Komercni Banka, A.s. · PSECZ:KOMB
Komercni Banka, A.s — Q1 2020 Earnings Presentation
45 slides from Komercni Banka, A.s's earnings presentation, May 6, 2020
Slide 1: Komerční banka Group Results First Quarter 2020
PRAGUE, 6 MAY 2020 KOMERČNÍ BANKA GROUP RESULTS First 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 Summary of KB’s crisis response Macroeconomic environment Corporate social responsibility Selected high-frequency business indicators Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Appendix KB GROUP AS OF 31 MARCH 2020│ 6 MAY 2020 │ 3
Slide 4: Resilience & Responsibility: Crisis Response Summary
CRISIS RESPONSE SUMMARY RESILIENCE & RESPONSIBILITY • Throughout the emergency, Komerční banka mantained the full scope of services to clients, with around 230 Full scope of services open branches, 800 ATMs and via digital banking channels. maintained • KB rapidly procured hundreds of thousands of
Slide 5: Contents
CONTENTS Summary of KB’s crisis response Macroeconomic environment Corporate social responsibility Selected high-frequency business indicators Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Appendix KB GROUP AS OF 31 MARCH 2020│ 6 MAY 2020 │ 5
Slide 6: Solid Pre-Crisis Fundamentals to Cushion the Hit to the Economy
SOLID PRE-CRISIS FUNDAMENTALS CZECH ECONOMY TO CUSHION THE HIT TO THE ECONOMY • GDP in 2020 expected to drop by 6.5%. The gradual opening of the Czech GDP growth (%, yoy)3 economy should drive a relatively fast recovery, but not reaching back to the pre-crisis activity levels • Car production resili
Slide 7: Comprehensive Reaction of the Central Bank
CNB VERSUS CORONAVIRUS COMPREHENSIVE REACTION OF THE CENTRAL BANK Monetary policy Monetary policy Interest rates (until 20 Apr 2020) Policy rate -125 bps to 1.00% • A 25 bps increase to 2.25% on 6 February, followed by two cuts, by 50 bps on 16 March and further by 75 bps on 26 March to current 1.00
Slide 8: Robust Fiscal Capacity of the Government
FISCAL POLICY & LEGISLATIVE MEASURES ROBUST FISCAL CAPACITY OF THE GOVERNMENT Guarantee programmes State budget adjustments in response to Covid-19 COVID programmes wave I (interest-free loan), COVID II (guarantee scheme) and Original 24-Mar 20-Apr COVID Prague funded from EU at a total capacity of
Slide 9: Contents
CONTENTS Summary of KB’s crisis response Macroeconomic environment Corporate social responsibility Selected high-frequency business indicators Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Appendix KB GROUP AS OF 31 MARCH 2020│ 6 MAY 2020 │ 9
Slide 10: Responding Effectively to Current and Long-Term Needs
RESPONDING EFFECTIVELY TO CORPORATE SOCIAL RESPONSIBILITY CURRENT AND LONG-TERM NEEDS INSTANT SUPPORT TO CLIENTS AFFECTED BY NOT FORGETTING LONG-TERM ISSUES THE COVID-19 OUTBREAK • KB Jistota foundation awarded a year-long support to six providers • From 13 March, KB introduced voluntary instalment
Slide 11: Contents
CONTENTS Summary of KB’s crisis response Macroeconomic environment Corporate social responsibility Selected high-frequency business indicators Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Appendix KB GROUP AS OF 31 MARCH 2020│ 6 MAY 2020 │ 11
Slide 12: Distributed Impacts on Client Activity
OPERATIONS & CLIENT ACTIVITY DURING EMERGENCY DISTRIBUTED IMPACTS ON CLIENT ACTIVITY Client activity indicators (% v. pre-Covid average, weekly) • KB has maintained the full scope of services offer to clients, including financing, throughout the state of emergency. Sales of retail products 135 • The
Slide 13: Drift to Digital Banking Continues
DIGITAL BANKING DRIFT TO DIGITAL BANKING CONTINUES DIGITAL IDENTITY DIGITAL ACCESS DIGITAL SALES Approval of Bank ID law in February opened third path Mobile banking penetration Share of sales by channel* for utilisation of bank authentication (KB Key): 1,000 (selected product categories, %) 836,000
Slide 14: Contents
CONTENTS Summary of KB’s crisis response Macroeconomic environment Corporate social responsibility Selected high-frequency business indicators Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Appendix KB GROUP AS OF 31 MARCH 2020│ 6 MAY 2020 │ 14
Slide 15: 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) +5.2% +2.2% YoY +3.2% 634.6 637.3 644.8 654.0 654.0 668.2 52.1 53.5 54.9 56.2 57.6 +10.6% YoY 50.
Slide 16: Selected Deals of the First Quarter of 2020
SELECTED DEALS SELECTED DEALS OF THE FIRST QUARTER OF 2020 RAILWAY RESEARCH & TESTING GLASS AND CERAMICS SUPPORT SERVICES VÚKV a.s. P-D REFRACTORIES CZ a.s. ARMEX GLOBAL a.s. Investment Financing Investment Financing Investment Financing CZK 135,000,000 EUR 3,900,000 CZK 180,000,000 Complex bank ser
Slide 17: Client Deposits Rose by 8.3% YoY
DEPOSITS AND OTHER AUM CLIENT DEPOSITS ROSE BY 8.3% YOY Group deposits (w/o repo operations) CZK billion Deposit product structure CZK billion +8.3% (w/o repo operations) +9.6% YoY YoY 826.0 838.6 860.2 894.9 795.6 816.3 860.2 894.9 795.5 826.1 838.6 816.3 61.2 60.8 -1.2% 61.8 61.5 61.6 61.8 562.7 5
Slide 18: Contents
CONTENTS Summary of KB’s crisis response Macroeconomic environment Corporate social responsibility Selected high-frequency business indicators Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Appendix KB GROUP AS OF 31 MARCH 2020│ 6 MAY 2020 │ 18
Slide 19: Initial Impacts from COVID-19
R E C O N C I L I A T IPORNO O F IFT I & N CLO OMSE S INITIAL IMPACTS FROM COVID-19 Drivers for year on year change in attributable net income (as of 31 March 2020) -16.3% 3,176 7 -47 -75 -96 111 2,658 -122 34 -330 Reported NII NFC NPFO & Regulatory OPEX CoR Other* Tax Reported 1Q 2019 other NBI fun
Slide 20: Healthy Balance Sheet Growth
STATEMENT OF FINANCIAL POSITION HEALTHY BALANCE SHEET GROWTH Assets 9.4% Liabilities and Equity CZK billion CZK billion 9.4% 15.1% 15.1% YoY YoY 1,240 1,133 1,240 1,077 1,133 118 372 +10.4% 1,077 +7.5% 110 337 262 94 +7.8% 924 661 +5.2% 857 822 629 647 3 4 131 131 158 +20.9% 3 54 4 3 47 4 81 +3.3% 3
Slide 21: Strong Capital Base
CAPITAL, RW A STRONG CAPITAL BASE Contributions to capital adequacy ratio in 2020 (%) Contributions to equity in 2020 (CZK million) +106 bps 2.51 80 110,229 20.78 -1,143 0.00 2,658 19.72 -0.44 -0.68 108,635 -0.33 31 Dec RWA RWA Retained Interim OCI & 31 Mar 1 Jan YtD profit Revaluations* Minority 31
Slide 22: NII Partly Reflecting Drop in Rates
NET INTEREST AND SIMILAR INCOME NII PARTLY REFLECTING DROP IN RATES -0.8% Net interest margin (%) QtD NII -1.3% YtD 2.35% 6,030 5,892 5,867 5,911 5,921 5,845 2.34% 2.35% 385 2.28% 2.28% 2.23% 346 383 356 357 345 2.15% 2.19% 2.19% 2.17% 2.17% 2.08% 2,891 2,901 2,888 2,926 2,882 2,869 4Q 2018 1Q 2019
Slide 23: Fees Impacted by SEPA Payments Regulation
NET FEES AND COMMISSIONS FEES IMPACTED BY SEPA PAYMENTS REGULATION NFC -5.3% Transaction fees – the drop caused by the new regulation of -12.3% charges for EUR payments within SEPA (effective from 15 Dec 1,579 1,533 1,543 2019), and by a lower number of transactions in March. 1,428 1,480 1,353 677
Slide 24: Higher Demand for Hedging but Higher Credit Value Adjustments
HIGHER DEMAND FOR HEDGING NET PROFIT FROM FINANCIAL OPERATIONS BUT HIGHER CREDIT VALUE ADJUSTMENTS +3.2% NPFO Clients’ demand for hedging of financial risks increased with the -6.1% 839 uncertainty and volatility of interest and exchange rates 790 768 589 627 A bigger part of gains from market o
Slide 25: Higher Resolution Fund Charge, Extraordinary Purchases Due to COVID-19
HIGHER RESOLUTION FUND CHARGE OPERATING EXPENDITURES EXTRAORDINARY PURCHASES DUE TO COVID-19 +5.2% Average number of employees (quarterly) OPEX +18.8% YoY 8,339 8,168 8,121 8,170 8,204 8,173 +0.1% -1,896 -1,905 -1,939 -1,978 -1,958 -1,940 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 -1,224 -841 -
Slide 26: Contents
CONTENTS Summary of KB’s crisis response Macroeconomic environment Corporate social responsibility Selected high-frequency business indicators Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Appendix KB GROUP AS OF 31 MARCH 2020│ 6 MAY 2020 │ 26
Slide 27: 1Q 2020 Asset Quality
LOAN PORTFOLIO QUALITY 1Q 2020 ASSET QUALITY Gross lending CZK billion 640.5 651.7 657.1 656.6 671.1 636.6 Loan exposure up by 4.8 % YoY, by 2.2% QoQ NPL exposure ratio YoY stable at 2.1% (vs. 2.5% in 1Q 585.8 590.6 604.5 609.5 609.0 620.2 2019) driven by historically low default rates, strong 3
Slide 28: 1Q 2020 Cost of Risk
COST OF RISK 1Q 2020 COST OF RISK (Year-to-date, in basis points) Total Cost of Risk 10 9 Impact of Covid19 only marginally reflected in 1Q 2020 9 due high level of uncertainty but included in 2020 CoR -2 -2 -4 -5 -5 -7 -10 -9 guidance -11 -11 -12 -15 -20 -19 -19 1Q 2020 CoR net creation at CZK
Slide 29: Key Features of Credit Risk Setup
CREDIT RISK SETUP KEY FEATURES OF CREDIT RISK SETUP Credit origination policies and drivers Expected benefits from historically prudent underwriting standards and from smart adjustments going forward Support to Czech economy (deferrals of loan instalments, Czech State support, etc.) Capacity
Slide 30: 2020-2021 Cost of Risk Outlook
COST OF RISK 2020-2021 COST OF RISK OUTLOOK Central macroeconomic scenario 6.5% GDP contraction expected for 2020 320 bps unemployment increase expected for 2020 9.7% GDP recovery expected for 2021 CoR expected to be contained in the range of 70 bps, under the bank’s central macroeconomic
Slide 31: Contents
CONTENTS Summary of KB’s crisis response Macroeconomic environment Corporate social responsibility Selected high-frequency business indicators Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Appendix KB GROUP AS OF 31 MARCH 2020│ 6 MAY 2020 │ 31
Slide 32: Baseline Outlook for 2020 Update for COVID-19
UPDATED OUTLOOK FOR 2020 BASELINE OUTLOOK FOR 2020 UPDATE FOR COVID-19 This is replacing the outlook presented on 6 February 2020, which should no longer be relied upon. Investors are advised to consider higher than usual level of uncertainty and risks Macroeconomic • Czech economy will record a ful
Slide 33: Contents
CONTENTS Summary of KB’s crisis response Macroeconomic environment Corporate social responsibility Selected high-frequency business indicators Business performance Financial performance Asset quality & cost of risk Updated outlook for 2020 Appendix KB GROUP AS OF 31 MARCH 2020│ 6 MAY 2020 │ 33
Slide 34: Number of Clients and Distribution Network
KB GROUP CLIENTS AND DISTRIBUTION NETWORK NUMBER OF CLIENTS AND DISTRIBUTION NETWORK 1Q 2019 1Q 2020 YoY Number of bank clients (thousands, CZ) Number of clients 1,664 1,668 1,664 1,663 * KB Group's clients 2,379,000 2,354,000 -25,000 1,654 Komerční banka 1,662,000 1,663,000 1,000 1,647 – individual
Slide 35: Income Statement
CONSOLIDATED INCOME STATEMENT INCOME STATEMENT Profit and Loss Statement Reported Change Change 1Q 2019 4Q 2019 1Q 2020 (CZK million, unaudited) YoY QoQ Net interest income and similar income 5,892 5,921 5,845 -0.8% -1.3% Net fee & commission income 1,428 1,543 1,353 -5.3% -12.3% Net profit of finan
Slide 36: Balance Sheet
CONSOLIDATED STATEMENT OF FINANCIAL POSITION BALANCE SHEET Balance Sheet YoY YoY Ytd Ytd (CZK million, unaudited) 31 Mar 2019 31 Dec 2019 31 Mar 2020 rel. abs. rel. abs. Assets 1,133,345 1,077,334 1,240,106 9.4% 106,761 15.1% 162,772 Cash and current balances with central bank 18,164 17,744 29,445 6
Slide 37: Capital & Profitability Indicators
FINANCIAL RATIOS CAPITAL & PROFITABILITY INDICATORS Reported Adjusted for IFRIC 21* (year-to-date, IFRS 9) 31/03/2019 31/12/2019 31/03/2020 31/03/2019 31/03/2020 Capital adequacy 18.9% 19.7% 20.8% Tier 1 ratio = Core Tier 1 ratio 18.4% 19.1% 20.2% Risk weighted assets for credit risk (CZK billion) 3
Slide 38: Loan Repayment Holidays; Lending with State COVID Guarantee
LOAN REPAYMENT HOLIDAYS CREDIT MORATORIUM LENDING WITH STATE COVID GUARANTEE LENDING WITH GUARANTEES As of 30 April 2020 Repayment moratorium Number of Related outstanding applications volume (CZK bil.) KB Mortgages 7,126 12.2 Consumer loans 7,058 1.3 Small business loans 5,898 5.5 Corporate loans 3
Slide 39: Business Performance of Subsidiaries 1/2
BUSINESS PERFORMANCE OF SUBSIDIARIES OVERVIEW OF KB SUBSIDIARIES 1/2 1Q 2019 1Q 2020 YoY Modrá pyramida (100%), #2 building savings & loans company Volume of new loans (CZK million) 2,008 3,805 90% Volume of total loans (gross, CZK million) 52,087 57,583 11% Volume of deposits (CZK million) 61,507 6
Slide 40: Business Performance of Subsidiaries 2/2
BUSINESS PERFORMANCE OF SUBSIDIARIES OVERVIEW OF KB SUBSIDIARIES 2/2 1Q 2019 1Q 2020 YoY Factoring KB (100%), #1 on the Czech factoring market Factoring turnover (CZK million) 11,652 12,541 8% Volume of total financing (gross, CZK million) 8,075 8,575 6% Average number of FTEs 43 43 -1% Komerční poj
Slide 41: Debt Securities Portfolio in the Banking Book
DEBT SECURITIES PORTFOLIO IN THE BANKING SECURITIES BOOK CZK billion 111.1 103.7 Romania 74.1 68.0 1.7 93.1 15.5 7.8 Poland 6.0 Slovakia 0.1 2.4 35.7 37.0 31/12/2019 31/03/2020 Debt securities at amortized cost Czech government bonds Debt securities at FV through OCI Foreign government bonds Bonds o
Slide 42: 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 -6.5 9.7 Inflation (%, average) 0.7 2.5 2.1 2.8 3.4 1.4 Household consumption (%, average) 3.5 4.4 3.2 3.0 -2.6 3.6 Unemployment (%, av., ILO meth.) 5.4 4.1 2.2 2.0 5.2
Slide 43: Interest Rates Evolution
INTEREST RATES EVOLUTION For the period 1 Jan 2006 – 30 April 2020 KB GROUP AS OF 31 MARCH 2020│ 6 MAY 2020 │ 43
Slide 44: KB #1 Listed Czech Bank
KB #1 LISTED CZECH BANK Development of KB share price and PX index (1 January 2001 – 30 April 2020) Shareholder structure Free-float 39.6% Société Générale 60.4% • The number of shareholders comprised 53,943 corporate entities and private individuals. • Of the Bank’s total share capital of CZK 19,00
Slide 45: 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 MARCH 2020│ 6 MAY 2020 │ 45