Slide 1: Komerční banka Group Financial results as of 30 June 2018
Komerční banka Group Financial results as of 30 June 2018 ACCORDING TO INTERNATIONAL FINANCIAL REPORTING STANDARDS, CONSOL IDATED, UNAUDITED PRAGUE, 2 AUGUST 2018
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: Agenda
AGENDA MACROECONOMIC ENVIRONMENT HIGHLIGHTS OF KB’s PERFORMANCE KB CHANGE STRATEGIC UPDATE BUSINESS PERFORMANCE FINANCIAL PERFORMANCE ASSET QUALITY & COST OF RISK APPENDIX KB GROUP AS OF 30 JUNE 2018 02 AUGUST 2018 3
Slide 4: Economy slowing closer to potential trend rate
ECONOMY OF THE CZECH REPUBLIC ECONOMY SLOWING CLOSER TO POTENTIAL TREND RATE GDP in 1Q18 up 0.5% QoQ, +4.2% YoY. Private consumption Real GDP outlook (YoY, %) and investments were the main growth drivers. On the supply side, the construction sector recorded a significant increase in value added 5.
Slide 5: Agenda
AGENDA MACROECONOMIC ENVIRONMENT HIGHLIGHTS OF KB’s PERFORMANCE KB CHANGE STRATEGIC UPDATE BUSINESS PERFORMANCE FINANCIAL PERFORMANCE ASSET QUALITY & COST OF RISK APPENDIX KB GROUP AS OF 30 JUNE 2018 02 AUGUST 2018 5
Slide 6: KB in second quarter 2018: fast adoption of digital, strong growth in retail
QUARTERS’ HIGHLIGHTS KB IN SECOND QUARTER 2018: FAST ADOPTION OF DIGITAL, STRONG GROWTH IN RETAIL Number of KB Mobilní banka users swiftly broke through the 500,000 mark Mobile banking users +150,000 YoY to 514,000 Total number of KB Bank and Group clients on the rise KB bank customers +12,000 to 1,
Slide 7: Agenda
AGENDA MACROECONOMIC ENVIRONMENT HIGHLIGHTS OF KB’s PERFORMANCE KB CHANGE STRATEGIC UPDATE BUSINESS PERFORMANCE FINANCIAL PERFORMANCE ASSET QUALITY & COST OF RISK APPENDIX KB GROUP AS OF 30 JUNE 2018 02 AUGUST 2018 7
Slide 8: Addressing upcoming challenges with KB Change plan
KEY TARGETS FOR 2020 ADDRESSING UPCOMING CHALLENGES WITH KB CHANGE PLAN Ambition category Target population Metric Score Client satisfaction Defined individual clients Number one SMEs Net Promoter Score among key peers in each target segment Large corporations Employee engagement KB Group employees
Slide 9: Progress update on KB Change in second quarter 2018
KB CHANGE STRATEGIC PROGRAMME PROGRESS UPDATE ON KB CHANGE IN SECOND QUARTER 2018 Shorter time-to-cash for clients Simplified process of new loans granting for clients in SME segments Improving clients’ digital KB Klíč Internet banking authentication via token (smartphone app) experience KB Key
Slide 10: Agenda
AGENDA MACROECONOMIC ENVIRONMENT HIGHLIGHTS OF KB’s PERFORMANCE KB CHANGE STRATEGIC UPDATE BUSINESS PERFORMANCE FINANCIAL PERFORMANCE ASSET QUALITY & COST OF RISK APPENDIX KB GROUP AS OF 30 JUNE 2018 02 AUGUST 2018 10
Slide 11: Selected deals of the second quarter of 2018
SELECTED DEALS SELECTED DEALS OF THE SECOND QUARTER OF 2018 PUBLIC SECTOR REAL ESTATE UTILITY CTP Property Královéhradecký kraj Europort Airport Center a.s. + 2P, s.r.o. Severočeská vodárenská společnost a.s. Municipal Financing Investment Financing Acquisition Financing CZK 900,000,000 EUR 35,000,0
Slide 12: Solid growth rate in retail lending
LOANS TO CLIENTS SOLID GROWTH RATE IN RETAIL LENDING Gross loans +4.2% YoY, +2.0% QoQ to CZK 624.8 billion Group lending (including repo, incl. client bonds) (excluding repo operations but including Debt securities CZK billion issued by KB’s corporate clients). 615.2 625.8 607.4 628.3 635.2 596.1
Slide 13: Faster growth in retail and in term deposits
DEPOSITS AND OTHER ASSETS UNDER MANAGEMENT FASTER GROWTH IN RETAIL AND IN TERM DEPOSITS Group deposits (incl. repo operations) Standard Group deposits (excluding repo) up +4.6% CZK billion 814.7 832.0 758.2 781.9 797.1 762.0 YoY to CZK 806.6 billion, +2.0% QoQ 61.6 61.3 63.8 62.6 62.5 62.7 Total
Slide 14: Agenda
AGENDA MACROECONOMIC ENVIRONMENT HIGHLIGHTS OF KB’s PERFORMANCE KB CHANGE STRATEGIC UPDATE BUSINESS PERFORMANCE FINANCIAL PERFORMANCE ASSET QUALITY & COST OF RISK APPENDIX KB GROUP AS OF 30 JUNE 2018 02 AUGUST 2018 14
Slide 15: Stable recurring net profit, increase in core revenues
RECONCILIATION OF INCOME STABLE RECURRING NET PROFIT, INCREASE IN CORE REVENUES Drivers for year on year change in attributable net income (as of 30 June 2018) -12.3% 7,697 -895 -0.7% 6,802 383 -48 -569 10 6,754 6,754 0 307 -9 -122 Reported One-offs Recurring NII NFC NPFO & Recurring CoR Other* Tax
Slide 16: Outlook for the rest of 2018
FINANCIAL AND BUSINESS OUTLOOK OUTLOOK FOR THE REST OF 2018 Czech economy to grow around 3.0% driven by domestic consumption and investments Macroeconomic Tight labour market to generate growth bottlenecks and boost inflation assumptions Faster inflation to allow continuing in normalisation of
Slide 17: Balance sheet growth driven by deposits from clients and banks
CONSOLIDATED STATEMENT OF FINANCIAL POSITION BALANCE SHEET GROWTH DRIVEN BY DEPOSITS FROM CLIENTS AND BANKS 30 Jun 31 Dec 1 Jan * 30 Jun Balance Sheet 2017 2017 2018 2018 Ytd Ytd According According According According rel. abs. (CZK million, unaudited) to IAS 39 to IAS 39 to IFRS 9 to IFRS 9 Assets
Slide 18: Shareholders' equity reflecting payment of annual dividend
EQUITY SHAREHOLDERS’ EQUITY REFLECTING PAYMENT OF ANNUAL DIVIDEND Total equity decreased year to date by 3.1% to CZK Contributions to equity in 1H 2018 95.1 billion as profit generation was offset by payment of the annual dividend in May of CZK 8.9 billion 98,162 6 754 -8,876 95,104 Total equity
Slide 19: Regulatory capital level solid ahead of increases in requirements
REGULATORY CAPITAL REGULATORY CAPITAL LEVEL SOLID AHEAD OF INCREASES IN REQUIREMENTS Contributions to capital adequacy ratio development in 1H 2018 Total RWA CZK 446.8 billion (-1.0% YoY, +2.2% QoQ) 1,5 -1.0 18.6 -0.7 Credit RWA CZK 369.0 billion (-3.3% YoY, +1.5% QoQ) -0.1 18.1 -0.2 RWA densi
Slide 20: Increasing market interest rates boosting income
NET INTEREST AND SIMILAR INCOME INCREASING MARKET INTEREST RATES BOOSTING INCOME 5,214 5,211 5,364 5,349 5,444 5,196 Net interest income in 1H 2018 +3.7% YoY. NII 306 311 322 351 390 421 in 2Q 2018 was up 1.8% QoQ 2,663 2,521 2,493 2,682 2,709 2,648 Higher interbank rates supported yields from r
Slide 21: Stable fee income except for elevated base
NET FEES AND COMMISSIONS STABLE FEE INCOME EXCEPT FOR ELEVATED BASE 1,640 1,610 1,572 NFC in 1H 2018 down 1.5% YoY, 2Q +4.5% QoQ 1,515 1,519 1,505 267 229 203 196 210 214 Deposit product fees increased as the number of 177 183 178 176 186 195 183 clients and the share of superior account package
Slide 22: Financial gains normalising after extraordinary 2017
NET PROFIT FROM FINANCIAL OPERATIONS FINANCIAL GAINS NORMALISING AFTER EXTRAORDINARY 2017 1,051 NPFO in 1H 2018 down by 29.4% YoY, 2Q18 941 higher by 13.2% QoQ 862 722 747 660 YoY decrease in NPFO was expected as 2017 739 653 560 401 had been boosted by significant client activity 424 351 around
Slide 23: Restructuring reserve created, recurring costs under control
OPERATING EXPENDITURES RESTRUCTURING RESERVE CREATED, RECURRING COSTS UNDER CONTROL 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 Recurring OPEX for 1H 2018 grew by +1.7% YoY1. Reported OPEX in 1H 2018 decreased by -0.3% YoY. 1 19 Cost / Income in 1H 2018 excluding one-offs at 48.7% (v. -1,763
Slide 24: Agenda
AGENDA MACROECONOMIC ENVIRONMENT HIGHLIGHTS OF KB’s PERFORMANCE KB CHANGE STRATEGIC UPDATE BUSINESS PERFORMANCE FINANCIAL PERFORMANCE ASSET QUALITY & COST OF RISK APPENDIX KB GROUP AS OF 30 JUNE 2018 02 AUGUST 2018 24
Slide 25: Sound asset quality
LOAN PORTFOLIO QUALITY SOUND ASSET QUALITY Gross lending CZK billion Loan exposure up 3.3% YoY and 1.1% QoQ 625.8 628.3 635.2 615.2 607.4 607.4 NPL exposure ratio down to 2.7% (vs. 3.3% in 2Q 2017) driven by low default rates, good 585.5 596.8 579.3 565.8 587.8 595.3 recovery performance, write-
Slide 26: Continued low levels of cost of risk
COST OF RISK CONTINUED LOW LEVELS OF COST OF RISK Total Cost of Risk (Year-to-date, in basis points) Net release of CoR in 1H 2018 at CZK 401 13 11 million (vs. net release of CoR in 1H 2017 at 4 0 CZK 94 million) -3 -6 -3 -8 -5 -6 -5 -5 Cost of Risk on Corporates loan portfolio at -22 -12 -13 -
Slide 27: Agenda
AGENDA MACROECONOMIC ENVIRONMENT HIGHLIGHTS OF KB’s PERFORMANCE KB CHANGE STRATEGIC UPDATE BUSINESS PERFORMANCE FINANCIAL PERFORMANCE ASSET QUALITY & COST OF RISK APPENDIX KB GROUP AS OF 30 JUNE 2018 02 AUGUST 2018 27
Slide 28: Number of clients and distribution network
KB GROUP CLIENTS AND DISTRIBUTION NERWORK NUMBER OF CLIENTS AND DISTRIBUTION NETWORK Number of bank clients (thousands, CZ) KB Group’s 2.4 million clients(+1%), of which KB bank 1,666,000 clients (1%) MPSS 487,000 clients (1%) KBPS 532,000 clients (0%) 1,654 1,664 1,666 1,626 1,647 1,589 E
Slide 29: Year-to-date income statement
CONSOLIDATED INCOME STATEMENT YEAR-TO-DATE INCOME STATEMENT Profit and Loss Statement Reported* Recurring Change Change (CZK million, unaudited) 1H 2017 1H 2018 1H 2017 1H 2018 YoY YoY Net interest income and similar income 10,410 10,793 3.7% 10,410 10,793 3.7% Net fee & commission income 3,125 3,07
Slide 30: Quarterly reported profit & loss (including one-off items)
CONSOLIDATED INCOME STATEMENT – QUARTERLY VIEW QUARTERLY REPORTED PROFIT & LOSS (INCLUDING ONE-OFF ITEMS) Profit and Loss Statement Reported* Change Change (CZK million, unaudited) 2Q 2017 1Q 2018 2Q 2018 YoY QoQ Net interest income and similar income 5,196 5,349 5,444 4.8% 1.8% Net fee & commission
Slide 31: Quarterly recurring profit & loss (excluding one-off items)
CONSOLIDATED INCOME STATEMENT – QUARTERLY VIEW QUARTERLY RECURRING PROFIT & LOSS (EXCLUDING ONE-OFF ITEMS) Profit and Loss Statement Recurring Change Change (CZK million, unaudited) 2Q 2017 1Q 2018 2Q 2018 YoY QoQ Net interest income and similar income 5,196 5,349 5,444 4.8% 1.8% Net fee & commissio
Slide 32: Strong capital & liquidity
FINANCIAL RATIOS STRONG CAPITAL & LIQUIDITY PROFITABILITY INDICATORS INFLUENCED IN FIRST QUARTER BY IFRIC 21 Reported Recurring (year-to-date, IFRS9) 30/06//2017 31/12/2017 30/06/2018 30/06/2017 30/06/2018 Capital adequacy 16.5% 18.6% 18.1% Tier 1 ratio = Core Tier 1 ratio 16.5% 18.0% 17.5% Risk wei
Slide 33: Business performance of subsidiaries 1/2
OVERVIEW OF KB SUBSIDIARIES BUSINESS PERFORMANCE OF SUBSIDIARIES 1/2 1H 2017 1H 2018 YoY Modrá pyramida (100%), #2 building savings & loans company Volume of new loans (CZK million) 7,054 7,005 -1% Volume of total loans (gross, CZK million) 40,602 47,078 16% Volume of deposits (CZK million) 62,591 6
Slide 34: Business performance of subsidiaries 2/2
OVERVIEW OF KB SUBSIDIARIES BUSINESS PERFORMANCE OF SUBSIDIARIES 2/2 1H 2017 1H 2018 YoY Factoring KB (100%), #1 on the Czech factoring market Factoring turnover (CZK million) 20,252 24,837 23% Volume of total financing (gross, CZK million) 7,437 8,463 14% Average number of FTEs 45 45 -1% Komerční p
Slide 35: Macroeconomic environment – Czech Republic
MACROECONOMIC ENVIRONMENT – CZECH REPUBLIC Macroeconomic Indicators 2015 2016 2017 2018* 2019* Real GDP (%, average) 5.4 2.4 4.5 3.0 2.9 Inflation (%, average) 0.3 0.7 2.5 2.1 2.1 Household consumption (%, average) 3.8 3.5 4.4 4.0 3.0 Unemployment (%, av., MLSA meth.) 6.4 5.4 4.1 3.2 3.1 3M PRIBOR (
Slide 36: Interest rates evolution
INTEREST RATES EVOLUTION (for the period 1 January 2006 – 26 July 2018) 5.0% 4.5% 4.0% 3.5% TBU 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Pribor 3M Pribor 6M ČNB REPO Rate IRS 5Y IRS 10Y KB GROUP AS OF 30 JUNE 2018 02 AUGUST 2018 36
Slide 37: KB #1 listed Czech bank
KB SHARES AND SHAREHOLDERS KB #1 LISTED CZECH BANK As of 30 June 2018 Development of KB share price and PX index (1 January 2001 – 26 July 2018) The number of shareholders comprised 500% 48,205 corporate entities and private individuals. 400% Of the Bank’s total share capital of CZK 300% 19,004,
Slide 38: Investor Relations
Investor Relations Jakub Černý, Renata Swaczynová, Marcela Ondrušová Tel.: +420 955 532 156, 955 532 155, 955 532 734 E-mail: investor_relations@kb.cz - Internet: www.kb.cz KB GROUP AS OF 30 JUNE 2018 02 AUGUST 2018 38