REG - Komercni Banka - 3rd Quarter Results
04/11/2022 07:00
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RNS Number : 2932F Komercni Banka 04 November 2022
Komercni banka, a.s. http://www.kb.cz/en (http://www.kb.cz/en)
Prague 1, Na Prikope 33, building identification number 969, Post Code 114 07
Identification No.: 45 31 70 54
LEI Code: IYKCAVNFR8QGF00HV840
incorporated in the Commercial Register maintained with the Municipal Court in
Prague,
section B, insert 1360
Disclosed on 4 November 2022 at 7:00 a.m. CET
Pursuant to Prague Stock Exchange Rules part III subsection 7(6)(a) and Act
256/2004 (Czech) Coll. subsections 125(1) Komercni banka, a.s. discloses
obligatory published information - Financial Results as of 30 September 2022:
Detailed information is available at the following link:
https://www.kb.cz/en/about-the-bank/for-investors/financial-results
(https://www.kb.cz/en/about-the-bank/for-investors/financial-results)
Regulatory information
Results
9M 2022
and
status of KB change 2025 implementation
Komerční banka's results for 9 months of 2022
Sound operating performance, cost of risk under control, recognition for
corporate social responsibility
"Komerční banka continues to deliver solid business and financial
performance. The credit profile of the loan portfolio is resilient, although
we have noted worsening confidence indicators among businesses and consumers.
Komerční banka will continue to stand by its clients at all times. Already
in pandemic years 2020-2021 we have proved our determination and commitment to
our clients even in uneasy times.
We have recently passed important milestones in our transformation journey
planned until 2025. KB's completely new digital banking infrastructure is
operational with 3,000 clients from among employees. We are ready to switch to
a new card management system in the next few days. The whole Change 2025
programme will reinforce Komerční banka's competitiveness in the years to
come.
I am especially happy of the high marks that Komerční banka has received
recently in reputable global assessments of companies' management of
environmental, social, and governance challenges. Both MSCI ESG and S&P
Global CSA measure various sustainability performance factors, including
governance structure, reporting transparency and tax transparency. The
acknowledgements attest to the important and positive role that the Bank plays
in supporting the stability and development of the Czech economy and society,"
remarked Jan Juchelka, KB's Chairman of the Board of Directors and Chief
Executive Officer.
Total volume of KB Group's lending to customers expanded by 8.6% year on year
to CZK 787.2 billion. Growth of the portfolio was faster in corporate
lending. Growth continued even in the outstanding volume of housing loans,
despite a drop in new production.
Overall volume of standard client deposits within KB Group decreased by
(3.2%), to CZK 1,010.1 billion, influenced by transfer of some client
savings to mutual funds, utilisation of financial reserves accumulated during
pandemic lockdowns, and stiff competition. Volume of non-bank assets under
management leapt by 5.3% to CZK 210.0 billion.
KB Group as a whole was serving 2,246,000 clients. That is 9,000 more than a
year earlier. Standalone Komerční banka had 1,651,000 customers, up by
28,000 year on year.
Compared with the first 9 months of the previous year, when economic activity
had been affected by pandemic restrictions, KB reported a 28.2% increase in
revenues to CZK 29.0 billion.
Operating expenditures were higher by 6.4%, at CZK 12.1 billion.
Quality of the loan portfolio remained resilient. Net creation of credit risk
provisions increased by 71.2% to CZK 1.2 billion, predominantly reflecting
anticipated impacts of high inflation.
Net profit attributable to shareholders improved by 51.1% to
CZK 12.9 billion. Income taxes rose by 45.5% to CZK 2.9 billion.
In 9 months of 2022, KB Group paid into public budgets CZK 2.8 billion in
income taxes, CZK 1.3 billion into the Resolution and Deposit Insurance
regulatory funds, CZK 1.5 billion for social and health insurance, CZK 1.0
billion in withholding tax from interest and dividends, and further
substantial amounts in other charges, such as VAT. The employees paid an
additional CZK 0.5 billion in income tax and CZK 0.5 billion in social and
health insurance.
Volume of regulatory capital reached CZK 110.7 billion, capital adequacy
stood at 21.1%, and the Core Tier 1 ratio was 20.5%.
Komerční banka had 67,358 shareholders (up by 9,204 year on year), of which
61,445 were private individuals from the Czech Republic.
Komerční banka was rated 'AA' by MSCI ESG ratings of global measurement of
companies' management of financially relevant ESG risks and opportunities. It
also received a score of 54 in the S&P Global Corporate Sustainability
Assessment, thereby ranking KB among leading banks globally in terms of
sustainability practices.
Prague, 4 November 2022 - Komerční banka reported today its unaudited
consolidated results for the 9 months of 2022.
Total revenues were up by 28.2%, at CZK 29.0 billion, as the comparative
base from the previous year had been affected by pandemic lockdowns and
extraordinarily low interest rates. Net interest income increased by 40.1% to
CZK 21.5 billion, driven by growing business volumes and higher yields from
reinvestment of liabilities and capital. Net fee and commission income
improved by 6.7% to CZK 4.4 billion because of greater transaction activity,
particularly due to card payments, clients' increased investments in mutual
funds, and heightened demand among corporations for some services, such as for
guarantees. Net profit on financial operations was almost stable (down by
(1.4%) to CZK 2.9 billion), driven by recovery in travel-related currency
conversions and demand from clients for hedging of financial risks in the
volatile and uncertain environment.
Operating expenses were up by 6.4%, at CZK 12.1 billion, mainly driven by a
24% increase in the regulatory levy to the Resolution Fund. Personnel expenses
were higher by 2.3%, even as the average number of employees decreased by
(2.7%) to 7,496 and salaries grew by an average 3% effective from April 2022.
Accruals for variable remuneration had been reduced in the first half of last
year, thus influencing the comparative base. Administrative costs rose across
all categories, but much less than did inflation, by a total 7.7%.
Depreciation and amortisation charges were up by 6.8% year on year, reflecting
the ongoing investments in digitalisation.
Net creation of provisions for the 9 months of 2022 totalled
CZK 1.2 billion, up by 71.2% year on year. The new provisioning mainly
related to anticipated impacts of the high inflation on the credit profile in
future, in line with the forward-looking principles of the IFRS 9 accounting
standard. The Group also released some provisions reflecting several
successful resolutions in the corporate client segment. The level of new
defaults remained relatively low across all client segments.
The reported net profit attributable to shareholders improved by 51.1% to
CZK 12.9 billion. Income taxes climbed by 45.5% to CZK 2.9 billion.
Lending to clients went up by 8.6% to CZK 787.2 billion.(( 1 (#_ftn1) ))
The volume of housing loans outstanding from KB and Modrá pyramida expanded
by 6.1%, even as new production of these loans in the first 9 months decreased
by (59.9%) to CZK 33.5 billion. Clients benefitted from interest rate
guarantees from previous periods and the drawing of loans for construction
often extends over several months. Consumer lending by KB and ESSOX increased
by 4.6%. Lending to businesses and other clients was up by 11.3%, with volumes
of working capital financing as well as investment loans both increasing.
Negative contribution from a 3.7% year-on-year appreciation of the Czech crown
against the euro on the reported CZK value of EUR-denominated loans
represented 0.8% of total lending.
Deposits from clients decreased by (3.2%) year on year to
CZK 1,010.1 billion.(( 2 (#_ftn2) )) This development was influenced by
clients shifting some of their savings to mutual funds or even utilising them
to cover the increased costs of living. The competition for deposits on the
market has intensified. Then, too, clients often have been switching their
deposits from current accounts to better-yielding term and savings accounts.
The volume of KB Group clients' assets in mutual funds, pension savings, and
life insurance rose by 5.3% to CZK 210.0 billion.
The capital adequacy ratio reached a strong 21.1%, and Core Tier 1 capital
stood at 20.5%. The liquidity coverage ratio was 159%, significantly above the
regulatory minimum of 100%.
The Bank had 67,358 shareholders as of 30 September 2022 (up by 9,204 year on
year), of which 61,445 (greater by 8,887 from the year earlier) were private
individuals from the Czech Republic. Strategic shareholder Société
Générale maintained its 60.4% stake while minority shareholders owned 39.0%
and KB held 0.6% of the registered capital in treasury.
Market environment (in third quarter 2022)(( 3 (#_ftn3) ))
Economic and social life in 2022's third quarter was mostly influenced by
energy prices and the inflationary environment generally, which is biting into
corporate profits and especially household budgets. The global market
environment was marked by rising interest rates. The direct consequences and
amplification of existing economic obstacles (i.e. supply chain disruptions)
from the Russian military's invasion of Ukraine were subdued in the third
quarter. Covid-19 during the third quarter was an issue only at the individual
level, as there were no general restrictive measures in place and a potential
autumn wave is so far not gaining strength in Czechia.
During the third quarter the Czech economy started to slowdown when
substracting 0.4% quarter on quarter (+1.6% year on year), as per the flash
estimate. In the second quarter economic performance reached +0.5% growth
quarter on quarter and +3.7% year on year, as per final numbers. The
manufacturing sector, represented especially by car production, gained further
momentum during summer, as production for 9 months was up by 9.8% year over
year. Labour market conditions remain tight. In the second quarter, wage
inflation picked up somewhat to +4.4% year on year (down by (9.8%) in real
terms). The unemployment rate remains one of the lowest within the EU
(standing at 2.2% in September, according to the Eurostat methodology after
seasonal adjustment).(( 4 (#_ftn4) )) Data from the Czech labour ministry
show that the unemployment rate rose marginally in September.(( 5 (#_ftn5) ))
Weighty pressure from the primary price categories continued in the third
quarter. Dynamics of industrial producer prices averaged 25.9% year on year
(2.1% quarter on quarter), agricultural producer prices 37.0% ((1.1%) quarter
on quarter), and construction work prices 13.1% in the quarter (3.0% quarter
on quarter). Pressure from the primary price categories together with wage
cost dynamics are transmitting through to consumer price inflation. It
accelerated in September to 18.0% year on year, mainly due to housing, water,
and energy. Dynamics of core inflation remained at a steady 15% during
July-September.
The CNB had left the main 2W repo monetary policy rate on hold at 7% since 23
June. Subsequently, as of 30 September, 3M PRIBOR reached 7.25% (+317 bps
year to date, +2 bps quarter on quarter) and the 10Y interest rate swap hit
5.09% (+183 bps year to date, (6) bps quarter on quarter). Meanwhile, the
interest rate swap curve remained inverted (5Y at 5.54%, +170 bps year to
date, (15) bps quarter on quarter) and yields on 10-year Czech government
bonds grew to 5.24% (+251 bps year to date, +45 bps quarter on quarter).
By the end of September, the Czech crown's exchange rate had appreciated
against the euro by 0.8% quarter over quarter, reaching CZK 24.6 per euro. The
crown exchange rate was to a certain extent again supported by CNB
interventions on the FX market in order to neutralise the depreciating mood on
this market and thereby to limit transmission of a weakened crown's influence
to worsen CPI inflation in Czechia.
Information on development in residential real estate prices is available for
the second quarter. In that period, growth in prices still continued apace,
although the quarter-on-quarter dynamics slowed, especially due to prices of
new dwellings as per the European house price index. Prices paid in 2022's
second quarter for previously owned flats were up 27.6% year on year across
Czechia and by 16.7% year on year in Prague. Prices obtained for new flats (in
Prague only) were 26.7% greater than a year earlier.(( 6 (#_ftn6) ))
Total bank lending for the overall market (excluding repo operations) grew by
7.7% year on year through the end of 2022's first nine months.(( 7 (#_ftn7)
)) Lending expansion was slower in retail banking (6.8% year over year), with
housing loans growth moving back to single-digit territory as new mortgage
production has decreased due to rising interest rates, stricter borrowing
conditions as per CNB regulations, and high property prices. Lending to
businesses increased year on year by 8.6% in September 2022, due to dynamics
of all main segments, non-financial corporates, public sector and the
financial institutions segment.
The volume of client deposits in Czech banks expanded by 7.9% year over year
as of September.(( 8 (#_ftn8) )) Individual term deposits tripled in
year-on-year terms. Business term deposits added 91.9% over the previous year.
Non-term deposits declined in both segments: ((7.5%) year over year in the
retail segment and (14.1%) in the business segment. Deposits from individuals
in total had grown by 3.4% while the business deposit market grew by 12.9%
year over year.
Progress in implementing KB Change 2025 strategic plan in the past 12 months
Komerční banka had presented on 5 November 2020 its KB Change 2025 plan
updating strategic directions and addressing the emerging challenges and
opportunities for creating a strong, client-focused bank. Komerční banka
aims to build together with its clients a better and sustainable future
through responsible and innovative financial solutions. KB aspires to be a
leader in a new era of banking for 2 million active clients. The Bank has
delivered tangible progress in ten areas covered by KB Change 2025 in the
second year following launch of the strategic plan.
Building of a new digital bank with the Temenos Transact system at its core is
a cornerstone of the transformation programme. As of October 2022, a pilot
operation of the new platform in mobile application, internet banking, and
relationship managers' dashboard is running with 3,000 clients from among KB's
employees. Functionalities in operation include client onboarding, current
account, savings account, investments, overdrafts, direct debit, SEPA
payments, and standing orders.
KB also has prepared for deployment in mid-November of the new TSYS Prime card
processing platform, in an application outsourcing to Global Payments Europe.
It will enhance security and processing efficiency, as well as offer
additional options for card administration.
Komerční banka and Modrá pyramida have merged into one team development and
processing of their housing loans.
In 9 months of 2022, the share of digitally sold products in total sales
reached 22.9% in the Individuals segment, of which 16.8% of products were sold
in an end-to-end digital manner. End-to-end digital sales of consumer loans
expanded by 81% year on year, representing 39% of total sales. End-to-end
digital sales of current accounts were up 67% year on year, but still at a
relatively modest 8% of total sales.
Because the network of branches will remain a building block of KB's
omnichannel strategy, KB is gradually refurbishing branches in a new design
concept that is appropriate for advisory and effectively serving clients'
various financial needs. Relationship managers at branches are assisted with
expert support in the areas of investments, financing, and debt resolution.
In order to procure new revenue sources, KB has been building an ecosystem of
complementary financial services by a combination of internal development,
co-operation with start-up as well as established providers, and even
acquiring participations in fintech companies via its fully owned platform KB
Smart Solutions. In this way, KB SmartSolutions during 2022 acquired full
ownership in Enviros, a leading Czech energy and environment advisory
providing its services to a number of important companies in Central Europe.
Furthermore, KB SmartSolutions increased to 96% its ownership stake in UPVEST,
a digital platform for crowdfunding of real estate projects. Some 3,500
investors have already funded 35 projects in the total amount of CZK 1.5
billion through the platform. The Group has also increased its stake in
MonkeyData, operator of the Lemonero digital platform for B2B financing of
e-commerce. The capital injection will facilitate expansion of that service
employing advanced data analytics and artificial intelligence. Meanwhile, the
internal start-up Finbricks, s.r.o., has become a leading aggregation platform
for financial services under the PSD 2 Directive for payment gateways in the
Czech Republic.
KB is striving to reinforce its market leadership position in services for
corporate clients. It has introduced a flatter organisation of the SME &
Public sector banking function for small and medium-sized corporations and
public sector entities. This improved clients' access to the Bank across the
Czech Republic, reinforced expert assistance to clients, and supports digital
solutions. In a year-over-year comparison, as of September 2022, KB's market
share in lending to businesses improved by some 0.9 percentage points to
18.2%.
Komerční banka intends to do its part to protect the climate by supporting a
fair, environmentally friendly, and inclusive energy transition, even as it
acknowledges that not all energy sources are equivalent in their costs to
consumers and that the energy sector represents thousands of jobs. The Bank is
committed to limiting global warming and to reducing its direct emissions
(scopes 1 and 2) in accordance with the 1.5°C scenario from the Paris
Agreement. KB will contribute to carbon removal projects with a view to
reaching carbon neutrality by 2026. In 2021, total emissions decreased by
32.5% compared to the reference year 2019, to 23,903 tonnes of CO2 equivalent
(14.7 kilograms per client). Measurement is audited on a yearly basis by the
non-profit Preferred by Nature. Over the past 12 months, the Group contracted
CZK 28.7 billion in financing of projects with sustainable positive impact in
accordance with EU Taxonomy. The outstanding volume of ESG-compliant loans
expanded by 70.1% to CZK 34.7 billion. Furthermore, Komerční banka has
committed to progressively reducing to zero by 2030 its exposure to projects
actively associated with the coal sector. On this basis, the Bank is no longer
providing new financial products to clients who have more than 25% of their
revenues linked to the thermal coal sector and have not communicated a
time-bound coal phase out plan aligned with the 2030/2040 thermal coal
phase-out objectives of Société Générale.
As part of its risk management framework, KB has deployed new digital fraud
prevention solutions. It has successfully piloted automated residential real
estate valuations based on an internal model, as a key enabler for digital
housing financing. Development of a new SOA-based credit risk management
platform is another key enabler for digital retail financing activities.
The effectiveness of delivering applications and services is being improved by
rollout of the DevOps concept, whereby dedicated teams have end-to-end
responsibility for complete client or banking service journeys in the new
digital bank. Moreover, KB has established its own Data Academy, at which more
than 330 colleagues completed various courses during 2022's first 6 months.
Operational efficiency was boosted by centralisation of additional support
functions across KB Group. Optimisation of operations through digitalisation,
branch reduction and switching to cashless banking, automation of middle- and
back-office and support functions, and robotics deployment will mean that the
standalone bank's full operations and services will be handled by
approximately 5,500 employees. This compares with 7,210 employees in the Bank
as of 31 December 2019. The average number of employees through 9 months of
2022 decreased by 8.2% compared to the average in the reference year 2019.
Although the branch will remain an important contact point for clients, as the
trend in providing services increasingly involves migration to digital
channels, the Bank aims to have just 200 branches by the strategy's horizon.
During the past 12 months, KB closed 25 branches, and the current number of
branches stands at 218, down by 36.3% from 342 as of 31 December 2019. KB also
agreed with Moneta Money Bank on sharing the two banks' ATM networks for
clients. This was a first step in an initiative that will lead to clients
having better access to financial services in less densely populated areas, as
well as better sustainability and efficiency in operating the ATM networks of
all participating banks.
The plan's operational targets, which are formulated for the standalone bank,
have been affirmed. KB aims to increase the level of client satisfaction as
measured by Net Promoter Score in the retail clients and small and
medium-sized enterprises segments while stabilising that satisfaction at the
already very high level (above 50 points) within the large corporations
segment. The measurements in retail segments during 2022 showed a gain in NPS
among individual clients to 45 from 32 in 2019, and among small businesses to
33 from 32. At the time of this report's publication, Ipsos agency was still
completing the NPS measurement in corporate segments. Based upon organic
growth, the clients' seamless omnichannel experience should help the Bank to
achieve its target of 1,850,000 clients by 2025. As of 30 September 2022, KB
was serving 1,651,000 clients. The development in the past year was influenced
by new accounts opened by war refugees from Ukraine.
The upgraded working and management methods are leading to employee
empowerment and effective teamwork across the entity. KB is maintaining the
Smart Office concept of hybrid work from office and home, developing the
Mojevitalita programme promoting and supporting healthy life style, and is
offering medical assistance as well as legal and life counselling for all
colleagues. Effective leadership should help to achieve further gains in
employee engagement levels as measured by a proprietary blended index to the
level of 83 points from a strong 78 points in 2019. The employee engagement
index's 2022 measurement stood at 79 points.
KB believes that pursuing sustainability in business and operations generates
long-term benefits in delivering new business and value for shareholders as
well as compliance with future Czech and European regulations. As a measure of
maturity in the environmental, social, and governance areas, KB has selected
the globally recognised FTSE4Good index of sustainably managed companies. Its
target will be to exceed the level of 4 points. The Bank's index stood at 3.6
in 2022, up by 0.3 points in comparison with a year earlier. In MSCI ESG
measurement, meanwhile, KB was rated at the 'AA' level, which is reserved for
companies leading their respective industries in managing the most significant
ESG risks and opportunities.
The financial targets have been set on a KB Group basis, and the management is
confident about at least reaching these targets. For 2025, the cost-to-income
ratio is targeted to move below 40%. Based upon organic growth, and after
recovering from the pandemic hit in 2020 and 2021, the Group's revenues will
slow their growth in 2023 as the interest rates will have peaked. This growth
should accelerate in 2025 with the full launch of KB's new digital bank,
boosted by digital sales and an advisory model supported by data analytics, as
well as new revenue sources. Operating expenditures will be kept under tight
control even in the high-inflation environment of 2022-2023. Savings from
decommissioning the old components of the banking infrastructure should begin
to accrue mainly from 2025.
With a view to reinforcing the scale of KB's existing business and thus
optimising efficiency and competitiveness in high-potential business segments
within the 2025 planning horizon, KB will consider to enhance its performance
with non-organic growth elements. Implementation of any such ambition will be
subject to further careful assessments and validations. The minimum ambition
for the number of bank clients inclusive of the non-organic growth component
has been set at 2,000,000.
The targeted cost-to-income ratio below 40% is valid also for the scenario of
non-organic growth. Upon successful implementation of non-organic growth
components, and assuming normalisation in the cost of risk levels at 25 basis
points, KB Group targets ROE above 15% for 2025.
Strong capital supported by potential Tier 2 issuance shall allow sustaining a
60-70% dividend payout in the context of higher mid-single digit growth of
risk-weighted assets that is driven by business growth, with some contribution
of risk-weighted regulatory adjustments. The Group will potentially pursue
accretive non-organic growth opportunities if they arise.
Key risks to these targets include significant worsening of the geopolitical
situation (escalation of the war in Ukraine), worsening of macroeconomic
development, unexpected increase in regulatory requirements and charges, new
bank tax, and adverse competitive dynamics.
Developments in the client portfolio and distribution networks
30 Sep 2021 30 Sep 2022 Change
YoY
KB Group's clients 2,237,000 2,246,000 9,000
Komerční banka 1,623,000 1,651,000 28,000
- individual clients 1,380,000 1,407,000 27,000
- internet banking clients 1,457,000 1,509,000 52,000
- mobile banking clients 1,008,000 1,122,000 115,000
Modrá pyramida 484,000 464,000 (20,000)
KB Penzijní společnost 522,000 509,000 (13,000)
ESSOX (Group) 138,000 133,000 (5,000)
KB branches (CZ) 243 218 (25)
Modrá pyramida points of sale 200 195 (5)
SGEF branches 9 9 0
ATMs (KB network) 856 862 6
- of which deposit-taking 494 521 27
- of which contactless 579 643 64
ATMs (Total shared network) 856 1,420 564
- of which deposit-taking 494 707 213
Number of active debit cards 1,415,000 1,464,000 49,000
Number of active credit cards 183,000 191,000 8,000
Number of cards virtualized into payment apps 359,000 480,000 120,000
KB key authentication users 935,000 1,065,000 131,000
Comments on business and financial results
The financial data published below are from unaudited consolidated results
compiled under IFRS (International Financial Reporting Standards). Unless
stated otherwise, the data are as of 30 September 2022.
BUSINESS PERFORMANCE
Loans to customers
Total gross volume of lending to clients rose by 8.6% year on year to
CZK 787.2 billion.(( 9 (#_ftn9) ))
In lending to individuals, the overall volume of housing loans grew by 6.1%
from the year earlier. Within this total, the portfolio of mortgages to
individuals expanded by 3.4% to CZK 267.1 billion. Modrá pyramida's loan
portfolio swelled by a strong 15.6% to CZK 83.8 billion. The outstanding
volume was growing mainly due to drawing of loans granted earlier, as the new
production of housing loans in the 9 months of 2022 decreased by (59.9%) year
on year from extraordinarily high levels of the previous year to
CZK 33.5 billion. The volume of KB Group's consumer lending (provided by the
Bank and ESSOX Group in the Czech Republic and Slovakia) was up by 4.6%, at
CZK 34.7 billion.
The total volume of loans to businesses and other lending provided by KB Group
was greater by 11.3% year on year, at CZK 401.6 billion. Lending to small
businesses declined by (0.6%) to CZK 47.4 billion. The overall CZK volume of
credit granted by KB to medium-sized, large corporate, and other clients in
the Czech Republic and Slovakia(( 10 (#_ftn10) )) climbed by 14.2% year on
year to CZK 322.8 billion. At CZK 31.4 billion, the total credit and
leasing amounts outstanding at SGEF were up by 2.4% year over year.
Amounts due to customers and assets under management
The volume of standard client deposits within KB Group decreased by (3.2%)
year on year to CZK 1,010.1 billion.(( 11 (#_ftn11) )) This development was
influenced by clients shifting some of their savings to mutual funds or even
utilising them to cover the increased costs of living. The competition for
deposits on the market has intensified. Then, too, clients often have been
switching their deposits from current accounts to better-yielding term and
savings accounts. Deposits at Komerční banka from individual clients were
down by (5.9%) from the year earlier, at CZK 336.7 billion. The deposit book
at Modrá pyramida diminished by (6.2%) to CZK 56.6 billion. Total deposits
from businesses and other corporations were down by (0.6%) to
CZK 610.1 billion.
Client assets managed by KB Penzijní společnost were 2.5% greater, at
CZK 72.0 billion. Technical reserves in life insurance at Komerční
pojišťovna were lower by (9.7%) year on year, at CZK 45.6 billion. The
volumes in mutual funds held by KB Group clients grew by 17.4% to
CZK 92.4 billion.
The Group's liquidity as measured by the ratio of net loans(( 12 (#_ftn12) ))
to deposits (excluding repo operations with clients but including debt
securities held by KB and issued by the Bank's clients) stood at 76.9%. The
Group's liquidity coverage ratio stood at 159%, well above the regulatory
limit of 100%.
FINANCIAL PERFORMANCE
Income statement
Komerční banka's revenues (net operating income) for the 9 months of 2022
improved by 28.2% year on year to reach CZK 29,005 million, as the
comparative base from the same period of 2021 had been affected by the severe
pandemic restrictions and interest rates had previously been at extremely low
levels. The increase in net interest income contributed most to the overall
growth in revenues. Net fees and commissions also improved, but net gains from
financial operations declined slightly year on year.
Net interest and similar income were up by 40.1%, at CZK 21,499 million,
from the low base of 2021's first three quarters. The loan and deposit volumes
were growing and market interest rates rose significantly year on year, thus
supporting the yields from reinvesting deposits and the Bank's own funds. The
net interest margin for the 9 months of 2022, computed as the ratio of net
interest income to interest-earning assets reported on the balance sheet,
reached 2.3%. That compares to 1.7% a year earlier, and stands a bit below the
2.4% in prepandemic 2019's first 9 months.
Net fee and commission income grew by 6.7% to CZK 4,447 million. Clients'
transaction activity in the 9 months of 2022 recovered across all transaction
types compared to the time of the economy's partial lockdown a year earlier.
In particular, payments by card gained significantly in popularity. Deposit
product fees were almost stable in line with the numbers of clients. Fees from
cross-selling were up notably, driven mainly by clients' rising investments in
mutual funds and sales of insurance products. Income from loan services was
down slightly year over year due to lower fees for loans to small businesses,
consumer loans, overdrafts, and credit cards, while fees for factoring
services and credit lines improved year on year. KB recorded also a gain in
income from specialised financial services, primarily due to greater issuance
of bank guarantees.
Net profit from financial operations diminished marginally (down by (1.4%) to
(CZK 2,913 million). Demand from clients for hedging of financial risks was
driven by volatility of Czech crown exchange and interest rates, but demand
for hedging of interest rate risks was affected in the situation of higher
rates in the later months of the period. KB was successful with its offer of
tailored hedging strategies for SME clients, particularly those based on
currency options. Increase in net gains on FX payment transactions was driven
by the return of international travel and related payments and conversions.
Dividend and other income declined by (8.8%) to CZK 146 million. This line
item primarily comprises revenues from property rental and ancillary services.
Operating expenses rose by 6.4% to CZK 12,079 million. Within that total,
personnel expenses increased by 2.3% to CZK 5,731 million, as salaries
climbed by an average 3% with effect from April 2022. The average number of
employees diminished by (2.7%) to CZK 7,496.(( 13 (#_ftn13) )) General
administrative expenses (not including contributions to the regulatory funds)
were up by 7.7%, at CZK 2,812 million, with the costs rising in most
categories, but still below the level of inflation. Relatively faster increase
was recorded in costs related to training, recruiting, and travel. The
full-year cost of contributions to the regulatory funds (Deposit Insurance
Fund, Resolution Fund) reached CZK 1,286 million, up 24.1% year on year. The
CNB adjusted the target volume of the Resolution Fund for 2024 and boosted the
aggregate annual contribution from Czech banks in 2022 by 16.2% year on year.
Depreciation and amortisation grew by 6.8% to CZK 2,250 million, driven
mainly by new and upgraded software acquired in pursuit of KB's digitalisation
strategy.
The sum of profit before allowances for loan losses, provisions for other
risk, profit on subsidiaries, and income tax (operating profit) was up by
50.1%, at CZK 16,926 million.
Cost of risk reached CZK 1,231 million, higher by 71.2% in comparison with
the three quarters of 2021. The new provisioning mainly related to anticipated
impacts of the high inflation on the credit profile in future, in line with
the forward-looking principles of IFRS 9 accounting standard. The Group also
released some provisions reflecting several successful resolutions in the
corporate client segment. The level of new defaults remained relatively low
across all client segments. The cost of risk in relative terms and as
measured against the average volume of the lending portfolio during 2022's
first 9 months came to 21 basis points. That compares with 13 basis points for
the same period a year earlier.
Income from shares in associated undertakings (i.e. Komerční pojišťovna)
was down (38.7%) year on year, at CZK 103 million, influenced by interest
rate developments and the insurance reserves creation and utilisation at
Komerční pojišťovna.
Net profit on subsidiaries and associates increased by 192.0% to CZK 73
million, as it included the gain from revaluation of a stake in a subsidiary.
Net profit on other assets reached CZK 136 million, mainly due to gains from
sales of buildings that were partly offset by accelerated depreciation of
technical improvements in leased branches that were closed. In the previous
year, net profit on other assets had been CZK 28 million.
Income tax was higher by 45.5%, at CZK 2,931 million.
KB Group's consolidated net profit for the three quarters of 2022 reached
CZK 13,076 million, which was higher by 49.3% in comparison with a year
earlier. Of this total, CZK 149 million was profit attributable to the
non-controlling owners of minority stakes in KB's subsidiaries (down by
(26.6%) year on year).
Reported net profit attributable to the Group's equity holders totalled
CZK 12,927 million, which is 51.1% more year on year.
Other comprehensive income, which derives mainly from revaluations and
remeasurements of some hedging, foreign exchange, and securities positions, as
well as from effects of changed interest rates on the value of equity
participation in an associated company, reached CZK (2,078) million.
Consolidated comprehensive income for the first 9 months of 2022 totalled
CZK 10,998 million, of which CZK 147 million was attributable to owners of
non-controlling stakes.
Statement of financial position
Unless indicated otherwise, the following text provides a comparison of the
balance sheet values as of 30 September 2022 with the values from the
statement of financial position as of 31 December 2021.
Assets
As of 30 September 2022, KB Group's total assets had grown by 19.9% year to
date to CZK 1,492.2 billion.
Cash and current balances with central banks were down (14.9%), at
CZK 25.5 billion. Financial assets at fair value through profit or loss
(trading securities and derivatives) increased by 49.6% to CZK 61.6 billion.
The fair value of hedging financial derivatives climbed by 57.5% to
CZK 22.5 billion.
Year to date, there was a (15.3%) decline in financial assets at fair value
through other comprehensive income totalling CZK 30.1 billion. This item
consisted mainly of debt securities issued by government institutions.
Financial assets at amortised cost grew by 21.0% to CZK 1,325.9 billion. The
largest portion of this consisted of (net) loans and advances to customers,
which increased year to date by 7.2% to CZK 776.6 billion. A 97.7% share in
the gross amount of client loans was classified in Stage 1 or Stage 2, while
2.3% of the loans were classified in Stage 3 (non-performing loans). The
volume of loss allowances created for amounts due from customers came to
CZK 14.1 billion. Loans and advances to banks grew by 63.6% to
CZK 420.8 billion. The majority of this item consists in reverse repos with
the central bank. The value held in debt securities was up by 12.7% and
reached CZK 128.6 billion at the end of September 2022.
Revaluation differences on portfolio hedge items totalled CZK (1.3) billion,
larger by 100.2%. Current and deferred tax assets stood at CZK 0.2 billion.
Other assets and accrued accounts, which include receivables from securities
trading and settlement balances, decreased overall by (9.8%) to
CZK 5.2 billion. Assets held for sale diminished by (87.4%) to
CZK 0.1 billion.
Investments in subsidiaries and associates rose by 45.0% to CZK 1.1 billion.
The net book value of tangible assets declined by (4.1%) to CZK 8.6 billion.
Intangible assets grew by 9.9% to reach CZK 8.7 billion. Goodwill, which
primarily derives from the acquisitions of Modrá pyramida, SGEF, and ESSOX,
remained unchanged at CZK 3.8 billion.
Liabilities
Total liabilities were 22.0% higher in comparison to the end of 2021 and stood
at CZK 1,362.9 billion.
Financial liabilities at amortised cost went up by 17.9% to
CZK 1,245.2 billion. Amounts due to customers comprise the largest
proportion of this total, and these grew by 17.1% to CZK 1,120.5 billion.
This total included CZK 110.4 billion of liabilities from repo operations
with clients and CZK 7.9 billion of other payables to customers. Amounts due
to banks increased through 9 months of 2022 by 31.6% to CZK 109.7 billion.
Revaluation differences on portfolios hedge items were CZK (57.1) billion.
Current and deferred tax liabilities were steady at CZK 2.2 billion. Other
liabilities and accruals, which include payables from securities trading and
settlement balances, grew by 49.0% to CZK 18.6 billion.
The provisions balance was (1.6%) lower, at CZK 1.3 billion. Provisions for
other credit commitments are held to cover credit risks associated with credit
commitments issued. The provisions for contracted commitments principally
comprise those for ongoing contracted contingent commitments, legal disputes,
self-insurance, and the retirement benefits plan.
Subordinated and senior non-preferred debt, at CZK 20.9 billion, was up
738.7% year to date, influenced by issuances of loans in order to meet
regulatory minimum requirements for own funds and eligible liabilities (MREL).
Because those debts are issued in euro, the CZK value of this debt reflects
also changes in the Czech crown exchange rate.
Equity
Total equity increased year to date by 2.0% to CZK 129.3 billion, driven by
the volume of net profit generated during the three quarters, partly offset by
the volume of dividends paid. The Group also recognised a decrease in the
value of retained earnings related to Komerční pojišťovna. The value of
non-controlling interests reached CZK 3.2 billion. As of 30 September 2022,
KB held in treasury 1,193,360 of its own shares constituting 0.63% of the
registered capital.
Regulatory capital and other regulatory requirements
Total regulatory capital for the capital adequacy calculation came to
CZK 110.7 billion as of 30 September 2022. Capital adequacy stood at 21.1%.
Core Tier 1 (CET1) capital totalled CZK 107.6 billion and the Core Tier 1
ratio was 20.5%. Tier 2 capital summed to CZK 3.1 billion, which was 0.6% of
risk-weighted assets. On October 10, KB exercised a call option and repaid the
subordinated debt of EUR 100 million from 2017 and at the same time took on a
new subordinated debt of EUR 100 million, with a maturity of 10 years and an
option to repay after 5 years. The interest rate of this loan is stipulated at
3M EURIBOR plus 3.79%, using the actual/360 day count convention.
As from 1 October 2022, Komerční banka's overall capital requirements (OCR)
come to approximately 16.6%. The minimum required level of CET1 is 12.0%, and
the minimum Tier 1 capital ratio stands at 14.0%.
Based on pre-announced hikes in the countercyclical buffer requirement, the
OCR will rise further by a cumulative 100 bps in two steps from January 2023
and April 2023. Assuming no further changes, as from 1 April 2023, the minimum
OCR will reach 17.6%, the minimum CET1 ratio 13.0%, and the minimum Tier 1
15.0%.
KB Group's Liquidity Coverage Ratio came to 159% as of 30 September 2022. The
applicable regulatory minimum is 100%.
Effective from 1 January 2022, KB Group is required to comply with a minimum
requirement for own funds and eligible liabilities (MREL) equal to 14.4% of
the consolidated total risk exposure and 4.46% of the consolidated total
exposure. Based on the CNB general approach,(( 14 (#_ftn14) )) MREL is
expected to reach 21.2% of the consolidated total risk exposure and 5.91% of
the consolidated total exposure with effect as of 1 January 2024. The MREL
requirement is defined as a sum of the amount of loss absorption and
recapitalisation. In addition to the MREL, expressed as a percentage of
risk-weighted assets, the Group must also fulfil the combined capital buffer.
According to current regulations and the criteria from the supervisor, this
requirement stands at 6.00% as of 1 October 2022.
With its considerable capital surplus, the Group fulfilled the interim target
level valid from the beginning of 2022. In order to proceed gradually to
meeting the ultimate MREL requirement, KB accepted the following senior
non-preferred loans from Société Générale S.A.:
on 27 June 2022, a loan of EUR 250 million, maturing on 27 June 2028,
including a call option with exercise date of 27 June 2027. The interest rate
of the loan is stipulated at 3M EURIBOR plus 2.05%, using the actual/360 day
count convention.
on 21 September 2022, a loan of EUR 250 million, maturing on 21 September
2027, including a call option with exercise date of 21 September 2026. The
interest rate of the loan is stipulated at 1M EURIBOR plus 1.82%, using the
actual/360 day count convention.
on 21 September 2022, a loan of EUR 250 million, maturing on 21 September
2030, including a call option with exercise date of 21 September 2029. The
interest rate of the loan is stipulated at 1M EURIBOR plus 2.13%, using the
actual/360 day count convention.
Expected development and main risks to that development in 2022
Note: This outlook updates that presented on 3 August 2022 upon release of
Komerční banka's results for the first half of 2022.
KB Group is continuously monitoring and evaluating potential influences of the
current crisis caused by Russia's invasion of Ukraine launched on 24 February
2022 upon its activities and upon its clients. Although its direct exposure to
Russia and Ukraine is limited, the Group is also evaluating indirect impacts
(e.g. dependency on energy resources and raw materials, supply chain
disruptions). As may be necessary and appropriate, the Group will respond to
the changing situation by adjusting its policies (e.g. risk, operational,
accounting), including possible adjustments to provisions and reserves in
accordance with the IFRS 9 standard.
Given the high level of uncertainty concerning the war in Ukraine and the
global pandemic situation that are in addition to the usual risks related to
projecting future business results, investors should exercise caution and
judgement before making their investment decisions while considering these
forward-looking estimates and targets.
The Czech economy has so far in 2022 been relatively resilient to the impact
of the energy crisis. However, according to KB's updated baseline
macroeconomic scenario for 2022, declining demand caused by high inflation and
uncertainty should translate into a mild recession at the turn of the year,
followed by only a gradual recovery in growth. On a full-year basis, the Czech
economy's growth will slow to 2.7% from 3.5% a year earlier. Fixed investments
and inventories should contribute positively to annual growth. Despite the
slower economy, the lack of available labour in the economy will remain a
factor limiting the growth potential. The average inflation rate in 2022 is
expected to reach almost 15%, with the impact from high energy prices being
mitigated by government measures.
The Czech National Bank is likely to keep interest rates at their current
levels (7% repo rate) until the middle of next year, when it could start to
reduce them gradually. The central bank may also need to continue intervening
in order to prevent depreciation of the crown during this year.
In the regulatory environment, the CNB has returned to stricter regulation of
mortgage lending, reinstating with effect from 1 April 2022 the limits on the
ratios of debt-to-income and debt service-to-income, as well as lowering the
maximum loan-to-value ratio. It decided, too, on increasing the
counter-cyclical capital buffer rate in two steps during 2022 followed by two
additional steps as of 1 January and 1 April 2023. This will take that rate to
2.5%. The national bank also announced in September 2021 that it would no
longer restrict the amount of bank dividends across the board. After the
annual general meeting approved the dividend payment representing 65% of net
profit generated in 2021, the Board of Directors proposed that the per rollam
Extraordinary General Meeting resolve to distribute to the shareholders
retained earnings of Komerční banka in the amount of CZK 10.5 billion, which
represents CZK 55.50 per share, before taxation. If approved, the payment of
the share in the retained earnings shall be due on 22 December 2022. During
the second half, KB will continue gradually taking loans from Société
Générale in order to meet the regulatory requirements for own funds and
eligible liabilities (MREL) from the EU's banks recovery and resolution
directive (as the concept of Single Point of Entry is applied within the SG
Group).
The banking market for loans and deposits entered 2022 on a solid footing, but
it will gradually absorb effects of the higher interest rates, slower-growing
economy, heightened economic uncertainty, and worsened cost-of-living
parameters. Total lending on the market should rise at an upper
mid-single-digit year-on-year percentage rate. The production of new housing
loans will diminish significantly in comparison with 2021 due to higher costs
and regulatory limitations, but the outstanding volume of these loans should
nevertheless expand modestly. Consumer credit expansion should reach a
mid-single-digit pace, even as it will balance the favourable labour market
situation with increased cost of living and worsened consumer confidence.
Lending to corporations should rise somewhat faster. Demand for working
capital financing has strengthened as companies need to keep higher
inventories of more-costly inputs. Investment lending is driven by the
developments in business confidence and partial return of clients to banking
loans from debt capital markets. It should also be supported by the
government's increased investment activity as supported by funds established
by the European Union. Growth in the volume of deposits will slow to
mid-single digits, lagging the expansion in loan volumes as the financial
situations of some households and businesses tighten. The competition for
deposits has stiffened.
Komerční banka will continue implementing the changes in accordance with its
KB Change 2025 programme that had been announced in November 2020. The new
digital bank will be developed in order to reach a marketable level of
maturity in 2023.
In this context, KB management expects that the Group's loan portfolio will
record an upper mid-single-digit growth rate for 2022. Within the total, the
corporate loan book will grow faster. The volume of housing loans outstanding
should still increase at a mid-single digit pace, even though new sales of
these loans will drop in comparison with the record level achieved in 2021.
Total deposit balances are expected to reach a level similar to that at the
end of the previous year, as growth in the deposits of corporate clients will
be offset by declining volumes in the retail segments. At the same time,
clients are expected to be shifting their deposits to term accounts.
KB Group's total net operating income for 2022 should expand by more than 20%
in comparison with the low base of 2021 that had been affected by the
pandemic. The growth in revenues will be driven mainly by net interest income,
reflecting increase in market rates and business volumes. Net fees and
commissions should improve by mid-single digits, driven mainly by recovery in
transaction activity and cross-selling. The net profit from financial
operations will probably decrease somewhat after having reached an
extraordinarily high level in the past year, even as gains from currency
conversions related to travelling recover from the pandemic drop and demand
for hedging of financial risks is influenced by the uncertain environment.
In spite of the elevated inflation and significantly higher regulatory charges
for the Resolution Fund, operating expenses remain under tight control and the
figure for the full year will rise at an upper mid-single-digit pace, thus by
much less than the rate of inflation. The Group will continue its
transformation, which consists in investing into building the new digital
infrastructure, overall simplification, and decreasing the numbers of
employees and premises in use. After raising salaries by an average 3%
effective from April 2022, the management agreed on an additional increase in
average salary by 5% for most employees as from October 2022. KB management
also has decided on further steps in optimising the branch network during
2022. As of 1 April 2022, 25 branches were closed and another 19 branches'
cash services are newly provided only via ATMs. As of 1 July 2022, KB
simplified the management structure of the branch network, including to
replace regional retail divisions with joint segment and line management of
all distribution channels at headquarters level. The selection of branches for
closing was based upon a long-term analysis of branch traffic, coverage and
potential of locations, and clients' changing behaviour reflecting growing
preference for remote sales and assisted services in the digital environment.
Cost of risk will be influenced by several factors, including the high
inflation, slower economic growth, disruptions to global supply chains, and
higher interest rates. Reflecting the excellent quality of KB's asset
portfolio, the cost of risk in 2022 should remain below the estimated
normalised level of around 30 basis points across the whole business cycle.
The key risks to the expectations described above consist in further
escalation of the war in Ukraine and its economic repercussions, prolonged or
deepened shortages of fuels or key input materials for the Czech economy, and
a return of pandemic restrictions and disruptions. Generally, the open Czech
economy would be sensitive to a worsening external economic environment, as
well as to abrupt changes to relevant exchange and interest rates or to
monetary or fiscal policies, including changes in taxation.
Management expects that KB's operations will generate sufficient profit in
2022 to cover the Group's capital needs ensuing from its growing volume of
assets as well as to pay out dividends.
ANNEX: Consolidated results as of 30 September 2022 under International
Financial Reporting Standards (IFRS)
Profit and Loss Statement Reported Recurring
9M 2021 9M 2022 Change 9M 2021 9M 2022 Change
YoY
YoY
(CZK million, unaudited)
Net interest income 15,347 21,499 40.1% 15,347 21,499 40.1%
Net fee and commission income 4,167 4,447 6.7% 4,167 4,447 6.7%
Net profit on financial operations 2,954 2,913 (1.4%) 2,954 2,913 (1.4%)
Dividend and other income 160 146 (8.8%) 160 146 (8.8%)
Net banking income 22,628 29,005 28.2% 22,628 29,005 28.2%
Personnel expenses (5,600) (5,731) 2.3% (5,600) (5,731) 2.3%
General admin. expenses (excl. regulatory funds) (2,611) (2,812) 7.7% (2,611) (2,812) 7.7%
Resolution and similar funds (1,036) (1,286) 24.1% (1,036) (1,286) 24.1%
Depreciation, amortisation and impairment of operating assets (2,107) (2,250) 6.8% (2,107) (2,250) 6.8%
Total operating expenses (11,354) (12,079) 6.4% (11,354) (12,079) 6.4%
Operating profit 11,274 16,926 50.1% 11,274 16,926 50.1%
Impairment losses (754) (1,152) +/- (754) (1,152) +/-
Net gain from loans and advances transferred and written off 35 (79) +/- 35 (79) +/-
Cost of risk (719) (1,231) 71.2% (719) (1,231) 71.2%
Net operating income 10,554 15,695 48.7% 10,554 15,695 48.7%
Income from share of associated companies 168 103 (38.7%) 168 103 (38.7%)
Net profit/(loss) on subsidiaries and associates 25 73 >100% 25 73 >100%
Net profits on other assets 28 136 >100% 28 136 >100%
Profit before income taxes 10,776 16,007 48.5% 10,776 16,007 48.5%
Income taxes (2,015) (2,931) 45.5% (2,015) (2,931) 45.5%
Net profit for the period 8,760 13,076 49.3% 8,760 13,076 49.3%
Profit attributable to the Non-controlling owners 203 149 (26.6%) 203 149 (26.6%)
Profit attributable to the Group's equity holders 8,557 12,927 51.1% 8,557 12,927 51.1%
Statement of financial 31 Dec 2021 30 Sep 2022 Ytd
position
(CZK million, unaudited)
Assets 1,244,353 1,492,210 19.9%
Cash and current balances with central bank 29,947 25,497 (14.9%)
Loans and advances to banks 257,196 420,753 63.6%
Loans and advances to customers (net) 724,587 776,560 7.2%
Securities and trading derivatives 190,924 220,415 15.4%
Other assets 41,699 48,984 17.5%
Liabilities and shareholders' equity 1,244,353 1,492,210 19.9%
Amounts due to banks 83,372 109,738 31.6%
Amounts due to customers 956,929 1,120,532 17.1%
Securities issued 13,666 12,587 (7.9%)
Subordinated and senior non preferred debt 2,490 20,885 738.8%
Other liabilities 61,114 99,201 62.3%
Total equity 126,782 129,267 2.0%
Key ratios and indicators 30 Sep 2021 30 Sep 2022 Change year on year
Capital adequacy (CNB) 23.0% 21.1% q
Tier 1 ratio (CNB) 22.5% 20.5% q
Total risk-weighted assets (CZK billion) 471.1 525,7 11.6%
Risk-weighted assets for credit risk (CZK billion) 388.9 432.2 11.1%
Net interest margin (NII / average interest-bearing assets)(III) 1.7% 2.3% p
Loans (net) / deposits ratio(IV) 68.1% 76.9% p
Cost / income ratio(V) 50.2% 41.6% q
Return on average equity (ROAE)(VI) 9.6% 13.8% p
Return on average Tier 1 capital(VII) 11.2% 16.5% p
Return on average assets (ROAA)(VIII) 0.9% 1.3% p
Earnings per share (CZK)(IX) 60.4 91.3 51.1%
Average number of employees during the period 7,705 7,496 (2.7%)
Business performance in retail segment - overview 30-Sep-22 Change year on year
CZK bil.
Mortgages to individuals - volume of loans outstanding 267.1 3.4%
Building savings loans (MPSS) - volume of loans outstanding 83.8 15.6%
Consumer loans (KB + ESSOX + PSA Finance) - volume of loans outstanding 34.7 4.6%
Small business loans - volume of loans outstanding 47.4 (0.6%)
Insurance premiums written (KP) 5.7 (9.9%)
Financial calendar:
8 February 2023
FY and 4Q 2022 results
12 May 2023 1Q 2023 results
3 August 2023 1H and 2Q 2023 results
3 November 2023 9M and 3Q 2023 results
Definitions of the performance indicators mentioned herein:
I.
Housing loans: mortgages to individuals provided by KB + loans to clients
provided by Modrá pyramida;
II.
Cost of risk in relative terms: annualised 'Allowances for loan losses'
divided by the average of 'Gross amount of client loans and advances', year to
date;
III.
Net interest margin (NIM): 'Net interest income' divided by average
interest-earning assets (IEA) year to date. IEA comprise 'Cash and current
balances with central banks' ('Current balances with central banks' only),
'Loans and advances to banks', 'Loans and advances to customers', 'Financial
assets held for trading at fair value through profit or loss' (debt securities
only), 'Non-trading financial assets at fair value through profit or loss'
(debt securities only), 'Financial assets at fair value through other
comprehensive income' (debt securities only), and 'Debt securities';
IV.
Net loans to deposits: ('Net loans and advances to customers' inclusive of
debt securities held by KB and issued by the Bank's clients less 'reverse repo
operations with clients') divided by the quantity ('Amounts due to customers'
less 'repo operations with clients');
V.
Cost to income ratio: 'Operating costs' divided by 'Net operating income';
VI.
Return on average equity (ROAE): annualised 'Net profit attributable to the
Group's equity holders' divided by the quantity average group 'shareholders'
equity' less 'Minority equity', year to date;
VII.
Return on average Tier 1 capital: annualised 'Net profit attributable to the
Group's equity holders' divided by average group 'Tier 1 capital', year to
date;
VIII.
Return on average assets (ROAA): annualised 'Net profit attributable to the
Group's equity holders' divided by average 'Total assets', year to date;
IX.
Earnings per share: annualised 'Net profit attributable to the Group's equity
holders' divided by the quantity average number of shares issued minus average
number of own shares in treasury.
Reconciliation of 'Net interest margin' calculation, (CZK million,
consolidated, unaudited):
(source: Profit and Loss Statement) 9M 2022 9M 2021
Net interest income income, year-to-date 21,499 15,347
Of which:
Loans and advances at amortised cost 36,489 13,676
Debt securities at amortised cost 2,243 1,524
Other debt securities 419 518
Financial liabilities at amortised cost (14,231) (1,142)
Hedging financial derivatives - income 25,763 7,526
Hedging financial derivatives - expense (29,185) (6,754)
(source: Balance Sheet) 30-Sep-22 31-Dec-21 30-Sep-21 31-Dec-20
Cash and current balances with central banks / Current balances with central 16,782 21,455 69,952 15,050
banks
Loans and advances to banks 420,753 257,196 374,771 262,606
Loans and advances to customers 776,560 724,587 709,811 679,956
Financial assets held for trading at fair value through profit or loss / Debt 13,232 8,696 10,244 3,342
securities
Non-trading financial assets at fair value through profit or loss / Debt 133 135 0 279
securities
Financial asset at fair value through other comprehensive income (FV OCI) / 30,082 35,509 37,730 40,151
Debt securities
Debt securities 128,593 114,078 109,760 92,839
Interest-bearing assets (end of period) 1,386,136 1,161,656 1,312,268 1,094,223
Average interest-bearing assets, year‑to-date 1,273,896 1,203,246
NIM year-to-date, annualised 2.25% 1.70%
(( 1 (#_ftnref1) )) Including debt securities issued by KB's corporate
clients. There were no reverse repo operations with clients to report as of 30
September 2022 or 30 September 2021.
(( 2 (#_ftnref2) )) Excluding repo operations with clients. The total volume
of 'Amounts due to customers' moved up by 2.4% to CZK 1,120.5 billion.
(( 3 (#_ftnref3) )) Unless stated otherwise, data sources for this section:
Czech Statistical Office, Czech National Bank, KB Economic Research.
Comparisons are year on year.
(( 4 (#_ftnref4) ))
https://ec.europa.eu/eurostat/documents/2995521/15228148/3-03112022-AP-EN.pdf/0fb6330c-11bf-3e4a-3590-a1b74ff5104b?t=1667238642154
(https://ec.europa.eu/eurostat/documents/2995521/15228148/3-03112022-AP-EN.pdf/0fb6330c-11bf-3e4a-359)
Data as of September 2022.
(( 5 (#_ftnref5) )) https://www.mpsv.cz/web/cz/mesicni
(https://www.mpsv.cz/web/cz/mesicni) . Data as of September 2022.
(( 6 (#_ftnref6) )) Source:
https://www.czso.cz/csu/czso/indices-of-realized-flat-prices-2-quarter-of-2022
(https://www.czso.cz/csu/czso/indices-of-realized-flat-prices-2-quarter-of-2022)
Publication code 014007-22, released 13 September 2022.
(( 7 (#_ftnref7) )) Source of data on banking market developments: ARAD
statistics of the CNB, www.cnb.cz.
(( 8 (#_ftnref8) )) Source of data on banking market developments: ARAD
statistics of the CNB, www.cnb.cz.
(( 9 (#_ftnref9) )) Including debt securities issued by KB's corporate
clients. There were no reverse repo operations with clients to report as of 30
September 2022 or 30 September 2021.
(( 10 (#_ftnref10) )) Inclusive of factor finance outstanding at Factoring KB
and merchant and car dealers' financing from ESSOX Group.
(( 11 (#_ftnref11) )) Excluding volatile repo operations with clients. The
total volume of 'Amounts due to customers' increased by 2.4% year on year to
CZK 1,120.5 billion.
(( 12 (#_ftnref12) )) Gross volume of loans reduced by the volume of
provisions for loan losses.
(( 13 (#_ftnref13) )) Recalculated to a full-time equivalent number.
(( 14 (#_ftnref14) ))
https://www.cnb.cz/en/resolution/general-approach-of-the-czech-national-bank-to-setting-a-minimum-requirement-for-own-funds-and-eligible-liabilities-mrel/
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