Slide 1: Komerční banka Group Results: Nine months and third quarter 2019
PRAGUE, 6 NOVEMBER 2019 KOMERČNÍ BANKA GROUP RESULTS Nine months and third 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 Executive summary Macroeconomic environment Highlights of KB’s 3Q 2019 Business performance Financial performance Asset quality & cost of risk Appendix KB GROUP AS OF 30 SEPTEMBER 2019│ 6 NOVEMBER 2019 │ 3
Slide 4: Highlights as of 30 September 2019
EXECUTIVE SUMMARY HIGHLIGHTS AS OF 30 SEPTEMBER 2019 Client service improvements introduced in the third quarter include instant payments 24/7 between KB Pursuing and four other Czech banks, upgrade of ATMs for contactless access, a banking app for Amazon’s safe and convenient Alexa, Modrá pyramida’
Slide 5: Contents
CONTENTS Executive summary Macroeconomic environment Highlights of KB’s 3Q 2019 Business performance Financial performance Asset quality & cost of risk Appendix KB GROUP AS OF 30 SEPTEMBER 2019│ 6 NOVEMBER 2019 │ 5
Slide 6: Czech economy resilient, to a certain point
CZECH ECONOMY CZECH ECONOMY RESILIENT, TO A CERTAIN POINT • GDP in 2Q19 up +2.8% YoY, +0.7% QoQ. The growth in Q2 was driven Czech GDP growth (%, yoy)3 predominantly by private and government consumption and net exports • So far, the Czech economy has proved resilient to the weakness of its main tra
Slide 7: Contents
CONTENTS Executive summary Macroeconomic environment Highlights of KB’s 3Q 2019 Business performance Financial performance Asset quality & cost of risk Appendix KB GROUP AS OF 30 SEPTEMBER 2019│ 6 NOVEMBER 2019 │ 7
Slide 8: Pursuing safe and convenient banking for clients
PURSUING SAFE AND CONVENIENT BANKING FOR CLIENTS Based on its long-term SOLUTIONS FOR CONVENIENCE OF BANKING ratings from Moody’s, HOUSING Instant interbank payments in CZK among Standard & Poor’s and KB and four other banks in a 24/7 regime Fitch rating agencies, the Relay mortgage - allows Global
Slide 9: Ongoing reinforcement of digital channels
ONGOING REINFORCEMENT OF DIGITAL CHANNELS Share of sales through digital channels Digital wallet penetration (selected product categories, %) (number of tokenized payment cards, thousands) End-to-end digital 2.5% 142,000 Personal account Partially digital 150 1.6% 4.1% packages Apple Consumer loans
Slide 10: Selected deals of the third quarter of 2019
SELECTED DEALS SELECTED DEALS OF THE THIRD QUARTER OF 2019 TRADE GAS DISTRIBUTION UTILITIES REAL ESTATE UTILITY Kaufland Česká Republika, v.o.s. CGN Holdings S.Á.R.L. CTP Industrial Property CZ, s.r.o. UCED DISTRIBUCE S.R.O. Syndicated Term Loan Facility Term Loans Syndicated Credit Facility Club Fa
Slide 11: Banking with positive impact
CORPORATE SOCIAL RESPONSIBILITY BANKING WITH POSITIVE IMPACT SHAPING VISION FOR THE FUTURE KB GROUP COMPANIES The Future Port Prague 2019 conference brought together KB’s subsidiaries have collectively backed ten thousands of participants, hundreds of innovative companies, organisations focused on i
Slide 12: Contents
CONTENTS Executive summary Macroeconomic environment Highlights of KB’s 3Q 2019 Business performance Financial performance Asset quality & cost of risk Appendix KB GROUP AS OF 30 SEPTEMBER 2019│ 6 NOVEMBER 2019 │ 12
Slide 13: Gross lending excluding repo up 4.0% YoY
LOANS TO CLIENTS GROSS LENDING EXCLUDING REPO UP 4.0% YOY Group lending (w/o repo, but incl. client bonds) CZK billion Group business and other loans CZK billion +4.0% (w/o repo, but incl. client bonds) +4.8% +1.4% YoY +1.7% 624.8 628.6 634.6 637.3 644.8 654.0 47.1 49.0 50.7 52.1 53.5 54.9 +12.1% Yo
Slide 14: Client deposits rose by 6.3% YoY
DEPOSITS AND OTHER AUM CLIENT DEPOSITS ROSE BY 6.3% YOY Group deposits (w/o repo operations) CZK billion Deposit product structure CZK billion +6.3% (w/o repo operations) +2.6% YoY YoY 806.6 809.6 795.5 826.1 838.9 860.2 809.5 826.1 838.6 860.2 806.6 795.5 61.1 61.5 61.6 61.2 +0.2% 61.3 61.8 563.4 5
Slide 15: Contents
CONTENTS Executive summary Macroeconomic environment Highlights of KB’s 3Q 2019 Business performance Financial performance Asset quality & cost of risk Appendix KB GROUP AS OF 30 SEPTEMBER 2019│ 6 NOVEMBER 2019 │ 15
Slide 16: Net profit improvement driven by interest income
R E C O N C I L I A T IPORNO O F IFT I & N CL O OMSS E NET PROFIT IMPROVEMENT DRIVEN BY INTEREST INCOME Drivers for year on year change in attributable net income (as of 30 September 2019) +0.9% +0.5% -5 -286 997 -309 10,958 10,956 -331 67 11,006 11,061 -2 55 -83 Reported One-offs in Recurring NII N
Slide 17: Balance sheet growth driven by client and interbank deposits
BALANCE SHEET GROWTH DRIVEN BY STATEMENT OF FINANCIAL POSITION CLIENT AND INTERBANK DEPOSITS Assets 7.9% Liabilities 7.9% CZK billion 15.8% and Equity 15.8% 1,227 YoY CZK billion 1,227 YoY 1,137 1,137 1,060 1,060 151 +20.6% 397 +15.2% 126 92 344 281 900 +5.8% 851 812 630 647 +2.7% 625 130 118 143 +1
Slide 18: Solid organic equity generation, higher requirements
CAPITAL, RWA SOLID ORGANIC EQUITY GENERATION, HIGHER REQUIREMENTS Contributions to capital adequacy ratio in 9M 2019 (%) Contributions to equity in 9M 2019 (CZK million) +95 bps 2.45 11,061 -9,632 19.43 103,329 243 104,664 18.48 0.16 -337 -1.59 -0.04 -0.03 31 Dec RWA RWA Other Interim Provision OCI
Slide 19: Expected development of capital requirements
REGULATORY CAPITAL ADEQUACY EXPECTED DEVELOPMENT OF CAPITAL REQUIREMENTS • KB’s overall capital requirement as of 30 September 2019 was Assumed baseline scenario changes to the minimum approximately 16.6% relative to the consolidated volume of risk- Overall Capital Requirement over the next 12 month
Slide 20: Moderate uptrend of interest income
NET INTEREST AND SIMILAR INCOME MODERATE UPTREND OF INTEREST INCOME 2.1% Net interest margin (%) QtD NII +0.7% YtD 2.35% 5,787 6,030 5,892 5,867 5,911 2.34% 5,493 385 2.28% 2.28% 2.23% 431 346 383 356 2.19% 2.19% 2.22% 2.19% 426 2.12% 2.15% 2.08% 2,618 2,891 2,901 2,888 2,926 2,428 2Q 2018 3Q 2018 4
Slide 21: Positive trend in fee income before new regulation
NET FEES AND COMMISSIONS POSITIVE TREND IN FEE INCOME BEFORE NEW REGULATION NFC +1.2% Deposit product fees – boosted by clients continued switch to -3.5% better account packages with a wider range of services included 1,524 1,579 1,533 Transaction fees – growing number of card and direct banking
Slide 22: Solid demand for hedging
NET PROFIT FROM FINANCIAL OPERATIONS SOLID DEMAND FOR HEDGING NPFO -17.2% Market liquidity in Q3 in summer mode but demand for FX and IR +9.2% hedging was adequate supported by weakening of CZK, moves in 1,013 IRS and bond yields, and lower visibility re CNB future policy rates 839 747 790 768 A
Slide 23: Costs reflecting transformation and digitalisation
OPERATING EXPENDITURES COSTS REFLECTING TRANSFORMATION AND DIGITALISATION Average number of employees (quarterly) +2.7% OPEX YoY -0.3% 19 8,454 8,355 8,339 8,168 8,121 8,170 -2.2% -1,932 -1,896 -1,905 -1,939 -1,978 -2,151 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 -1,008 -1,224 -841 -994 -910 -
Slide 24: Contents
CONTENTS Executive summary Macroeconomic environment Highlights of KB’s 3Q 2019 Business performance Financial performance Asset quality & cost of risk Appendix KB GROUP AS OF 30 SEPTEMBER 2019│ 6 NOVEMBER 2019 │ 24
Slide 25: Sound asset quality
LOAN PORTFOLIO QUALITY SOUND ASSET QUALITY Gross lending CZK billion 635.2 640.7 636.6 640.5 651.7 657.1 Loan exposure up by 2.6 % YoY and 0.8% QoQ NPL exposure ratio down to 2.3% YoY (vs. 2.8% in 3Q 595.3 601.2 585.8 590.6 604.5 609.5 2018) driven by low default rates, good recovery 22.6 21.7 3
Slide 26: Low cost of risk
COST OF RISK LOW COST OF RISK (Year-to-date, in basis points) Total Cost of Risk Net release of CoR in 9M 2019 at CZK 328 million (vs. -2 -2 CoR net release at CZK 659 million for 9M 2018) -5 -11 -5 -5 -7 -10 -11 -11 -13 -14 -12 Year-to-date CoR on corporate loan portfolio at -12 bps -18 -19 -19
Slide 27: Contents
CONTENTS Executive summary Macroeconomic environment Highlights of KB’s 3Q 2019 Business performance Financial performance Asset quality & cost of risk Appendix KB GROUP AS OF 30 SEPTEMBER 2019│ 6 NOVEMBER 2019 │ 27
Slide 28: Number of clients and distribution network
KB GROUP CLIENTS AND DISTRIBUTION NETWORK NUMBER OF CLIENTS AND DISTRIBUTION NETWORK 9M 2018 9M 2019 YoY Number of clients Number of bank clients (thousands, CZ) KB Group's clients 2,391,000 2,367,000 -24,000 1,664 1,668 1,662 * 1,647 1,654 Komerční banka 1,669,000 1,662,000 -7,000* – individual cli
Slide 29: 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 (CZK million, unaudited) 9M 2018 9M 2019 9M 2018 9M 2019 YoY YoY 9M 2018: Net interest income and similar income 16,673 17,670 6.0% 16,673 17,670 6.0
Slide 30: 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 (CZK million, unaudited) 3Q 2018 2Q 2019 3Q 2019 YoY QoQ Net interest income and similar income 5,787 5,867 5,911 2.1% 0.7% Net fee & commission incom
Slide 31: Quarterly income statement (excluding one-off items)
QUARTERLY INCOME STATEMENT CONSOLIDATED INCOME STATEMENT – QUARTERLY VIEW (EXCLUDING ONE-OFF ITEMS) Profit and Loss Statement Recurring Items excluded in “recurring”: Change Change (CZK million, unaudited) 3Q 2018 2Q 2019 3Q 2019 YoY QoQ Net interest income and similar income 5,787 5,867 5,911 2.1%
Slide 32: Balance sheet
CONSOLIDATED STATEMENT OF FINANCIAL POSITION BALANCE SHEET Balance Sheet 30 Sep 31 Dec 30 Sep YoY YoY Ytd Ytd (CZK million, unaudited) 2018 2018 2019 rel. abs. rel. abs. Assets 1,136,746 1,059,932 1,226,874 7.9% 90,128 15.8% 166,942 Cash and current balances with central bank 14,060 24,851 30,514 11
Slide 33: Capital & profitability indicators
FINANCIAL RATIOS CAPITAL & PROFITABILITY INDICATORS Reported Recurring* (year-to-date, IFRS 9) 30/09/2018 30/09/2019 30/09/2018 30/09/2019 Capital adequacy 18.4% 19.4% Tier 1 ratio = Core Tier 1 ratio 17.8% 18.9% Risk weighted assets for credit risk (CZK billion) 371.3 371.6 Net interest margin, ann
Slide 34: 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 35: Business performance of subsidiaries 1/2
OVERVIEW OF KB SUBSIDIARIES BUSINESS PERFORMANCE OF SUBSIDIARIES 1/2 9M 2018 9M 2019 YoY Modrá pyramida (100%), #2 building savings & loans company Volume of new loans (CZK million) 10,369 6,980 -33% Volume of total loans (gross, CZK million) 48,969 54,899 12% Volume of deposits (CZK million) 61,113
Slide 36: Business performance of subsidiaries 2/2
OVERVIEW OF KB SUBSIDIARIES BUSINESS PERFORMANCE OF SUBSIDIARIES 2/2 9M 2018 9M 2019 YoY Factoring KB (100%), #1 on the Czech factoring market Factoring turnover (CZK million) 36,572 39,320 8% Volume of total financing (gross, CZK million) 8,366 8,576 3% Average number of FTEs 44 44 -1% Komerční poj
Slide 37: Macroeconomic environment – Czechia
MACROECONOMIC ENVIRONMENT – CZECHIA Macroenomic indicators 2015 2016 2017 2018 2019f 2020f Real GDP (%, average) 5.4 2.4 4.5 2.9 2.5 2.0 Household consumption (%, average) 3.8 3.5 4.4 3.3 2.8 2.4 Inflation (%, average) 0.3 0.7 2.5 2.1 2.7 2.7 Unemployment (%, avg., ILO methodology) 5.1 4.0 2.9 2.2 1
Slide 38: Interest rates evolution
INTEREST RATES EVOLUTION For the period 1 Jan 2006 – 31 October 2019 KB GROUP AS OF 30 SEPTEMBER 2019│ 6 NOVEMBER 2019 │ 38
Slide 39: KB #1 listed Czech bank
KB #1 LISTED CZECH BANK Development of KB share price and PX index (1 January 2001 – 31 October 2019) Shareholder structure Free-float 39.6% Société Générale 60.4% • The number of shareholders comprised 50,160 corporate entities and private individuals. • Of the Bank’s total share capital of CZK 19,
Slide 40: 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 2019│ 6 NOVEMBER 2019