REG - Komercni Banka - Half-year Report
01/08/2024 07:00
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RNS Number : 6821Y Komercni Banka 01 August 2024
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 1 August 2024 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 June 2024.
Detailed information is available at the following link:
https://www.kb.cz/en/about-the-bank/for-investors-directory
(https://www.kb.cz/en/about-the-bank/for-investors-directory)
Regulatory Information
Komerční banka, a.s.
Results
H1 2024
First half 2024: Komerční banka reports growing number of customers and
volume of client assets under management
"Komerční banka Group turned out strong results in its transformation as
well as in the business and financial performance. We recorded significant
growth in the number of retail banking clients, which we attribute to the
attractive proposition of our New Era of Banking. We also observed growth in
the volume of deposits and total lending. The strong dynamics of growth in
client assets under management continued, too.
"Komerční banka is optimising its physical presence across the Czech
Republic. After downsizing of the branch network, we are introducing the new
KB Poradenství advice points. We are reconstructing branches in a new,
modern, and sustainable concept. At the same time, we are strengthening KB's
remote virtual Na Dálku branch service.
"In accordance with the long-term real estate management strategy and to bring
all head office employees together from multiple locations across Prague into
a single state-of-the-art office centre, we have agreed to sell our building
at Václavské náměstí 42. As it is being acquired by the City of Prague,
we believe this building will continue in future to well serve the inhabitants
of Prague.
"By signing a Memorandum of Understanding with SGEF International, we have set
a stage for consolidating our ownership in SGEF Czech Republic. We expect from
this transaction to reinforce KB Group's leading position in the Corporate
Clients segment," remarked Jan Juchelka, Komerční banka's Chairman of the
Board of Directors and Chief Executive Officer, adding "On the other hand,
interest income was under pressure mainly because competition on the deposit
market was intense and demand in the market for investment loans remained
subdued. The decline in net profit was affected by a creation of credit risk
provisions in the first half, whereas provisions had been released during the
first half of the previous year."
KB Group's lending to customers rose by 3.7% year on year to
CZK 824.1 billion. Deposits from clients grew by 6.5% from a year earlier to
CZK 1,059.4 billion. Volume of non-bank assets (mutual funds, pension funds,
life insurance) under management expanded by 13.9% to CZK 268.5 billion.
The number of customers in standalone Komerční banka increased by 47,000
year on year to 1,708,000. Some 439,000 clients had already enrolled in KB's
new digital bank introduced in April 2023. KB Group was serving 2,203,000
clients.
First half 2024: Total revenues were down by (3.0%) year on year to
CZK 17.5 billion. Operating expenditures decreased by (0.2%) to
CZK 9.1 billion. The Group reported a CZK 0.6 billion net creation of
provisions for credit risk. Income taxes reached CZK 1.5 billion. Net profit
attributable to the Group's equity holders, at CZK 6.3 billion, was down by
(21.5%) year on year.
Second quarter 2024: Total revenues decreased by (4.6%) year on year to
CZK 8.7 billion. Operating expenditures were up by 4.6% to
CZK 4.3 billion. The Group reported a CZK 0.1 billion net creation of
provisions for credit risk. Income taxes reached CZK 0.8 billion. Net profit
attributable to the Group's equity holders, at CZK 3.5 billion, was down by
(21.8%) year on year.
Volume of regulatory capital reached CZK 106.3 billion, capital adequacy
stood at 18.9%, and the Core Tier 1 ratio was 17.8%.
Komerční banka signed a Memorandum of Understanding with SGEF SA with a view
for KB to fully own SG Equipment Finance Czech Republic s.r.o. The Bank will
buy the remaining 49.9% stake in the company that it does not already hold.
KB had 74,908 shareholders (greater by 2,605 year on year), of which 68,864
were private individuals from the Czech Republic.
Prague, 1 August 2024 - Komerční banka reported today its unaudited
consolidated results for the first half of 2024.
Business and financial performance
Lending to clients went up by 3.7% to CZK 824.1 billion.(( 1 ))
The volume of housing loans outstanding grew by 4.7%. Within that total,
lending from Modrá pyramida building society expanded faster than did KB's
mortgage portfolio. New production of housing loans in the first half of 2024
was higher by 39.1% compared to the previous year's first half. The rise in
consumer lending reached 5.1%, growing within the Bank across all product
categories. Growth in lending to businesses, at 2.8%, was still affected by
subdued investment activity in the slow economy, increased bond issuance by
large corporations, as well as by the Bank's selective approach to such
lending.
Deposits from clients improved by 6.5% year on year to
CZK 1,059.4 billion.(( 2 )) The year-on-year increase was concentrated in
savings accounts and term deposits while the volumes on current accounts
started to climb again in the second quarter of this year. Meanwhile, the
volume of KB Group clients' assets in mutual funds, pension savings, and life
insurance has risen by 13.9% year on year to CZK 268.5 billion, with
clients' investments in mutual funds making the main contribution to this
growth.
Total revenues reached CZK 17.5 billion, lower by (3.0%) compared to the
first half of 2023. Net interest income declined slightly, as costs of funds
were elevated and there were increased interest costs related to the volume of
new liabilities mandated by regulation (MREL). Furthermore, from October 2023,
the CNB stopped paying interest on banks' obligatory deposits (minimum
reserves) with the central bank. Net fee and commission income was up
modestly, reflecting especially clients' larger investments in mutual funds
and greater demand among corporate clients for various financial services,
such as bond issuance, custody services, and issuance of guarantees. Net
profit on financial operations came down slightly from the strong levels of
last year, as clients' hedging and trading activities moderated in the context
of a sluggish economy and decreasing rates.
Operating expenses were down by (0.2%), at CZK 9.1 billion. Personnel
expenses were higher by 6.9%. The average number of employees declined
slightly even as a lower number of staff in support functions and the
distribution network was offset by hiring of more IT and data specialists.
Administrative costs were down a bit, mainly due to lower expenses related to
marketing. The full-year levy to the regulatory funds decreased markedly as
the CNB adjusted downwards the aggregate contribution from Czech banks to the
Resolution Fund and the comparison base from last year was also influenced by
an increased charge for deposit insurance due to the failure of Sberbank CZ.
Greater depreciation and amortisation charges reflected the ongoing
investments into digitalisation.
Cost of risk reached CZK 0.6 billion. Net creation of credit risk allowances
related predominantly to the portfolios of loans to consumers and small
businesses segments and it was partly offset by successful resolution of a few
corporate client exposures. KB did not reduce the inflation overlay reserve
which had been created in 2021 and 2022. The mortgage portfolio and the large
corporate clients segment continued to demonstrate strong resilience.
Reported net profit attributable to shareholders for 2024's first half
decreased by (21.5%) year on year to CZK 6.3 billion. Income taxes came to
CZK 1.5 billion.
Shareholders, capital, and dividends
KB's capital adequacy ratio reached a strong 18.9%, and Core Tier 1 capital
stood at 17.8%. During 2024, the reported capital ratios are adjusted for the
'foreseeable dividend' at the level of a 100% payout ratio. That is in
accordance with management's published intention.
The Liquidity Coverage Ratio was 170% and the Net Stable Funding Ratio at
135%, both indicators standing significantly above their applicable regulatory
minimums.
The Annual General Meeting held on 24 April 2024 approved a dividend payment
of CZK 15.7 billion, or CZK 82.66 per share before tax. This represents 100%
of attributable consolidated net profit generated by KB in 2023. The approved
profit distribution is in line with the long-term capital management plan,
which maintains capital adequacy at a level appropriate to the risks assumed
under the given economic conditions in the Czech Republic and in view of the
Bank's business opportunities. It also maintains adequate scope for the Bank's
future business growth and, in the opinion of the Board of Directors, provides
shareholders with a fair share of profits. Considering the current state of
affairs, KB's management intends for 2024 to propose distributing as dividends
100% of attributable consolidated net profit earned in the year.
The General Meeting approved the reported financial statements for 2023 and
the proposal for distribution of profit. It further approved the consolidated
financial statements for 2023 and the Remuneration Report for 2023. It also
decided on revision of the Articles of Association. The General Meeting
elected Ms Delphine Garcin-Meunier as a member of the Supervisory Board. Ms
Garcin-Meunier and Mr Petr Dvořák were elected as members of the Audit
Committee. The General Meeting also decided to appoint KPMG Česká republika
Audit s.r.o. to perform the statutory audit for the year 2024.
As of 30 June 2024, Komerční banka had 74,908 shareholders (up by 2,605 year
on year), of which 68,864 (greater by 2,685 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.
Selected achievements and initiatives in the second quarter of 2024
Komerční banka proceeded with the strategic implementation of its KB2025
programme. Client enrolment in the KB+ proposition, which is being built as a
component of the Bank's new digital infrastructure, progressed quickly. About
439,000 customers were utilising the new digital bank as of 30 June 2024, and
that figure surpassed 500,000 in July.
On 18 July 2024, with a view to become sole shareholder of SG Equipment
Finance Czech Republic s.r.o. (SGEF CR), Komerční banka signed a non-binding
Memorandum of Understanding with Société Générale Equipment Finance, S.A.
(SGEF SA) and Société Générale, S.A. (SG SA) to acquire the remaining
49.9% stake in SGEF CR. This transaction will consolidate KB's control over a
dynamic and profitable company with a leading position in several segments of
the market for financing of business investments and strong potential for
further growth. The planned transaction aligns with SG SA's planned sale of
its Equipment Finance activities to Groupe BPCE, excluding in the Czech
Republic and Slovakia. The transaction is expected to close in the first
quarter of 2025.
In June, Komerční banka signed an agreement with the City of Prague on the
sale of its fully owned subsidiary VN 42, s.r.o., which owns the head office
building at Václavské náměstí 796/42 in Prague. This transaction has
concluded the long-term strategic consolidation of Komerční banka Group's
staff from multiple locations into a state-of-the-art office centre in
Prague-Stodůlky, thereby fostering the company culture while enhancing
collaboration and innovation by bringing KB's team together. The new and
modern workspace is designed to boost efficiency and productivity and it
offers amenities that support KB's commitment to excellence and employee
well-being. Transfer of the company to the City of Prague took place at the
beginning of July 2024.
In June, two companies of the Komerční banka Group - KB Advisory, s.r.o. and
ENVIROS, s.r.o. - decided to join forces and offer their clients expert
services under a single brand. The two companies have specific expertise in
the field of energy and sustainability, and, upon their merger, will provide
comprehensive solutions and advice to businesses, institutions, and
municipalities.
Since July, KB Group has centralised processing and administration of housing
loans from KB and Modrá pyramida within its One Mortgage Factory operated by
Modrá pyramida. This will simplify processes while enhancing efficiency and
speed. Modrá pyramida has also expanded its scope of activity with additional
focus on helping Czech households to reduce their energy consumption.
KB was recognised through several awards during the second quarter. The Pluxee
Zaměstavatel roku (Employer of the Year) ranking placed KB third among
employers with more than 5,000 employees. Komerční banka was also honoured
with the Green Crown Award for its Loan for Sustainable Technologies and SGEF
stood third in this contest with its Photovoltaics for One Crown solution.
Furthermore, KB received a Sustainability Banking Award from global banking
technology provider Temenos.
Jitka Haubová, member of KB's Board of Directors and the Chief Operating
Officer, was elected to the Executive Board of the International Chamber of
Commerce (ICC), the institutional representative of companies in more than 170
countries that is focused on making it easier for businesses to trade
internationally.
Market environment (in second quarter 2024)(( 3 ))
Public discussions in the second quarter of 2024 focused on elections in
Europe, as well as on the US presidential campaigns.Although no imminent
economic challenges were present during the second quarter, the persistently
weak global demand for industrial goods and problems rearising with supplies
of selected components for domestic car production inhibited Czechia's economy
from accelerating GDP growth. The country reported GDP growth of 0.3% in the
second quarter over the prior quarter (0.4% year over year), reflecting
industry sluggish performance. In the previous, first quarter of 2024, the
Czech economy had expanded by 0.2% quarter on quarter (0.3% year on year). GDP
growth was supported by both final private as well as government consumption
in about equal measures, and the trade balance recorded a positive
contribution. Fixed investment contributed negatively to GDP growth. During
the first two months of 2024's second quarter, the manufacturing sector
experienced year-on-year contraction of 1.8% while car production in the same
period was down by 4.0% compared to the previous year. The labour market
remained tight, and nominal wage growth surpassed price-change dynamics after
some quarters of lagging behind.(( 4 (#_ftn4) )) The unemployment rate
continued to be one of the lowest in the EU, standing at 2.6% in May 2024 (as
per the Eurostat methodology after seasonal adjustment).(( 5 (#_ftn5) ))
In the second quarter of 2024, the Czech Republic saw a continuing moderation
in inflation compared to previous periods. Industrial producer prices added
1.1% year on year in the second quarter. Quarter-on-quarter dynamics were at
(0.4%). Agricultural producer prices were lower by (10.5%) year on year and on
a quarter-on-quarter basis by (11.1%), driven down only by crop product prices
while price dynamics in livestock product were marginally positive. Prices of
construction work continued to rise by an average 2.1% year on year, 0.7%
quarter on quarter. Muted development of these primary prices contributed to
consumer price inflation's remaining within the tolerance band around the
inflation target. Consumer price inflation reached 0.1% in quarter-on-quarter
terms. Year on year, prices increased by 2.5%. Monthly time series for
consumer prices inflation stayed within the tolerance band around the
inflation target of 2% in all months during the second quarter. In 2024's
second quarter, the Czech Republic experienced year-on-year price increases or
stagnation in all major segments of the consumer basket apart from food and
non-alcoholic beverages. Specifically, housing-related costs (highest weight
in the consumer basket) rose by 3.1%. Other segments recorded higher dynamics,
but, due to their lower weights, did not contribute significantly to overall
consumer price inflation. Conversely, prices of food and non-alcoholic
beverages (second-greatest weight) decreased by (3.5%). The dynamics of core
inflation declined to 2.4% in second quarter 2024.(( 6 (#_ftn6) ))
This stable price development allowed the Czech National Bank to implement two
additional reductions in its main two-week monetary policy repo rate during
the second quarter of 2024. At the beginning of May, the rate was cut by 50
basis points to 5.75%. There followed another 50 bps reduction to 5.25% at the
end of June. Hence, year to date, the two-week repo rate is already lower by
200 bps. As of the end of 2024's first half, the three-month PRIBOR rate stood
at 4.71%, showing a decrease of (206) bps since the beginning of the year. The
10-year interest rate swap climbed to 3.89%, up by 40 bps over the same
period. The longer end of the interest rate swap curve has been marginally
positive in its slope, with the 5-year IRS rate at 3.85%, an increase of 31
bps year to date. Yields on 10-year Czech government bonds have also gone up
(by 42 bps since the start of the year, to 4.24%). The Czech crown depreciated
against the euro by 0.3% year to date, reaching CZK 25.0 per euro by the end
of June.
The latest information on residential real estate prices, available for the
first quarter of 2024 from the Czech Statistical Office, showed prices for
second-hand homes in Prague had grown by 0.2% quarter on quarter and were
again higher by 1.0% as compared to the previous year's first quarter.(( 7
(#_ftn7) )) Prices of second-hand flats in the rest of the country were up by
3.2% quarter on quarter but were (0.2%) lower year on year. Prices of newly
developed flats in Prague slipped by (1.0%) in the first quarter of 2024 and
fell by (3.0%) from the same quarter a year earlier. According to the European
house price index,(( 8 (#_ftn8) )) Czech residential real estate prices were
up quarter on quarter by 0.9% and year over year by 1.2%.
Total bank lending for the overall market (excluding repo operations) had
grown by 6.1% year on year as of June 2024.(( 9 )) Lending to individuals rose
by 4.5%, with housing loans expanding 3.6% year on year as new mortgage
production gained in momentum while recovering as interest rates continued
gradually to decline. Lending to businesses and other corporations increased
year on year by 7.7% in June 2024, with growth recorded across all main
segments and mainly in euro-denominated loans.
The volume of client deposits in Czech banks had expanded by 6.5% year over
year as of June 2024.(( 10 )) Deposits from individuals had grown in total by
8.3% while the market deposits from businesses and other corporations were up
by 4.8% year over year. Switching from current to term and saving deposits
moderated, as the volumes on current accounts increased by 1.7%, volume on
saving accounts dropped by (2.1%) year on year, while those on term deposits
swelled by 27.9% as compared to the same month a year earlier.
Developments in the client portfolio and distribution networks
30 Jun 2023 30 Jun 2024 Change
YoY
KB Group's clients 2,227,000 2,203,000 (24,000)
Komerční banka 1,661,000 1,708,000 47,000
- individual clients 1,417,000 1,465,000 48,000
- New Digital Bank clients 15,000 439,000 424,000
- internet banking clients 1,532,000 1,583,000 51,000
- mobile banking clients 1,194,000 1,375,000 181,000
Modrá pyramida 446,000 407,000 (39,000)
KB Penzijní společnost 491,000 452,000 (40,000)
ESSOX (Group) 133,000 115,000 (18,000)
KB branches (CZ) 215 207 (8)
KB Poradenství outlets n.a. 186 n.a.
SGEF branches 9 9 0
ATMs (KB network) 852 793 (59)
- of which deposit-taking 536 504 (32)
- of which contactless 690 757 67
ATMs (Total shared network) 2,062 1,982 (80)
Number of active debit cards 1,487,000 1,563,000 76,000
Number of active credit cards 206,000 224,000 18,000
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 June 2024.
BUSINESS PERFORMANCE
Loans to customers
Total gross volume of lending to clients rose by 3.7% year on year to
CZK 824.1 billion.(( 11 ))
In lending to individuals, the overall volume of housing loans grew by 4.7%
from the year earlier. Within this total, the portfolio of mortgages to
individuals increased by 3.8% to CZK 281.6 billion. Modrá pyramida's loan
portfolio developed even faster, by 7.5% to CZK 95.1 billion. New production
of housing loans was higher by 39.1% compared to the previous year's first
half. The volume of KB Group's consumer lending (provided by the Bank and
ESSOX Group in the Czech Republic and Slovakia) was up by 5.1%, at
CZK 38.6 billion, growing in the Bank across all product categories.
The total volume of loans to businesses and other lending provided by KB Group
was greater by 2.7% year on year, at CZK 408.8 billion. Growth in lending to
businesses was affected by subdued investment activity in the slow economy,
increased bond financing of large corporatíons, as well the Bank's taking a
selective approach to making these loans. Lending to small businesses remained
flat at CZK 47.9 billion. The overall CZK volume of credit granted by KB to
medium-sized, large corporate, and other clients in the Czech Republic and
Slovakia(( 12 (#_ftn12) )) climbed by 2.4% year on year to
CZK 325.8 billion. At CZK 35.2 billion, the total credit and leasing
amounts outstanding at SGEF were up by 8.2% year over year.
Amounts due to customers and assets under management
The volume of standard client deposits within KB Group increased by 6.5% year
on year to CZK 1,059.4 billion.(( 13 )) Within the total deposit base,
volumes on current accounts grew by 1.7% year on year but were already up by
4.9% in the second quarter as the trend of clients switching money from
current accounts to term and savings accounts seemed to be fading.
Deposits at Komerční banka from individual clients were up by 5.0% from the
year earlier to CZK 340.0 billion. The deposit book at Modrá pyramida
diminished by (5.8%) to CZK 50.8 billion. Total deposits from businesses and
other corporations were higher by 8.1% , at CZK 660.3 billion.
The volumes in mutual funds held by KB Group clients grew by 26.2% to
CZK 146.8 billion. Client assets managed by KB Penzijní společnost were
2.0% greater, at CZK 75.5 billion. Technical reserves in life insurance at
Komerční pojišťovna were smaller by 2.0% year on year, at
CZK 46.2 billion.
The Group's liquidity as measured by the ratio of net loans(( 14 (#_ftn14) ))
to deposits (excluding repo operations with clients but including debt
securities held by KB and issued by the Bank's clients) stood at 78.5%. The
Group's liquidity coverage ratio ended the first half at 154%, well above the
regulatory limit of 100%.
FINANCIAL PERFORMANCE
Income statement
Komerční banka's revenues (net operating income) reached
CZK 17,547 million, down by (3.0%) compared to the first half of 2023. Net
interest income declined slightly, as costs of funds were elevated and there
were increased interest costs relating to the volume of new liabilities
mandated by regulation (MREL). Furthermore, the CNB ceased from October 2023
paying interest on banks' obligatory deposits (minimum reserves) with the
central bank. Net fee and commission income was up modestly, reflecting
especially clients' demand for investments in mutual funds, insurance
products, and wealth management solutions in private banking. Greater, too,
was demand among corporate clients for various financial services, such as
bond issuance, custody services, and issuance of guarantees. Net profit on
financial operations came down slightly from the strong levels of last year,
as clients' hedging and trading activity moderated in the context of a
sluggish economy and decreasing interest rates.
Net interest income was down by (2.9%), at CZK 12,435 million, in spite of
the expanded volumes of loans and deposits. The average costs of deposits were
significantly higher year on year, although these began to decrease moderately
during the second quarter. The average lending spreads were almost stable year
on year, with a slightly positive trend appearing this year. KB also had to
absorb interest costs stemming from loans accepted in order to meet the
minimum requirement for own funds and eligible liabilities (MREL) set by the
CNB. Moreover, from October 2023, the CNB stopped paying interest on banks'
obligatory deposits (minimum reserves) that it holds. Net interest margin for
the 6 months of 2024, computed as the ratio of net interest income to
interest-earning assets reported on the balance sheet, reached 1.7%. That
compares to 2.0% a year earlier.
Net fee and commission income grew by 6.9% to CZK 3,259 million. This growth
was mainly driven by cross-selling of mutual funds, life insurance, and wealth
management solutions in private banking, as well as by stronger demand among
corporate clients for various financial services, such as bond issuance,
custody and depository services, asset management, guarantees, and, in the
second quarter, also loan syndications. The Bank also paid less for received
guarantees. Transaction fees contributed positively, too, as clients'
transaction activity continued to pick up speed, especially in card payments
but also in other non-cash payments. Deposit product fees were down slightly,
influenced by clients' switching to the new digital bank and by lower number
of building savings contracts. Income from loan services decreased slightly,
as higher production of consumer loans was offset by lower fees from financing
products for businesses.
Net profit on financial operations was down by (17.8%) from the strong result
of 2023's first half to CZK 1,695 million. Clients' hedging and trading
activity moderated in the context of a soft economy and decreasing rates.
Financial markets saw also intense competition among service providers across
asset classes. The result of the previous year's first half also included gain
from sales of bonds reported on the banking book. Gains from foreign exchange
payments were higher year on year, reflecting recovery in travelling and
related transaction activity of clients together with spreads adjustments.
Dividend and other income was up by (9.1%) to CZK 159 million. This line
item primarily comprises revenues from property rental and ancillary services
and dividends from associated companies.
Operating expenses declined by (0.2%) to CZK 9,076 million. The average
number of employees decreased by 0.3% to 7,523(( 15 (#_ftn15) )) as a lower
number of staff in support functions and the distribution network was
partially offset by hiring of additional IT and data specialists. The Bank has
agreed with the trade unions on increasing salaries in the annual compensation
review by an average 4.5%, effective from April. Personnel expenses
subsequently grew by 6.9% to CZK 4,349 million. General administrative
expenses (not including contributions to the regulatory funds) were down by
(0.7%), at CZK 2,109 million. This category generally remained under tight
control, with main savings in this category related to marketing. The
full-year levy to the regulatory funds (Deposit Insurance Fund, Resolution
Fund) was lower by (38.6%) year on year, at CZK 784 million, because the CNB
adjusted downwards the aggregate contribution from Czech banks to the
Resolution Fund and the comparison base from last year was also influenced by
the temporarily increased charge for deposit insurance due to the failure of
Sberbank CZ. Depreciation, amortisation, and impairment of operating assets
grew by 13.0% to CZK 1,835 million, driven by higher charges reflecting
investments 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 down by
(5.9%), at CZK 8,471 million.
Cost of risk (impairment losses, provisions for loans, and net result from
loans written off) reached CZK 585 million (i.e. a net creation of
provisions or +22 basis points in relative terms) compared to a net provisions
release of CZK (899) million a year earlier (or −21 basis points in
relative terms). Net creation of credit risk allowances related predominantly
to the portfolios of loans to consumers and small businesses segments and it
was partly offset by successful resolution of a few corporate client
exposures. KB did not reduce the inflation overlay reserve that had been
created in 2021 and 2022. The mortgage portfolio continued to demonstrate
strong resilience.
Income from shares in associated undertakings (i.e. Komerční pojišťovna)
was up by 4.7% year on year, at CZK 133 million, influenced by interest rate
developments, as well as by creation and utilisation of the insurance
reserves.
Net loss on subsidiaries and associates reached CZK (54) million, mainly due
to impairment of a stake in a subsidiary of KB Smart Solutions. In the same
period of 2023, this line had been at CZK 0.
Net profits (losses) on other assets reached a negative CZK (33) million due
to a creation of allowances for buildings held for sale and costs related to
sale of buildings. In the previous year's first half, net loss on other assets
had been CZK (7) million.
Income tax was lower by (19.4%), at CZK 1,477 million.
KB Group's consolidated net profit for the first half of 2024 came to
CZK 6,455 million, down by (21.2%) in comparison with the year earlier. Of
this total, CZK 110 million was profit attributable to the non-controlling
owners of minority stakes in KB's subsidiaries (higher by 2.8% year on year).
Reported net profit attributable to the Group's equity holders totalled
CZK 6,344 million, which is (21.5%) less year on year.
Other comprehensive income stood at CZK (138) million. This derived mainly
from revaluation of some cash flow hedging positions and liabilities.
Consolidated comprehensive income for the first half of 2024 totalled
CZK 6,317 million, of which CZK 113 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 June 2024 with the values from the statement of
financial position as of 31 December 2023.
Assets
As of 30 June 2024, KB Group's total assets had grown by 1.1% year to date to
CZK 1,533.7 billion.
Cash and current balances with central banks were up by 174.8%, at
CZK 35.3 billion. Financial assets held for trading at fair value through
profit or loss (trading securities and derivatives) decreased by (5.5%) to
CZK 45.8 billion. The fair value of hedging financial derivatives declined
by (11.0%) to CZK 7.6 billion.
Year to date, there was a (14.0%) drop in financial assets at fair value
through other comprehensive income totalling CZK 14.4 billion. This item
consisted mainly of debt securities issued by government institutions.
Financial assets at amortised cost grew by 0.1% to CZK 1,398.8 billion. The
largest portion of this consisted of (net) loans and advances to customers,
which decreased year to date by (0.2%) to CZK 831.9 billion. A 98.0% share
in the gross amount of client loans was classified in Stage 1 or Stage 2 while
2.0% 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 12.0 billion. Loans and advances to banks climbed by 3.4% to
CZK 425.8 billion. The majority of this item consists in reverse repos with
the central bank. The value held in debt securities was down by (7.4%) and
reached CZK 141.0 billion at the end of June 2024.
Revaluation differences on portfolio hedge items totalled CZK (0.9) billion,
higher by 12.1%. Current and deferred tax assets stood at CZK 1.6 billion.
Prepayments, accrued income, and other assets, which include receivables from
securities trading and settlement balances, decreased overall by (10.4%) to
CZK 5.6 billion. Assets held for sale declined by (3.6%) to
CZK 0.8 billion.
Investments in associates declined by (11.8%) in comparison with the 2023
year-end value, to CZK 2.7 billion.
The net book value of tangible assets decreased by (2.2%) to
CZK 7.9 billion. Intangible assets grew by 2.1% to reach CZK 10.4 billion.
Goodwill, which derives primarily from the acquisitions of Modrá pyramida,
SGEF, and ESSOX, remained unchanged at CZK 3.8 billion.
Liabilities
Total liabilities were 1.9% higher in comparison to the end of 2023 and stood
at CZK 1,414.7 billion.
Financial liabilities at amortised cost went up by 2.3% to
CZK 1,276.2 billion. Amounts due to customers comprise the largest
proportion of this sum, and these climbed by 6.5% to CZK 1,200.5 billion.
This total included CZK 141.1 billion in liabilities from repo operations
with clients and CZK 5.9 billion of other payables to customers. Amounts due
to banks decreased through the first half of 2024 by (42.6%) to
CZK 60.7 billion.
Revaluation differences on portfolios hedge items were CZK (35.7) billion.
Current and deferred tax liabilities ended at CZK 0.9 billion, down by
(17.8%). Accruals and other liabilities, which include payables from
securities trading and settlement balances, grew by 38.5% to
CZK 24.0 billion.
The provisions balance was (6.4%) lower, at CZK 0.8 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 65.3 billion, was up by
1.2% year to date, due to the Czech crown's depreciated exchange rate
vis-à-vis the euro. That is because MREL instruments are denominated in euro.
Equity
Total equity declined year to date by (7.2%) to CZK 119.0 billion. The value
of non-controlling interests reached CZK 3.3 billion. As of 30 June 2024,
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 106.3 billion as of 30 June 2024. Capital adequacy stood at 18.9%. Core
Tier 1 (CET1) capital totalled CZK 100.1 billion and the Core Tier 1 ratio
was 17.8%. Tier 2 capital summed to CZK 6.2 billion, which was 1.1% of
risk-weighted assets.
As of 30 June 2024, Komerční banka's overall capital requirements (OCR) were
at approximately 16.9%. The minimum required level of CET1 was 12.2% and the
minimum Tier 1 capital ratio stood at 14.2%.
During 2024, the CNB decreased the required level of countercyclical capital
buffer by 25 bps with effect from 1 January, by another 25 bps with effect
from 1 April, and by 50 bps to 1.25% with effect from 1 July 2024. As from 1
January 2025, the CNB will newly set a systemic risk buffer requirement at a
rate of 50 bps.
KB Group's Liquidity Coverage Ratio came to 170% as of 30 June 2024. The
applicable regulatory minimum is 100%.
Effective from 1 January 2024, KB Group needed to comply with an MREL minimum
requirement equal to 21.2% of the consolidated total risk exposure and 5.91%
of the consolidated total exposure. The MREL requirement is defined as the 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. This requirement stood at 6.25% as of 30
June 2024 (and decreases by 0.50% from 1 July 2024 due to reduction of the
countercyclical buffer but increases again from 1 January 2025 due to
introduction of the systemic risk buffer at 0.50%.)
Pursuing the so-called "single point of entry" resolution strategy, KB intends
to fulfil its MREL requirements by taking on senior non-preferred loans from
Société Générale S.A. As of 30 June 2024, KB had accepted such loans in a
total principal volume of EUR 2.4 billion.(( 16 (#_ftn16) )) KB Group's MREL
ratio stood at 29.7%.
Developments in the Group structure in the second quarter of 2024
In June, Komerční banka concluded an agreement with the City of Prague on
the sale of its fully owned subsidiary VN 42, s.r.o., which owns the head
office building at Václavské náměstí 796/42 in Prague. Transfer of the
company took place at the beginning of July 2024. The sale will have positive
impact on the consolidated result in the third quarter of 2024. The sale also
includes an agreement on the lease of some premises in the building at
Václavské náměstí 42 by Komerční banka until the end of 2026 at the
latest.
In June, the Commercial Register recorded a merger of ENVIROS s.r.o. and KB
Advisory, s.r.o. Both companies had been fully owned by KB SmartSolutions,
s.r.o., which itself is 100% owned by Komerční banka, a.s. Following the
merger, ENVIROS s.r.o. continues as the successor company. ENVIROS is a
leading energy, environmental, and management consultancy. It operates mainly
in the Czech Republic, but also in Slovakia, and provides its services
internationally. KB SmartSolutions invested in ENVIROS s.r.o. in July 2022 and
acquired 100% of its shares. KB Advisory, s. r. o. was established on 16
September 2019 as a consultancy for small and medium-sized enterprises and
municipalities.
In July, Komerční banka signed a Memorandum of Understanding with Société
Générale Equipment Finance, S.A. (SGEF SA) and its parent company Société
Générale, S.A. (SG SA) with a view to purchase from SGEF SA the remaining
49.9% stake in SG Equipment Finance Czech Republic s.r.o. (SGEF CR). This
intended acquisition would happen concomitantly with the contemplated sale by
the SG Group of its Equipment Finance activities, including the shares in SGEF
SA (but excluding activities in the Czech Republic and Slovakia), to BPCE
group, a French financial group. The signing of this Memorandum of
Understanding follows a previously signed Memorandum of Understanding entered
into between Société Générale and BPCE that was announced in April 2024.
The acquisition by Komerční banka, which already holds 50.1% of SGEF CR, of
the remaining 49.9% stake in SGEF CR would thus complete the transaction. The
continuation of business co-operation with clients and suppliers common to
SGEF SA and SGEF CR would be ensured by a Business Co-operation Agreement into
which both companies intend to enter. The closing of the acquisition is
contemplated to occur in the first quarter of 2025.
Expected development and main risks to that development in 2024
Note: This outlook updates and thus replaces the outlook presented on 8
February 2024 on the occasion of Komerční banka's announcing its results for
the full year 2023. Given the high level of uncertainty and 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.
After stable development during 2023, according to the Czech Statistical
Office,(( 17 (#_ftn17) )) the Czech economy is expected to grow marginally in
2024. Weak domestic demand was the main reason for the Czech economy's feeble
performance in the past year. Households had seen their purchasing power
eroded by high inflation and have cut back on spending as a result.
Nevertheless, the labour market remains tight and corporate profitability
resilient. Higher nominal wage growth should therefore continue in 2024 and
contribute to a resumption of real wage growth in the context of a rapid
decline in inflation. On the other hand, tight monetary policy, fiscal
consolidation efforts of the Czech government, and sluggish performance of
some trading partners, Germany in particular, are likely to weigh on the
domestic economy in 2024.
Inflation is expected to come down rapidly, and its average rate during the
year should already fit into the Czech National Bank's 1-3% tolerance band. In
December 2023, the central bank commenced its policy rate cutting cycle with a
decrease in the two-week repo rate by 25 bps to 6.75%. Reflecting a sharp
weakening in inflation dynamics across the CEE region, the CNB's repo rate
will probably be cut sharply through 2024, moving to below 4% at the year's
end.
The Czech Parliament adopted in 2023 a set of measures aimed at reducing the
state budget deficit in 2024 and thereafter. Those elements of the fiscal
consolidation package having significant impact on the Group include an
increase in the corporate income taxation rate to 21% from 19% and lowering of
limits for tax-exempt employee benefits and meal vouchers. Moreover, the
package lowers the limit for application of the upper 23% personal income tax
rate and increases mandatory sickness insurance paid by employees by 0.6% (of
the gross salary). Additional measures include changes in the rates of
value-added tax, increases in excise taxes and real estate property taxes,
cancellation of certain tax exemptions, and higher minimum taxes for
entrepreneurs.
The Slovak Parliament approved in December 2023 a new levy on banks in
Slovakia, with a rate for 2024 at 30% of accounting pre-tax profit.
In December 2022, Parliament approved a bill introducing a new tax impacting
several banks, including Komerční banka. This so-called "windfall tax" will
be applied to profits of selected banks generated in the years 2023, 2024, and
2025. The windfall tax rate of 60% is constructed as a surcharge on top of the
standard 19% tax rate, which means that the effective tax rate for the
"windfall" part of the profit is 79%. Windfall is defined as the difference
between the income tax base (profit before tax) of the respective year and the
average profit before tax in the four years 2018-2021, increased by 20%. The
windfall tax is imposed on (standalone) banks with net interest income that
had exceeded CZK 6 billion in 2021. Within KB Group, it applies to standalone
Komerční banka. Given the income tax base of standalone KB in 2018, 2019,
2020, and 2021, the windfall tax base comes to CZK 15.8 billion. According to
the projections for the financial results detailed below, the new tax's impact
in 2024, if any, should be limited.
According to the joint decision of the College of Supervisors of the Société
Générale Group (where the Czech National Bank participates as a local
regulator), effective from 1 January 2024, Komerční banka is required to
maintain a capital ratio on a sub-consolidated basis at the minimum level of
10.6% (Total SREP Capital Ratio), representing a decrease by 30 bps in
comparison with the ratio required previously.
Moreover, credit institutions in the Czech Republic are simultaneously subject
to the combined capital requirements, which are additive to the TSCR
requirement set in the aforementioned joint decision. As of 1 January 2024, KB
was required to maintain a combined capital buffer comprising the capital
conservation buffer at 2.5%, the O-SII capital buffer at 2.0%, and the
countercyclical buffer determined by competent authorities for exposures in a
particular country (at 2.0% in the Czech Republic effective from 1 October
2023). The countercyclical buffer requirement was lowered in two steps to
1.25% effective from July 2024 (and the CNB also announced introduction of a
systemic risk buffer requirement at a rate of 0.50% from 1 January 2025).
Thus, Komerční banka's overall capital requirement as of 1 January 2024
stood at approximately 17.1% in relation to the volume of risk-weighted
assets, and as of 30 June 2024 it was approximately 16.9%. The minimum Common
Equity Tier 1 capital ratio was at approximately 12.46% as of 1 January 2024
(12.2% as of 30 June) and the minimum Tier 1 capital ratio at about 14.45%
(14.2%) in relation to the volume of risk-weighted assets. Komerční banka
will continue in its capital planning to apply prudent assumptions about the
future development of regulatory capital requirements.
As of 1 January 2024, KB has also met the regulatory requirements for own
funds and eligible liabilities (MREL) from the EU's banks recovery and
resolution directive, at 21.2% of the consolidated total risk exposure and
5.91% of the consolidated total exposure. The MREL requirement is defined as
the 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.
Pursuing the so-called "single point of entry" resolution strategy, and if
such a need ensues from the developing volumes of risk exposures and
regulatory requirements, KB may continue in 2024 to fulfil its MREL
requirements by taking on senior non-preferred loans from Société Générale
S.A.
The banking market for loans in 2024 is expected to expand at a
mid-single-digit pace. Both corporate and retail lending should grow
similarly. Credit activity in the economy should be driven by easing of
domestic and foreign monetary policy and mildly strengthening domestic
economic growth. On the contrary, a high level of households' and firms' own
funds is likely to limit financing needs.
The outstanding volume of housing loans on the market should grow also at a
mid-single-digit pace, albeit slightly faster than in 2023. New production of
housing loans is expected to improve strongly. That growth should be supported
by relative improvement in affordability of housing, lower interest costs,
reduced value-added tax on construction works, as well as relaxed prudential
limits imposed by the CNB. Offer of longer fixed-term mortgages has been
limited due to refinancing risk concerns not fully alleviated by an amendment
to the Consumer Credit Act.
Consumer lending market should grow around mid-single-digit pace. The expected
recovery in household consumption will be mainly supported by solid household
savings and high aggregate household savings, but it is not likely to be
accompanied by a large surge in borrowing.
Corporate lending market should grow at a mid-single-digit pace, as the
willingness of businesses to invest will be underpinned by the gradual easing
of monetary conditions and development of business confidence and aggregate
demand. Nevertheless, large liquidity buffers will allow corporations to
finance less capital-intensive investments from their own funds. A growing
share of financing for real estate projects has been flowing through domestic
real estate investment funds, and large corporations have taken recourse to
debt capital markets to meet their funding needs. The outlook for growth in
corporate lending is also pushed down by the low GDP growth estimate as well
as the unfavourable outlook for industry, which accounts for a large share of
domestic credit demand. Euro-denominated loans are likely to maintain their
relative interest rate advantage this year, albeit to a lesser extent than
previously, given the expected earlier and faster rate cutting by the CNB
compared to that of the ECB.
Expansion in the volume of deposits on the market may slow to mid-single
digits in total. A slowing in household deposits growth would be consistent
with expected recovery in consumer spending and, as interest rates fall, the
outflow to non-bank solutions in search of higher returns could intensify. The
slowdown in business deposits could reflect lower profitability or stronger
investment activity by corporations.
Komerční banka will continue implementing the changes in accordance with its
KB2025 programme that had been announced in November 2020. A cornerstone of
the transformation programme consists in building a new digital banking
infrastructure that includes a new core banking system, the KB+ mobile
application, internet banking, a card management system, and analytical tools
allowing an upgraded client proposition.
In 2023, KB had commenced onboarding of new clients to the new platform and a
gradual migration of clients from the legacy system. KB intends to welcome
1,000,000 clients into the new digital bank by the end of 2024. The migration
that has begun in the Individuals segment will include in 2024 also
entrepreneurs and later clients in the corporate segment. The advancements in
building the new digital bank for clients in retail segments will enable KB
during 2024 to progressively refocus its development capacities on services
and systems within the new digital bank for corporate clients.
In this context, KB management expects that the Group's loan portfolio will
record a mid-single-digit growth rate for 2024. The volume of housing loans
outstanding should grow at a mid-single-digit pace, supported by recovery on
the market. Consumer lending will expand at a mid-single-digit pace thanks to
improvements in the offer and the sales process, along with the expected
rebound in households' consumption. The corporate loan book should grow at a
low- to mid-single-digit pace.
KB Group's total deposit balances are expected to expand at a mid- to
high-single-digit pace. Deposits of clients from corporate clients should grow
somewhat faster than do volumes in retail segments. The volumes on current
accounts are expected to resume their growth.
The volume of clients' assets in mutual funds should expand at a double-digit
pace. Meanwhile, assets in pensions fund will expand by low-single digits and
volume of technical reserves in life insurance will change insignificantly.
Following a correction in 2023, KB Group's total net operating income
(revenues) for 2024 should return to growth by a low- to mid-single-digit
figure. Net interest income will probably improve slightly, combining moderate
volume growth with modestly smaller average interest margins. Net fees and
commissions should improve by mid-single digits, driven mainly again by growth
of the volumes in mutual funds. The net profit on financial operations is
expected to repeat the strong result of the previous year, fuelled by foreign
currency transactions and expansion of services for smaller corporations.
As ever, operating expenses remain under tight control. The figure for the
full year 2024 will rise at a low-single-digit pace, thus more slowly than
will revenues. The Group will continue its transformation, which consists in
developing the new digital infrastructure, overall simplification, and
optimisation as to the composition and numbers of employees and premises in
use.
Personnel expenses will be higher by a mid-single-digit percentage rate. The
management has agreed with the trade unions on raising wages by an average
4.5% from April 2024 on a constant staff basis, and a further 0.3% increase is
dedicated towards eliminating the equal-pay gap. Depreciation and amortisation
charges will be growing at a low-double-digit pace, reflecting investments in
the digital transformation. Regulatory levies for the Resolution and Deposit
insurance have been booked in the first half, lower by 39% year on year in
accordance with the decision of the regulator regarding the charge for the
whole banking system. Other administrative costs will reach the same or even
lower amount compared to 2023, thanks to the ongoing optimisation of
operations.
Cost of risk will be influenced by several factors. On the one hand, there
will be continuing low unemployment and decreasing interest rates. On the
other, the economy will still be growing below its potential. In such context,
cost of risk is expected to increase in comparison with the low levels
recorded in 2023. Nevertheless, reflecting the resilient credit profile of
KB's asset portfolio, the cost of risk in 2024 is expected to remain
materially below the through-the-cycle range of 20-30 bps.
The key risks to the expectations described above comprise further escalation
of geopolitical conflicts, in particular the war in Ukraine and its economic
repercussions, including disruptions to trade, fuel supplies, and transport
connections. 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.
Management expects that KB's operations will generate sufficient profit in
2024 to cover the Group's capital needs ensuing from its growing volume of
assets as well as to pay out dividends. Considering the current state of
affairs, KB's management intends for 2024 to propose distributing as dividends
100% of attributable consolidated net profit earned in the year.
ANNEX: Consolidated results as of 30 June 2024 under International Financial
Reporting Standards (IFRS)
Reported Recurring
1H 2023 1H 2024 Change 1H 2023 1H 2024 Change
YoY
YoY
(CZK million, unaudited)
Net interest income 12,812 12,435 (2.9%) 12,812 12,435 (2.9%)
Net fee and commission income 3,049 3,259 6.9% 3,049 3,259 6.9%
Net profit on financial operations 2,063 1,695 (17.8%) 2,063 1,695 (17.8%)
Dividend and other income 175 159 (9.1%) 175 159 (9.1%)
Net banking income 18,099 17,547 (3.0%) 18,099 17,547 (3.0%)
Personnel expenses (4,069) (4,349) 6.9% (4,069) (4,349) 6.9%
General admin. expenses (excl. regulatory funds) (2,123) (2,109) (0.7%) (2,123) (2,109) (0.7%)
Resolution and similar funds (1,277) (784) (38.6%) (1,277) (784) (38.6%)
Depreciation, amortisation and impairment of operating assets (1,624) (1,835) 13.0% (1,624) (1,835) 13.0%
Total operating expenses (9,093) (9,076) (0.2%) (9,093) (9,076) (0.2%)
Operating profit 9,006 8,471 (5.9%) 9,006 8,471 (5.9%)
Impairment losses 911 (589) +/- 911 (589) +/-
Net gain from loans and advances transferred and written off (13) 4 +/- (13) 4 +/-
Cost of risk 899 (585) +/- 899 (585) +/-
Net operating income 9,906 7,886 (20.4%) 9,906 7,886 (20.4%)
Income from share of associated companies 127 133 4.7% 127 133 4.7%
Net profit/(loss) on subsidiaries and associates 0 (54) n.a. 0 (54) n.a.
Net profits on other assets (7) (33) >100% (7) (33) >100%
Profit before income taxes 10,025 7,932 (20.9%) 10,025 7,932 (20.9%)
Income taxes (1,832) (1,477) (19.4%) (1,832) (1,477) (19.4%)
Net profit for the period 8,193 6,455 (21.2%) 8,193 6,455 (21.2%)
Profit attributable to the Non-controlling owners 107 110 2.8% 107 110 2.8%
Profit attributable to the Group's equity holders 8,086 6,344 (21.5%) 8,086 6,344 (21.5%)
.
Statement of Financial 31 Dec 2023 30 Jun 2024 Ytd
Position
(CZK million, unaudited)
Assets 1,516,302 1,533,717 1.1%
Cash and current balances with central bank 12,835 35,265 >100%
Loans and advances to banks 411,644 425,819 3.4%
Loans and advances to customers (net) 833,542 831,938 (0.2%)
Securities and trading derivatives 217,484 201,238 (7.5%)
Other assets 40,798 39,457 (3.3%)
Liabilities and shareholders' equity 1,516,302 1,533,717 1.1%
Amounts due to banks 105,694 60,705 (42.6%)
Amounts due to customers 1,127,228 1,200,507 6.5%
Securities issued 12,431 12,567 1.1%
Subordinated and senior non preferred debt 64,560 65,340 1.2%
Other liabilities 78,106 75,580 (3.2%)
Total equity 128,284 119,017 (7.2%)
.
Key ratios and indicators 30 Jun 2023 30 Jun 2024 Change year on year
Capital adequacy (CNB) 20.0% 18.9% q
Tier 1 ratio (CNB) 19.5% 17.8% q
Total risk-weighted assets (CZK billion) 524.6 560.8 6.9%
Risk-weighted assets for credit risk (CZK billion) 427.3 447.6 4.7%
Net interest margin (NII / average interest-bearing assets)III 2.0% 1.7% q
Loans (net) / deposits ratioIV 80.2% 78.5% q
Cost / income ratioV 50.2% 51.7% p
Return on average equity (ROAE)VI 13.5% 10.5% q
Return on average Tier 1 capitalVII 16.1% 12.7% q
Return on average assets (ROAA)VIII 1.2% 0.8% q
Earnings per share (CZK)IX 85.6 67.2 (21.5%)
Average number of employees during the period 7,549 7,523 (0.3%)
Business performance in retail segment - overview 30 Jun 2024 Change year on year
CZK bil.
Mortgages to individuals - volume of loans outstanding 281.6 3.8%
Building savings loans (MPSS) - volume of loans outstanding 95.1 7.5%
Consumer loans (KB + ESSOX + PSA Finance) - volume of loans outstanding 38.6 5.1%
Small business loans - volume of loans outstanding 47.9 1.1%
Insurance premiums written (KP) 3,761.5 3.2%
Senior non-preferred loans as of 30 June 2024:
Drawing date Principal Call option date* Interest rate (ACT/360)
27 Jun 2022 EUR 250m 28 Jun 2027 3M Euribor + 2.05%
21 Sep 2022 EUR 250m 21 Jun 2026 1M Euribor + 1.82%
21 Sep 2022 EUR 250m 21 Sep 2029 1M Euribor + 2.13%
9 Nov 2022 EUR 250m 9 Nov 2025 1M Euribor + 2.05%
9 Nov 2022 EUR 250m 9 Nov 2027 1M Euribor + 2.23%
9 Nov 2022 EUR 250m 9 Nov 2028 3M Euribor + 2.28%
15 Jun 2023 EUR 250m 15 Jun 2026 3M Euribor + 1.70%
15 Jun 2023 EUR 200m 15 Jun 2028 3M Euribor + 2.01%
28 Nov 2023 EUR 250m 30 Nov 2026 3M Euribor + 1.51%
28 Nov 2023 EUR 200m 29 Nov 2027 3M Euribor + 1.61%
* Call option exercise date is one year before final maturity date.
Subordinated debt as of 30 June 2024:
Drawing date Principal Call option date* Interest rate (ACT/360)
10 Oct 2022 EUR 100m 11 Oct 2027 3M Euribor + 3.79%
29 Nov 2023 EUR 100m 29 Nov 2028 3M Euribor + 2.82%
* Call option exercise date is five years before final maturity date
Financial calendar:
31 October 2024 9M and 3Q 2024 results
6 February 2025 FY and 4Q 2024 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) 1H 2024 1H 2023
Net interest income income, 12,435 12,812
year to date
Of which:
Loans and advances at amortised cost 36,595 30,191
Debt securities at amortised cost 2,191 2,160
Other debt securities 108 271
Financial liabilities at amortised cost (23,146) (16,814)
Hedging financial derivatives - income 22,530 23,685
Hedging financial derivatives - expense (25,843) (26,681)
(source: Balance Sheet) 30 Jun 2024 31 Dec 2023 30 Jun 2023 31 Dec 2022
Cash and current balances with central banks/Current balances with central 28,318 4,530 4,162 6,167
banks
Loans and advances to banks 425,819 411,644 383,240 233,398
Loans and advances to customers 831,938 833,542 797,985 781,463
Financial assets held for trading at fair value through profit or loss / Debt 22,193 19,621 11,868 9,968
securities
Non-trading financial assets at fair value through profit or loss / Debt 0 0 0 132
securities
Financial asset at fair value through other comprehensive income (FV OCI) / 14,381 16,729 27,362 30,119
Debt securities
Debt securities 141,014 152,238 152,825 139,276
Interest-bearing assets (end of period) 1,463,663 1,438,304 1,377,441 1,200,524
Average interest-bearing assets, year to date 1,450,983 1,288,983
NIM year to date, annualised 1.71% 1.99%
(( 1 )) Including debt securities issued by KB's corporate clients and
excluding reverse repo operations with clients. The volume including reverse
repo operations with clients increased by 3.7% to CZK 824.4 billion.
(( 2 )) Excluding repo operations with clients. The total volume of 'Amounts
due to customers' moved up by 10.0% to CZK 1,200.5 billion.
(( 3 )) Unless stated otherwise, data sources for this section: Czech
Statistical Office, Czech National Bank, KB Economic Research. Comparisons are
year on year.
(( 4 )) The latest available data for the first quarter 2024 showed wage
inflation at +7.0% year on year (up by 4.8% in real terms).
(( 5 )) Source:
https://ec.europa.eu/eurostat/databrowser/view/EI_LMHR_M/default/table?lang=en&category=euroind.ei_lm
Data as of May 2024.
(( 6 )) Source:
https://www.cnb.cz/arad/#/en/display_link/single__SCPIMZM09YOYPECNA_ ARAD
statistics of the CNB.
(( 7 )) Source:
https://csu.gov.cz/produkty/indices-of-realized-flat-prices-1-quarter-of-2024
(https://csu.gov.cz/produkty/indices-of-realized-flat-prices-1-quarter-of-2024)
Publication code 014007-23, released 14 June 2024.
(( 8 )) Source:
https://ec.europa.eu/eurostat/databrowser/view/prc_hpi_q/default/table?lang=en
(( 9 )) Source of data on banking market developments: ARAD statistics of the
CNB, www.cnb.cz/arad.
(( 10 )) Source of data on banking market developments: ARAD statistics of the
CNB, www.cnb.cz/arad.
(( 11 )) Including debt securities issued by KB's corporate clients and
excluding reverse repo operations with clients.The volume including reverse
repo operations with clients increased by 3.7% to CZK 824.4 billion.
(( 12 )) Inclusive of factor finance outstanding at Factoring KB and merchant
and car dealers' financing from ESSOX Group.
(( 13 )) Excluding volatile repo operations with clients. The total volume of
'Amounts due to customers' increased by 13.8% year on year to CZK 1,200.5
billion.
(( 14 )) Gross volume of loans reduced by the volume of provisions for loan
losses.
(( 15 )) Recalculated to a full-time equivalent number.
(( 16 )) An overview of senior non-preferred tranches to meet the MREL
requirements is provided in the Annex.
(( 17 )) https://www.czso.cz/csu/czso/hdp_narodni_ucty
(https://www.czso.cz/csu/czso/hdp_narodni_ucty)
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