Komercni Banka, A.s. · PSECZ:KOMB
Komercni Banka, A.s — Q3 2022 Earnings Presentation
46 slides from Komercni Banka, A.s's earnings presentation, Nov 4, 2022
Slide 1: KB Group Results as of 30 Sep 2022 and KB Change 2025 Implementation
PRAGUE, 4 NOVEMBER 2022 KB GROUP RESULTS AS OF 30 SEP 2022 AND STATUS OF KB CHANGE 2025 IMPLEMENTATION 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 Highlights as of 30 September 2022 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Outlook update for 2022 KB Change 2025 Year 2 delivery Appendix KB GROUP AS OF 30 SEPTEMBER 2022│ 4 NOVEMBER 2022 │ 3
Slide 4: Highlights as of 30 September 2022
HIGHLIGHTS AS OF 30 SEPTEMBER 2022 Solid business and financial performance, resilient asset quality, acknowledgements for sustainability Loans (gross) * Client deposits * Non-bank assets under management CZK 787.2 billion CZK 1,010.1 billion CZK 210.0 billion +8.6% YoY / + 2.3% QoQ -3.2% YoY / -1.4
Slide 5: Contents
CONTENTS Highlights as of 30 September 2022 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Outlook update for 2022 KB Change 2025 Year 2 delivery Appendix KB GROUP AS OF 30 SEPTEMBER 2022│ 4 NOVEMBER 2022 │ 5
Slide 6: Economy pulled down by household consumption, net exports improving
ECONOMY PULLED DOWN BY HOUSEHOLD CZECH ECONOMY CONSUMPTION, NET EXPORTS IMPROVING • GDP in 3Q 2022 -0.4% QoQ and +1.6% YoY, YoY growth was driven by fixed Czech GDP growth (%, YoY) investments and foreign demand, while consumption contributed 10 3.5 negatively1 5 3.0 2.7 3.1 0.5 • Manufacturing and
Slide 7: Contents
CONTENTS Highlights as of 30 September 2022 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Outlook update for 2022 KB Change 2025 Year 2 delivery Appendix KB GROUP AS OF 30 SEPTEMBER 2022│ 4 NOVEMBER 2022 │ 7
Slide 8: Gross lending up 8.6% YoY
LOANS TO CLIENTS GROSS LENDING UP 8.6% YOY Group lending (w/o repo, but incl. client bonds)* CZK billion Group business and other loans CZK billion +8.6% (w/o repo, but incl. client bonds) +2.3% +11.3% YoY +3.7% 750.7 769.4 787.2 708.1 724.8 738.9 YoY 76.0 78.8 81.5 83.8 +15.6% 69.0 72.5 387.2 401.6
Slide 9: AUM up by 5.3%, client deposits down 3.2% YoY
AUM UP BY +5.3%, CLIENT DEPOSITS DOWN 3.2% YOY, D E POOTSHI ETRS AA UN MD PRUDENT REMUNERATION POLICY MAINTAINED GROUP DEPOSITS (excluding repo operations)LIENT NON-BANK ASSETS UNDER MANAGEMENTLIENT -3.2% CZK billion -1.4% CZK billion +5.3% YoY YoY 996.9 1,043.1 1,015.1 1,024.3 1,010.1 206.9 205.6 2
Slide 10: Contents
CONTENTS Highlights as of 30 September 2022 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Outlook update for 2022 KB Change 2025 Year 2 delivery Appendix KB GROUP AS OF 30 SEPTEMBER 2022│ 4 NOVEMBER 2022 │ 10
Slide 11: Net profit increase driven by core revenues
R E C O N C I L I A T IPORNO O F IFT I & N CLOOM SSE NET PROFIT INCREASE DRIVEN BY CORE REVENUES Drivers for year on year change in attributable net profit Development of quarterly net profit and its drivers (as of 30 September 2022) +34.3% +51.1% -4.1% 6,152 280 146 12,927 3,513 4,806 4,608 -55 -25
Slide 12: Balance sheet growth steady adjusting for seasonal effects
BALANCE SHEET GROWTH STEADY STATEMENT OF FINANCIAL POSITION ADJUSTING FOR SEASONAL EFFECTS Assets Liabilities and Equity CZK billion +8.2% CZK billion +8.2% +19.9% +19.9% YoY YoY 1,492 1,492 1,379 1,379 110 +21.4% 1,244 -1.7% 90 1,244 446 83 454 287 1,121 +2.4% +9.4% 1,094 777 957 710 725 21 13 179
Slide 13: Capital ratios to be optimised from 4Q 2022 with proposed catch-up dividend
CAPITAL RATIOS TO BE OPTIMISED FROM 4Q 2022 CAPITAL, RWA WITH PROPOSED PAYMENT OF CATCH-UP DIVIDEND Contributions to capital adequacy ratio in 9M 2022 (%) Contributions to equity in 9M 2022 (CZK million) -25 bps 21.31 0.92 21.06 -8,272 -1.73 12,927 129,267 -1.41 2.67 126,782 -0.36 -2,063 -107 -0.34
Slide 14: Growth slowing on lower contribution from trading, higher funding costs
GROWTH SLOWING ON LOWER CONTRIBUTION NET INTEREST INCOME FROM TRADING, HIGHER FUNDING COSTS +36.2% Net interest margin (%) QtD NII +0.5% YtD 2.09% 1.93% 2.22% 2.22% 2.17% 2.22% 2.12% 2.25% 7,302 7,342 1.60% 1.70% 1.68% 1.70% 6,856 6,448 660 821 494 5,390 332 4,953 229 291 3,121 3,265 3,534 2Q 2021 3
Slide 15: Growth in transactions, mutual funds, guarantees
NET FEES AND COMMISSIONS GROWTH IN TRANSACTIONS, MUTUAL FUNDS, GUARANTEES NFC +7.4% ▪ Transaction fees – All transaction types up compared to 9M21 +0.1% (which had been affected by pandemic restrictions). Main 1,544 1,493 1,477 1,478 1,418 1,376 contribution from fast increasing number of card payme
Slide 16: Recovery in FX conversions, hedging activity reflecting market conditions
RECOVERY IN FX CONVERSIONS, NET PROFIT FROM FINANCIAL OPERATIONS HEDGING ACTIVITY REFLECTING MARKET CONDITIONS NPFO ▪ Solid client FX hedging activity, CZK volatility limited by CNB -3.3% +11.9% interventions 1,081 953 1,000 967 864 ▪ Successful tailored hedging strategies for SME clients, 588 591 6
Slide 17: Tight cost control in inflationary environment
OPERATING EXPENDITURES TIGHT COST CONTROL IN INFLATIONARY ENVIRONMENT Average number of employees (quarterly) +3.8% OPEX 3Q22/3Q21 0.0% -2.3% 7,676 7,621 7,635 7,564 7,482 7,447 3Q22/2Q22 -1,843 -1,933 -1,939 -1,871 -1,916 -1,944 -0.5% 2Q 2021 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 -923 -871 -893 ▪
Slide 18: Contents
CONTENTS Highlights as of 30 September 2022 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Outlook update for 2022 KB Change 2025 Year 2 delivery Appendix KB GROUP AS OF 30 SEPTEMBER 2022│ 4 NOVEMBER 2022 │ 18
Slide 19: 3Q 2022 asset quality
LOAN PORTFOLIO QUALITY 3Q 2022 ASSET QUALITY Gross lending CZK billion ▪ Loan portfolio up 8.6% YoY and 2.3% QoQ 787.2 738.9 750.7 769.4 708.1 724.8 ▪ Resilient credit risk profile of KB loan portfolio and prudent approach to IFRS9 classification 664.1 643.2 663.6 663.3 672.4 698.8 • Higher stage 2
Slide 20: 3Q 2022 cost of risk development
COST OF RISK 3Q 2022 COST OF RISK DEVELOPMENT Total Cost of Risk (Year-to-date, in basis points) 42 43 40 ▪ 3Q 2022 CoR at CZK 669 million. 9M 2022 CoR at CZK 34 37 24 21 1,231 million. 19 13 10 15 14 8 0 7 ▪ CZK 1,389 million in new provisions on the S1 and S2 -3 -17 -5 portfolios (anticipation of
Slide 21: Contents
CONTENTS Highlights as of 30 September 2022 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Outlook update for 2022 KB Change 2025 Year 2 delivery Appendix KB GROUP AS OF 30 SEPTEMBER 2022│ 4 NOVEMBER 2022 │ 21
Slide 22: Updated outlook for 2022
OUTLOOK FOR 2022 UPDATED OUTLOOK FOR 2022 This is an update of the outlook presented on 3 August 2022. Investors are advised to consider higher than usual level of uncertainty and risks Macroeconomic • Czech GDP expected to grow by 2.7% in FY 2022, with a mild recession (GDP QoQ declining) in 4Q22 a
Slide 23: Contents
CONTENTS Highlights as of 30 September 2022 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Outlook update for 2022 KB Change 2025 Year 2 delivery Appendix KB GROUP AS OF 30 SEPTEMBER 2022│ 4 NOVEMBER 2022 │ 23
Slide 24: 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 Growth Helpfulness Responsibility ▪ Digital bank for pe
Slide 25: Deliveries in Year 2 of KB Change 2025 plan
DELIVERIES IN YEAR 2 OF KB CHANGE 2025 PLAN ▪ New Digital Bank – pilot multi-channel operation with 3,000 users DIGITAL BANK FOR PEOPLE WITH ASPIRATIONS ▪ New card management system ready for deployment ▪ Total digital sales ratio (in Individuals segment) at 22.9%, of which 16.8% end-to- end digital
Slide 26: Deliveries in Year 2 of KB Change 2025 plan
DELIVERIES IN YEAR 2 OF KB CHANGE 2025 PLAN ▪ Carbon emissions from own operations in 2021 down 32.5% compared to 2019 to ENVIRONMENT, SOCIETY, 23,903 tonnes CO2 eq. (14.7 kg per client), certified by Preferred by Nature GOVERNANCE ▪ The outstanding volume of ESG compliant loans to corporate clients
Slide 27: New Digital Bank – on track to begin migration of retail clients in 2023
NEW DIGITAL BANK – ON TRACK TO BEGIN MIGRATION OF RETAIL CLIENTS IN 2023, CORPORATE CLIENTS FROM 2025 Komerční banka’s New digital bank Delivered by October 2022 Complete overhaul of banking infrastructure and client-facing as well as internal bank processes • Pilot operation on Temenos Transact cor
Slide 28: Interim delivery on operational targets
INTERIM DELIVERY ON OPERATIONAL TARGETS TARGET MAIN OPERATIONAL TARGETS * 2019 2021 SEP-2022 2025 CLIENT SATISFACTION (NPS) ▪ Retail NPS: further improved satisfaction with services – INDIVIDUALS 32 39 45 50 on the branch, continued excellent satisfaction with – SMALL BUSINESSES 32 41 33 50 contact
Slide 29: Confirmed growth and financial targets for 2025
CONFIRMED GROWTH AND FINANCIAL TARGETS FOR 2025 ▪ Slower growth of revenues after 2022 due to peaking interest rates, to accelerate again from 2025 with the digital sales, advisory model supported by data analytics in the New digital bank and new sources of revenues ▪ Operating expenditures to be ke
Slide 30: Contents
CONTENTS Highlights as of 30 September 2022 Macroeconomic environment Business performance Financial performance Asset quality & cost of risk Outlook update for 2022 KB Change 2025 Year 2 delivery Appendix KB GROUP AS OF 30 SEPTEMBER 2022│ 4 NOVEMBER 2022 │ 30
Slide 31: Number of clients and distribution network
KB GROUP CLIENTS AND DISTRIBUTION NETWORK NUMBER OF CLIENTS AND DISTRIBUTION NETWORK 9M 2021 9M 2022 YoY Number of bank clients (thousands, CZ) Number of clients KB Group's clients 2,237,000 2,246,000 9,000 1,664 1,667 1,664 1,641 1,625 1,651 Komerční banka 1,623,000 1,651,000 28,000 – individual cl
Slide 32: Continued fast adoption of mobile banking
DIGITAL & INNOVATIONS CONTINUED FAST ADOPTION OF MOBILE BANKING Share of sales by channel* Mobile banking – volume of payments Mobile banking and KB Key penetration (in (selected product categories, %) (CZK billion per month) thousands) 1,122,000; 68.0% 1,200 0% 40 3Q 2022 CZK 104.5 billion (+ 49% Y
Slide 33: Income statement
CONSOLIDATED INCOME STATEMENT INCOME STATEMENT Profit and Loss Statement Reported Change (CZK million, unaudited) 9M 2021 9M 2022 YoY Net interest income 15,347 21,499 40.1% Net fee & commission income 4,167 4,447 6.7% Net profit of financial operations 2,954 2,913 -1.4% Dividend and other income 16
Slide 34: Income statement
CONSOLIDATED INCOME STATEMENT INCOME STATEMENT Profit and Loss Statement Reported Change Change (CZK million, unaudited) 3Q 2021 2Q 2022 3Q 2022 YoY QoQ Net interest income 5,390 7,302 7,342 36.2% 0.5% Net fee & commission income 1,376 1,477 1,478 7.4% 0.1% Net profit of financial operations 1,000 8
Slide 35: Balance sheet
CONSOLIDATED STATEMENT OF FINANCIAL POSITION BALANCE SHEET Balance Sheet 30 Sep 31 Dec 30 Sep YoY YoY Ytd Ytd (CZK million, unaudited) 2021 2021 2022 rel. abs. rel. abs. Assets 1,378,937 1,244,353 1,492,210 8.2% 113,273 19.9% 247,857 Cash and current balances with central bank 79,070 29,947 25,497 -
Slide 36: Capital & profitability indicators
FINANCIAL RATIOS CAPITAL & PROFITABILITY INDICATORS Adjusted for IFRIC 21 Reported linearisation* (year-to-date, IFRS 9) 30/09/2021 31/12/2021 30/09/2022 30/09/2021 30/09/2022 Capital adequacy 23.0% 21.3% 21.1% Tier 1 ratio = Core Tier 1 ratio 22.5% 20.9% 20.5% Risk weighted assets for credit risk (
Slide 37: MREL target and fulfilment status, Tier 2
MREL, TIER 2 MREL TARGET AND FULFILMENT STATUS, TIER 2 • As of 1 January 2022, KB Group is required to comply with a MREL equal to 14.4% of the Own funds and eligible liabilities (for MREL) consolidated total risk exposure and 4.46% of the consolidated total exposure. KB Group fulfilled the interim
Slide 38: Windfall tax proposal
WINDFALL TAX WINDFALL TAX PROPOSAL Proposal of the Finance Ministry for a windfall tax (WFT) submitted outside the standard legislation process as an amendment to an existing bill in second reading in the Chamber of Deputies on 24 October 2022, third reading planned for 4 November 2022. If approved,
Slide 39: 9M 2022 cost of risk structure
APPENDIX - COMPOSITION OF 9M 2022 COST OF RISK 9M 2022 COST OF RISK STRUCTURE Contribution to Key components YtD Q3 2022 CoR (bps) Non-retail NPL portfolio -3 bps Retail NPL portfolio -2 bps Non-retail performing portfolio (Stage 1 & 2) 19 bps Retail performing portfolio (Stage 1 & 2) 7 bps TOTAL 21
Slide 40: Business performance of subsidiaries 1/2
BUSINESS PERFORMANCE OF SUBSIDIARIES OVERVIEW OF KB SUBSIDIARIES 1/2 9M 2021 9M 2022 YoY Modrá pyramida (100%), #2 building savings & loans company Volume of new loans (CZK million) 26,268 13,361 -49% Volume of total loans (gross, CZK million) 72,462 83,761 16% Volume of deposits (CZK million) 60,35
Slide 41: Business performance of subsidiaries 2/2
BUSINESS PERFORMANCE OF SUBSIDIARIES OVERVIEW OF KB SUBSIDIARIES 2/2 9M 2021 9M 2022 YoY Factoring KB (100%), #1 on the Czech factoring market Factoring turnover (CZK million) 43,604 50,370 16% Volume of total financing (gross, CZK million) 8,890 9,789 10% Average number of FTEs 41 42 1% Komerční po
Slide 42: Debt securities portfolio in the banking book
SECURITIES DEBT SECURITIES PORTFOLIO IN THE BANKING BOOK CZK billion 161.8 147.6 112.1 131.7 149.6 Slovakia 5.0 11.0 6.1 Poland 1.2 35.5 30.1 31/12/2021 30/09/2022 Czech sovereign securities Debt securities at amortized cost Foreign government bonds Debt securities at FV through OCI Corporations Not
Slide 43: Macroeconomic environment – Czechia
MACROECONOMIC ENVIRONMENT – CZECHIA Macroeconomic Indicators 2017 2018 2019 2020 2021 2022* 2023* 2024* Real GDP (%, average) 5.3 3.2 3.0 -5.5 3.6 2.7 0.5 3.1 Inflation (%, average) 2.5 2.1 2.8 3.2 3.8 15.1 12.0 2.8 Household consumption (%, average) 4.0 3.3 2.6 -7.4 4.2 0.8 0.4 2.2 Unemployment (%,
Slide 44: Interest rates evolution
INTEREST RATES EVOLUTION For the period 1 Jan 2015 – 31 October 2022 KB GROUP AS OF 30 SEPTEMBER 2022│ 4 NOVEMBER 2022 │ 44
Slide 45: KB #1 listed Czech bank
KB #1 LISTED CZECH BANK Development of KB share price and PX index (1 January 2001 – 31 October 2022) Shareholder structure Free-float 39.6% Société Générale 60.4% • The number of shareholders comprised 67,358 corporate entities and private individuals • Of the Bank’s total share capital of CZK 19,0
Slide 46: 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 2022│ 4 NOVEMBER 2022