARKET WITH SOLID GROWTH POTENTIAL THE CZECH REPUBLIC – ECONOMIC ASSUMPTIONS BANKING SECTOR • Looking to the 2025 horizon, Czech economy expected to recover in (%) 2017 2018 2019 1H20 2021 from the drop caused by the pandemic and in the following Loan/Deposit Ratio 74.0 74.4 68.

  32. Slide 32: Era of Digital Banking Bringing New Challenges and Opportunities

    ERA OF DIGITAL BANKING BRINGING NEW CHALLENGES AND OPPORTUNITIES Customer Competitive Social Technology Regulation needs landscape responsibility  Reliability, trust and  Big financial  Green economy,  Transformation of  Prevention of partnership helping to competition pool with energy transiti

  33. Slide 33: KB Change 2025 Strategic Framework

    KB CHANGE 2025 STRATEGIC FRAMEWORK “Building together with our clients a better and sustainable future through Purpose responsible and innovative financial solutions.” Vision “Leader in new era of banking, for 2 million active clients.” Pillars Helpfulness Growth Responsibility  Digital bank for pe

  34. Slide 34: Attaining Leadership Position in Digital Banking

    ATTAINING LEADERSHIP POSITION IN DIGITAL BANKING DIGITAL BANK “The future goes beyond pure Number of bank clients FOR PEOPLE banking, therefore New Digital Bank NPS Individuals, Small Businesses WITH (NDB) will discover and bring new ASPIRATION services together with new partners, NPS Corporate clie

  35. Slide 35: Delivering Seamless Omnichannel Client Experience

    DELIVERING SEAMLESS OMNICHANNEL CLIENT EXPERIENCE FULLY “New Digi KB world will rebalance the 50% Share of digital sales in retail DIGITAL organization, win market share through 40 % Share of client acquisition via digital SALES & innovation, lead market transformation, SERVICES optimize processes a

  36. Slide 36: Assuring Long-Term Relevance via Responsibility and Effectiveness

    ASSURING LONG-TERM RELEVANCE VIA RESPONSIBILITY AND EFFECTIVENESS Faster time-to-decision via digitization & enhanced “Identify emerging risks and contain automation of the entire credit cycle for RISK individuals, small business and SME segments risk losses in new world of digital MANAGEMENT Increa

  37. Slide 37: Key Business Initiatives to Approach Strategic Targets

    KEY BUSINESS INITIATIVES TO APPROACH TO STRATEGIC TARGETS CORPORATE & IB RETAIL BANKING  CIB portal launch TECHNOLOGY  Mortgage factory  Group-wide IB front-office solution  Investment portal  Digital banking identity as a service Launch of the New Digital Bank,  New advisory and sales platfor

  38. Slide 38: Adapting Network to Changed Client Preferences

    ADAPTING NETWORK TO CHANGED CLIENT PREFERENCES MAIN OPERATIONAL TARGETS* 2019 TARGET 2025 CLIENT SATISFACTION (NPS) – INDIVIDUALS 32 50  Seamless omnichannel experience, appealing and simple offer of – SMALL BUSINESSES 32 50 high-quality products and services, reliability and security of 35 50 inte

  39. Slide 39: Growth Strategy Reflecting in Strong Financials

    GROWTH STRATEGY REFLECTING IN STRONG FINANCIALS  Driven by rising business volumes, digital sales, advisory model supported by data analytics and new sources of revenues, KB’s strategy assumes a dynamic growth of revenues within 2025 horizon, after bottoming out in 2021  Management targets positiv

  40. Slide 40: Contents

    CONTENTS Highlights of third quarter 2020 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Strategic update until 2025 Appendix KB GROUP AS OF 30 SEPTEMBER 2020│ 5 NOVEMBER 2020 │ 40

  41. Slide 41: Number of Clients and Distribution Network

    KB GROUP CLIENTS AND DISTRIBUTION NETWORK NUMBER OF CLIENTS AND DISTRIBUTION NETWORK 9M 2019 9M 2020 YoY Number of bank clients (thousands, CZ) Number of clients 1,667 1,664 1,664 KB Group's clients 2,364,000 * 2,299,000 * -65,000** 1,654 1,647 1,651 Komerční banka 1,662,000 1,651,000 -11,000 – indi

  42. Slide 42: Consolidated Income Statement

    CONSOLIDATED INCOME STATEMENT INCOME STATEMENT Profit and Loss Statement Reported Recurring* 9M 2019 9M 2020 Change 9M 2019 9M 2020 Change Items excluded in “recurring”: (CZK million, unaudited) YoY YoY Net interest income and similar income 17,670 16,098 -8.9% 17,670 16,098 -8.9% 9M 2019 Net fee &

  43. Slide 43: 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 3Q 2019 2Q 2020 3Q 2020 (CZK million, unaudited) YoY QoQ Net interest income and similar income 5,911 4,999 5,254 -11.1% 5.1% Net fee & commission inco

  44. Slide 44: 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) 3Q 2019 2Q 2020 3Q 2020 YoY QoQ Net interest income and similar income 5,911 4,999 5,254 -11.1% 5.1% Net fee & commission inc

  45. Slide 45: Balance Sheet

    CONSOLIDATED STATEMENT OF FINANCIAL POSITION BALANCE SHEET Balance Sheet YoY YoY Ytd Ytd (CZK million, unaudited) 30 Sep 2019 31 Dec 2019 30 Sep 2020 rel. abs. rel. abs. Assets 1,226,874 1,077,334 1,263,532 3.0% 36,658 17.3% 186,198 Cash and current balances with central bank 30,514 17,744 47,764 56

  46. Slide 46: Capital & Profitability Indicators

    FINANCIAL RATIOS CAPITAL & PROFITABILITY INDICATORS Adjusted for restructuring Reported reserve and IFRIC 21 linearisation* (year-to-date, IFRS 9) 30/09/2019 31/12/2019 30/09/2020 30/09/2019 30/09/2020 Capital adequacy 19.4% 19.7% 21.6% Tier 1 ratio = Core Tier 1 ratio 18.9% 19.1% 20.9% Risk weighte

  47. Slide 47: Zoom on Stage 2 Exposure Evolution

    APPENDIX ZOOM ON STAGE 2 EXPOSURE EVOLUTION  3Q 2020 stage 2 share higher at 7% of loan exposures Stage 2 KB Group 7.0% 5.3% 5.3% • In-depth assessment of loan moratorium portfolios 4.7% 4.8% 4.9% 5.8% resulting in 7.9 Bn CZK of exposures transferred to stage 2 4.7% • Few large corporate clients do

  48. Slide 48: Reminder on Key Features of Credit Risk Setup

    APPENDIX REMINDER ON KEY FEATURES OF CREDIT RISK SETUP  Credit policies  Expected benefits from historically prudent underwriting standards  Support to Czech economy (proactive implementation of government loan guarantee and loan moratorium programs, smart and timely adjustments to credit policie

  49. Slide 49: Lending with State Covid Guarantee

    LENDING WITH GUARANTEES LENDING WITH STATE COVID GUARANTEE Outstanding Signed exposure* GUARANTEED COVID LENDING No. of clients (CZK million) (CZK million) Covid II 865 3,787 3,567 Covid Prague 52 333 277 Covid III 944 6,799 6,230 Covid EGAP 3 753 677 Total 1,864 11,671 10,751 * according to ČNB met

  50. Slide 50: Business Performance of Subsidiaries 1/2

    BUSINESS PERFORMANCE OF SUBSIDIARIES OVERVIEW OF KB SUBSIDIARIES 1/2 9M 2019 9M 2020 YoY Modrá pyramida (100%), #2 building savings & loans company Volume of new loans (CZK million) 6,980 13,265 90% Volume of total loans (gross, CZK million) 54,899 61,744 12% Volume of deposits (CZK million) 61,210

  51. Slide 51: Business Performance of Subsidiaries 2/2

    BUSINESS PERFORMANCE OF SUBSIDIARIES OVERVIEW OF KB SUBSIDIARIES 2/2 9M 2019 9M 2020 YoY Factoring KB (100%), #1 on the Czech factoring market Factoring turnover (CZK million) 39,320 35,475 -10% Volume of total financing (gross, CZK million) 8,576 7,379 -14% Average number of FTEs 44 42 -4% Komerční

  52. Slide 52: Debt Securities Portfolio in the Banking Book

    SECURITIES DEBT SECURITIES PORTFOLIO IN THE BANKING BOOK CZK billion 125.5 103.7 84.4 68.0 Romania 6.4 110.8 14.2 7.8 Poland 0.1 0.5 35.7 41.2 31/12/2019 30/09/2020 Debt securities at amortized cost Czech government bonds Debt securities at FV through OCI Foreign government bonds Bonds of fin.instit

  53. Slide 53: Macroeconomic Environment – Czechia

    MACROECONOMIC ENVIRONMENT – CZECHIA Macroeconomic Indicators 2016 2017 2018 2019 2020* 2021* Real GDP (%, average) 2.5 5.4 3.2 2.3 -7.6 3.0 Inflation (%, average) 0.7 2.5 2.1 2.8 3.2 2.3 Household consumption (%, average) 3.7 4.0 3.3 2.9 -4.8 1.9 Unemployment (%, av., ILO meth.) 4.0 2.9 2.2 2.0 2.4

  54. Slide 54: Interest Rates Evolution

    INTEREST RATES EVOLUTION For the period 1 Jan 2006 – 31 October 2020 KB GROUP AS OF 30 SEPTEMBER 2020│ 5 NOVEMBER 2020 │ 54

  55. Slide 55: KB #1 Listed Czech Bank

    KB #1 LISTED CZECH BANK Development of KB share price and PX index (1 January 2001 – 31 October 2020) Shareholder structure Free-float 39.6% Société Générale 60.4% • The number of shareholders comprised 57,068 corporate entities and private individuals. • Of the Bank’s total share capital of CZK 19,

  56. Slide 56: 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 SEPTEMBER 2020│ 5 NOVEMBER 2020

Komerční banka — Q3 2020 Earnings Presentation on 6ix