REG - Komercni Banka - 1st Quarter Results
03/05/2024 07:00
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RNS Number : 0856N Komercni Banka 03 May 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 3 May 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 31 March 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
Q1 2024
Komerční banka's first-quarter performance highlights strategic advancements
"The financial result for the first quarter shows improvement at the level of
operating profit. We continue expanding our deposit base and the volume of
client assets under management, and we see a positive trend in lending as
well. I am especially happy that growth in the number of the Bank's clients
has been accelerating. The reported decline in net profit is due to a release
of credit risk provisions in the comparative base of the previous year,"
remarked Jan Juchelka, Komerční banka's Chairman of the Board of Directors
and Chief Executive Officer.
"In the coming quarters, we will further enrich the client proposition in the
New Era of Banking by Komerční banka. We will continue developing our new
digital bank and will advance in our strategic transformation. Komerční
banka will remain a loyal corporate citizen and one of the largest taxpayers
in the Czech Republic. As ever, we will stand by our clients and ready to back
projects reinforcing long-term prosperity for Czechia, because the success of
our country is a prerequisite for Komerční banka's own successful
development," Jan Juchelka added.
KB Group's lending to customers rose by 4.6% year on year to
CZK 825.5 billion.
Deposits from clients grew by 7.2% from a year earlier to
CZK 1,049.8 billion.
Volume of non-bank assets (mutual funds, pension funds, life insurance) under
management expanded by 15.3% to CZK 261.8 billion.
Standalone Komerční banka had 1,678,000 customers, up by 22,000 year on
year. Some 255,000 clients had already enrolled in KB's new digital bank
introduced in April 2023. KB Group was serving 2,195,000
clients.
Total revenues were down by an (1.5%) year on year to CZK 8.8 billion.
Operating expenditures decreased by (4.1%) to CZK 4.8 billion. The Group
reported a CZK 0.5 billion net creation of provisions for credit risk.
Income taxes reached CZK 0.7 billion. Net profit attributable to the Group's
equity holders, at CZK 2.8 billion, was down by (21.3%) year on year.
Volume of regulatory capital reached CZK 106.2 billion, capital adequacy
stood at 18.8%, and the Core Tier 1 ratio was 17.7%.
The Annual General Meeting held on 24 April 2024 approved an annual dividend
payment of CZK 82.66 per share (before tax) to Komerční banka shareholders
as of 6 May. The dividend will be payable from 27 May 2024.
KB had 74,415 shareholders (greater by 2,968 year on year), of which 68,023
were private individuals from the Czech Republic.
Prague, 3 May 2024 - Komerční banka reported today its unaudited
consolidated results for the first quarter of 2024.
Business and financial performance
Lending to clients went up by 4.6% to CZK 825.5 billion.(( 1 ))
The volume of housing loans outstanding grew by 4.5%. Within that total,
lending from Modrá pyramida building society expanded faster than did KB's
mortgage portfolio. New production of housing loans was higher by 34.2%
compared to the previous year's first quarter. The growth in consumer lending
reached 6.5%, boosted by greater utilisation of credit cards and overdrafts.
Growth in lending to businesses, at 4.5%, was still affected by subdued
investment activity and working capital needs in the slow economy, as well as
by the Bank's selective approach to such lending.
Deposits from clients improved by 7.2% year on year to
CZK 1,049.8 billion.(( 2 )) The growth was concentrated in savings accounts
and term deposits while the volumes on current accounts were lower from the
prior year. Meanwhile, the volume of KB Group clients' assets in mutual funds,
pension savings, and life insurance has risen by 15.3% year on year to
CZK 261.8 billion.
Total revenues reached CZK 8.8 billion, lower by (1.5%) compared to the
first quarter 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 (4.1%), at CZK 4.8 billion. Personnel
expenses were higher by 9.6%. The average number of employees rose 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 declined due to lower expenses related to marketing, IT support, and
real estate. The estimated full-year levy to the regulatory funds decreased
markedly 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 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 0.5 billion. Net creation of credit risk allowances
related predominantly to the portfolios of loans to consumers and small
businesses segments as well as to a very limited number of medium-sized
corporate client situations. KB did not reduce the inflation overlay reserve
which had been created in 2021 and 2022. The mortgage portfolio and the
segment of large corporate clients continued to record a strong level of
resilience.
Reported net profit attributable to shareholders for 2024's first quarter
decreased by (21.3%) year on year to CZK 2.8 billion. Income taxes came to
CZK 0.7 billion.
Shareholders, capital, and dividends
KB's capital adequacy ratio reached a strong 18.8%, and Core Tier 1 capital
stood at 17.7%. 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 154%, significantly above the regulatory
minimum of 100%.
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 dividend
can be claimed by every shareholder holding a Komerční banka share as of 6
May 2024. The dividend's payment date is 27 May 2024.
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. The proposal 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.
As of 31 March 2024, Komerční banka had 74,415 shareholders (up by 2,968
year on year), of which 68,023 (greater by 2,876 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 first quarter of 2024
Komerční banka continued implementing its strategic KB2025 programme.
Enrolment of clients to the KB+ application - which is developed as part of
the Bank's new digital infrastructure - advanced rapidly. As of 31 March 2024,
some 255,000 clients were using the new digital bank, and their number
exceeded 300,000 during April.
A part of the KB2025 programme's Operational Efficiency pillar is the OneGroup
initiative, which aims to leverage resources and skills, create synergies, and
fully exploit the strengths of individual companies across the Group. As part
of the OneGroup initiative, from February 2024, Modrá pyramida's finance
functions are outsourced to KB's Strategy and Finance division.
As part of the building savings sector, Modrá pyramida remains a reliable
partner for its clients in the area of housing. All of the Group's
housing-related products, including mortgages, are managed by Modrá pyramida
for Komerční banka Group from one place in order to simplify processes while
increasing efficiency and speed. Modrá pyramida has also expanded its scope
of activity with additional focus on helping Czech households to reduce their
energy consumption.
Komerční banka was named #1 sustainable bank in the 2023 Visa Awards. The
jury recognised KB's innovative work in the area of sustainability, including
its co-operation with the Laformela fashion brand on production of clothing
made of captured carbon dioxide.
Moreover, KB received two recognitions in the Mastercard Awards 2024. The
title Responsible Innovation went to KB's Touch cards featuring a new card
design with tactile notches cut out to make life easier for visually impaired
clients. KB was also named Premium Card Issuer for having the fastest growth
in the volume of transactions made using premium payment cards.
Komerční banka also announced that the Board of Directors had decided to
enter into exclusive negotiation with the City of Prague on potential sale of
KB's fully owned subsidiary VN 42, s.r.o., which owns the head office building
at Václavské náměstí 796/42 in Prague. This decision does not create an
obligation to conclude a transaction or to agree on its terms and conditions.
Market environment (in first quarter 2024)(( 3 ))
In the first quarter of 2024, global financial markets experienced notable
volatility, primarily driven by escalating conflict in the Middle East. This
turbulence particularly affected Asian markets, resulting in a significant
decline of stock prices and increase in commodity prices. Despite these
economic challenges, the Czech Republic has maintained a stable economic
environment. The country reported GDP growth of 0.5% in the first quarter over
the prior quarter, and, together with other economic indicators, it is
signalling potential improvement after a period of stagnation in 2023.
Additionally, the inflation rate in the Czech Republic was reported at 2% in
March, remaining, as in February, at the inflation target. This all suggests a
positive economic outlook as the year progresses.
The Czech economy had expanded by just 0.4% quarter on quarter in the fourth
quarter ((0.2%) year on year). In the first quarter, then, real GDP increased
by 0.5% on a quarterly basis and was 0.4% higher on a year-on-year basis,
supported by final consumption expenditures and increasing trade balance.
During the first two months of 2024, the manufacturing sector experienced
modest year-on-year expansion of 0.7%. Additionally, car production in the
same period was up by 7.9% compared to the previous year. Despite a tight
labour market, nominal wage growth did not keep up with inflation.(( 4 )) The
unemployment rate continued to be one of the lowest in the EU, standing at
2.6% in February 2024 (as per the Eurostat methodology after seasonal
adjustment).(( 5 ))
In the first quarter of 2024, the Czech Republic saw a notable moderation in
inflation compared to previous periods. Industrial producer prices declined by
(0.9%) year on year in the first quarter. Quarter-on-quarter dynamics were at
2.3%. Agricultural producer prices were lower by (17.3%) year on year and on a
quarter-on-quarter basis by (0.3%), driven down by both livestock and crop
production. Only prices of construction work continued to rise by an average
1.7% year on year, 0.2% quarter on quarter. Consumer prices climbed, with
inflation reaching 1.4% in quarter-on-quarter terms. Year on year, prices
increased by 2.0%, marking a significant reduction of (5.6) pp from the
year-on-year inflation rate reported in the fourth quarter of 2023. Monthly
time series for prices closely followed by the inflation-targeting national
bank then tracked exactly the inflation target of 2% in both February and
March. In 2024's first 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 rose by 3.4% and prices for alcoholic beverages and tobacco by 4.7%.
Conversely, prices of food and non-alcoholic beverages decreased by (4.9%).
The dynamics of core inflation declined to 2.6% in March.(( 6 ))
This favourable price development brought a second wind to the Czech National
Bank, which implemented two reductions in its main two-week monetary policy
repo rate during the first quarter of 2024. Initially, at the beginning of
February, the rate was cut by 50 basis points to 6.25%. There followed another
50 bps reduction to 5.75% at the end of March. As of the end of 2024's first
quarter, the three-month PRIBOR rate stood at 5.61%, showing a decrease of
(116) bps since the beginning of the year. The 10-year interest rate swap
climbed to 3.71%, up by 22 bps over the same period. Nevertheless, the
interest rate swap curve has been positively sloping since January, with the
5-year IRS rate at 3.65%, an increase of 11 bps year to date. Yields on
10-year Czech government bonds have also gone up (by 20 bps since the start of
the year, to 4.02%). Additionally, the Czech crown depreciated against the
euro by 2.3% year to date, reaching CZK 25.3 per euro by the end of March.
The latest information on residential real estate prices, available for the
fourth quarter of 2023 from the Czech Statistical Office, showed prices for
second-hand homes in Prague had grown by 3.2% quarter on quarter and were
lower by (2.6%) as compared to the previous year's fourth quarter.(( 7 ))
Prices of second-hand flats in the rest of the country were down by (0.3%)
quarter on quarter and were (6.4%) lower year on year. Prices of newly
developed flats in Prague slipped by (1.9%) in the fourth quarter of 2023 and
fell by (3.3%) from the same quarter a year earlier. Czech residential real
estate prices according to the European house price index(( 8 )) were up
quarter on quarter by 0.3% but down year on year by (1.0%).
Total bank lending for the overall market (excluding repo operations) grew by
7.5% year on year as of March 2024.(( 9 )) Lending to individuals rose by
5.1%, with housing loans expanding 4.2% year on year as new mortgage
production was recovering from the drop and interest rates are gradually
declining. Lending to businesses and other corporations increased year on year
by 10.0% in March 2024, with growth recorded across all main segments and
mainly in euro-denominated loans.
The volume of client deposits in Czech banks expanded by 8.6% year over year
as of March 2024.(( 10 )) Deposits from individuals had grown in total by 8.0%
while the market deposits from businesses and other corporations were up by
9.2% year over year. Switching from current to term and saving deposits
moderated, but the volumes on current accounts were (3.4%) lower while those
on term deposits swelled by 19.8% year on year and saving accounts added 21.4%
as compared to the same month a year earlier.
Developments in the client portfolio and distribution networks
31 Mar 2023 31 Mar 2024 Change
YoY
KB Group's clients 2,232,000 2,195,000 (37,000)
Komerční banka 1,656,000 1,678,000 22,000
- individual clients 1,412,000 1,436,000 23,000
- New Digital Bank clients n.a. 255,000 n.a.
- internet banking clients 1,523,000 1,552,000 29,000
- mobile banking clients 1,169,000 1,297,000 128,000
Modrá pyramida 451,000 418,000 (34,000)
KB Penzijní společnost 500,000 463,000 (37,000)
ESSOX (Group) 133,000 116,000 (16,000)
KB branches (CZ) 217 212 (5)
Modrá pyramida points of sale n.a. 186 n.a.
SGEF branches 9 9 0
ATMs (KB network) 855 792 (63)
- of which deposit-taking 533 505 (28)
- of which contactless 662 722 60
ATMs (Total shared network) 2,052 1,979 (73)
Number of active debit cards 1,490,000 1,520,000 30,000
Number of active credit cards 202,000 221,000 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 31 March 2024.
BUSINESS PERFORMANCE
Loans to customers
Total gross volume of lending to clients rose by 4.6% year on year to
CZK 825.5 billion.(( 11 ))
In lending to individuals, the overall volume of housing loans grew by 4.5%
from the year earlier. Within this total, the portfolio of mortgages to
individuals expanded by 3.3% to CZK 278.5 billion. Modrá pyramida's loan
portfolio developed even faster, by 8.3% to CZK 93.7 billion. New production
of housing loans was higher by 34.2% compared to the previous year's first
quarter. The volume of KB Group's consumer lending (provided by the Bank and
ESSOX Group in the Czech Republic and Slovakia) was up by 6.5%, at
CZK 38.2 billion, boosted by increased utilisation of credit cards and
overdrafts.
The total volume of loans to businesses and other lending provided by KB Group
was greater by 4.5% year on year, at CZK 415.0 billion. Growth in lending to
businesses was still affected by subdued investment activity and working
capital needs in the slow economy, as well by the Bank's taking a selective
approach to making these loans. Lending to small businesses remained flat at
CZK 47.6 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 )) climbed by 4.4% year on year to CZK 332.7 billion. At
CZK 34.7 billion, the total credit and leasing amounts outstanding at SGEF
were up by 10.2% year over year.
Amounts due to customers and assets under management
The volume of standard client deposits within KB Group increased by 7.2% year
on year to CZK 1,049.8 billion.(( 13 )) Within the total deposit base,
volumes on current accounts diminished by (4.4%) as clients have been
switching some money from current accounts to term and savings accounts.
Deposits at Komerční banka from individual clients were up by 5.3% from the
year earlier to CZK 337.3 billion. The deposit book at Modrá pyramida
diminished by (5.2%) to CZK 51.3 billion. Total deposits from businesses and
other corporations were higher by 8.1% , at CZK 646.1 billion.
The volumes in mutual funds held by KB Group clients grew by 30.2% to
CZK 141.0 billion. Client assets managed by KB Penzijní společnost were
1.1% greater, at CZK 74.1 billion. Technical reserves in life insurance at
Komerční pojišťovna were smaller by 2.7% year on year, at
CZK 46.7 billion.
The Group's liquidity as measured by the ratio of net loans(( 14 )) to
deposits (excluding repo operations with clients but including debt securities
held by KB and issued by the Bank's clients) stood at 79.9%. The Group's
liquidity coverage ratio ended the first quarter at 154%, well above the
regulatory limit of 100%.
FINANCIAL PERFORMANCE
Income statement
Komerční banka's revenues (net operating income) reached
CZK 8,822 million, down by (1.5%) compared to the first quarter 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' 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 activity moderated in the context of a sluggish economy
and decreasing interest rates.
Net interest income was down by (1.1%), at CZK 6,276 million, in spite of
the expanded volumes of loans and deposits. Switching of deposit volumes from
current accounts to savings and term deposits, together with higher rates paid
on deposit products, led to significantly higher average costs of deposits.
The average lending spreads stabilised. KB 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 3 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 4.9% to CZK 1,589 million. This growth
was mainly driven by cross-selling of mutual funds and life insurance and by
stronger demand of corporate clients for various financial services, such as
bond issuance, custody services, and issuance of 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 client
acquisition costs and lower number of building savings contracts. Income from
loan services decreased somewhat, due to lower fees for committed lines and
from loans to small businesses.
Net profit on financial operations decreased by (16.2%) from the very strong
result of 2023's first quarter to CZK 838 million. Clients' hedging and
trading activity moderated in the context of a sluggish economy and decreasing
rates. Financial markets saw also intense competition among service providers
across asset classes. Gains from foreign exchange payments were higher year on
year, reflecting seasonality of travel, transaction activity of clients, and
spreads adjustments.
Dividend and other income was up by 28.0% to CZK 119 million. This line item
primarily comprises revenues from property rental and ancillary services and
dividends from associated companies.
Operating expenses declined by (4.1%) to CZK 4,804 million. The average
number of employees increased by 0.3% to 7,563(( 15 )) as a lower number of
staff in support functions and the distribution network was offset by hiring
of more IT and data specialists. Personnel expenses subsequently grew by 9.6%
to CZK 2,131 million. General and administrative expenses (not including
contributions to the regulatory funds) were down by (7.6%), at
CZK 1,018 million. The main savings in this category related to marketing,
IT support, and real estate. The estimated full-year levy to the regulatory
funds (Deposit Insurance Fund, Resolution Fund) was lower by (35.4%) year on
year, at CZK 753 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 13.5% to
CZK 902 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 up by
1.7%, at CZK 4,018 million.
Cost of risk (impairment losses, provisions for loans, and net result from
written-off loans) reached CZK 485 million (i.e. a net creation of
provisions or +22 basis points in relative terms) compared to a net provisions
release of CZK (432) 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 as well as to a
very limited number of medium-sized corporate client situations. KB did not
reduce the inflation overlay reserve which had been created in 2021 and 2022.
The mortgage portfolio and the segment of large corporate clients continued to
record a strong level of resilience.
Income from shares in associated undertakings (i.e. Komerční pojišťovna)
was up by 11.3% year on year, at CZK 69 million, influenced by interest rate
developments, as well as creation and utilisation of the insurance reserves.
Net loss on subsidiaries and associates reached CZK (43) million due to
impairment of a stake in a subsidiary of KB Smart Solutions. In the same
period of 2023, this line was at CZK 0.
Net profits (losses) on other assets reached a negative CZK (30) 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 quarter, net loss on other
assets had been CZK (1) million.
Income tax was lower by (19.7%), at CZK 669 million.
KB Group's consolidated net profit for the first quarter of 2024 reached
CZK 2,861 million, which was down by (20.8%) in comparison with the year
earlier. Of this total, CZK 56 million was profit attributable to the
non-controlling owners of minority stakes in KB's subsidiaries (up by 12.0%
year on year).
Reported net profit attributable to the Group's equity holders totalled
CZK 2,804 million, which is (21.3%) less year on year.
Other comprehensive income reached CZK (99) million. This derived mainly
from revaluation of some cash flow hedging positions and liabilities
securities. Consolidated comprehensive income for the first quarter of 2024
totalled CZK 2,762 million, of which CZK 60 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 31 March 2024 with the values from the statement of
financial position as of 31 December 2023.
Assets
As of 31 March 2024, KB Group's total assets had grown by 6.5% year to date to
CZK 1,614.5 billion.
Cash and current balances with central banks were up by 79.5%, at
CZK 23.0 billion. Financial assets held for trading at fair value through
profit or loss (trading securities and derivatives) increased by 3.8% to
CZK 50.3 billion. The fair value of hedging financial derivatives declined
by (11.0%) to CZK 7.7 billion.
Year to date, there was a (10.5%) drop in financial assets at fair value
through other comprehensive income totalling CZK 15.0 billion. This item
consisted mainly of debt securities issued by government institutions.
Financial assets at amortised cost grew by 6.3% to CZK 1,485.3 billion. The
largest portion of this consisted of (net) loans and advances to customers,
which increased year to date by 0.6% to CZK 838.9 billion. A 97.9% share in
the gross amount of client loans was classified in Stage 1 or Stage 2 while
2.1% 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 12.5 billion. Loans and advances to banks climbed by 19.9% to
CZK 493.7 billion. The majority of this item consists in reverse repos with
the central bank. The value held in debt securities was up by 0.3% and reached
CZK 152.6 billion at the end of March 2024.
Revaluation differences on portfolio hedge items totalled CZK (0.8) billion,
higher by 0.5%. Current and deferred tax assets stood at CZK 1.3 billion.
Prepayments, accrued income, and other assets, which include receivables from
securities trading and settlement balances, increased overall by 10.0% to
CZK 6.9 billion. Assets held for sale declined by (3.6%) to
CZK 0.8 billion.
Investments in associates rose by 2.3%, to CZK 3.1 billion, compared to the
2023 year-end value.
The net book value of tangible assets decreased by (2.6%) to
CZK 7.8 billion. Intangible assets grew by 1.0% to reach CZK 10.3 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 6.9% higher in comparison to the end of 2023 and stood
at CZK 1,483.4 billion.
Financial liabilities at amortised cost went up by 7.7% to
CZK 1,344.2 billion. Amounts due to customers comprise the largest
proportion of this sum, and these climbed by 9.0% to CZK 1,228.6 billion.
This total included CZK 178.8 billion of liabilities from repo operations
with clients and CZK 14.2 billion of other payables to customers. Amounts
due to banks decreased through the 3 months of 2024 by (4.8%) to
CZK 100.6 billion.
Revaluation differences on portfolios hedge items were CZK (36.3) billion.
Current and deferred tax liabilities ended at CZK 1.0 billion, down by
(0.4%). Accruals and other liabilities, which include payables from securities
trading and settlement balances, grew by 22.1% to CZK 21.2 billion.
The provisions balance was (5.3%) 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 66.1 billion, was up by
2.3% 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 rose year to date by 2.2% to CZK 131.1 billion,. The value of
non-controlling interests reached CZK 3.3 billion. As of 31 March 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 106.2 billion as of 31 March 2024. Capital adequacy stood at 18.8%. Core
Tier 1 (CET1) capital totalled CZK 99.8 billion and the Core Tier 1 ratio
was 17.7%. Tier 2 capital summed to CZK 6.4 billion, which was 1.1% of
risk-weighted assets.
As from 1 January 2024, Komerční banka's overall capital requirements (OCR)
were at approximately 17.1%. The minimum required level of CET1 was 12.2% and
the minimum Tier 1 capital ratio stood at 14.2%. The OCR decreased by
approximatelly 0.25% following a decision of the CNB to lower the
countercyclical buffer requirement for Czech exposures by 25 basis points with
effect from 1 April 2024.
KB Group's Liquidity Coverage Ratio came to 154% as of 31 March 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 6.50% as of 31
March 2024 (and decreases by 0.25% as from 1 April 2024 due to reduction of
the countercyclical buffer.)
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 31 March 2024, KB had accepted such loans in a
total principal volume of EUR 2.4 billion.(( 16 )) KB Group's MREL ratio stood
at 29.6%.
Developments in the Group structure during the first quarter of 2024
In March, KB Smart Solutions, a fully owned subsidiary of Komerční banka,
decreased to 25.317% from 33.171% its stake in MonkeyData s.r.o. MonkeyData
fully owns a subsidiary, Lemonero, s.r.o., which provides financing to e-shops
utilising an AI-powered scoring model.
Also in March, Komerční banka's Board of Directors decided to enter into
exclusive negotiation with the City of Prague on potential sale of KB's fully
owned subsidiary VN 42, s.r.o., which owns the head office building at
Václavské náměstí 796/42 in Prague. This decision does not represent an
obligation to conclude a transaction or to agree on its terms and conditions.
ANNEX: Consolidated results as of 31 March 2024 under International Financial
Reporting Standards (IFRS)
Profit and Loss Statement Reported Recurring
1Q 2023 1Q 2024 Change 1Q 2023 1Q 2024 Change
YoY
YoY
(CZK million, unaudited)
Net interest income 6,349 6,276 (1.1%) 6,349 6,276 (1.1%)
Net fee and commission income 1,515 1,589 4.9% 1,515 1,589 4.9%
Net profit on financial operations 1,000 838 (16.2%) 1,000 838 (16.2%)
Dividend and other income 93 119 28.0% 93 119 28.0%
Net banking income 8,958 8,822 (1.5%) 8,958 8,822 (1.5%)
Personnel expenses (1,944) (2,131) 9.6% (1,944) (2,131) 9.6%
General admin. expenses (excl. regulatory funds) (1,102) (1,018) (7.6%) (1,102) (1,018) (7.6%)
Resolution and similar funds (1,166) (753) (35.4%) (1,166) (753) (35.4%)
Depreciation, amortisation and impairment of operating assets (795) (902) 13.5% (795) (902) 13.5%
Total operating expenses (5,007) (4,804) (4.1%) (5,007) (4,804) (4.1%)
Operating profit 3,951 4,018 1.7% 3,951 4,018 1.7%
Impairment losses 447 (502) +/- 447 (502) +/-
Net gain from loans and advances transferred and written off (15) 18 +/- (15) 18 +/-
Cost of risk 432 (485) +/- 432 (485) +/-
Net operating income 4,384 3,533 (19.4%) 4,384 3,533 (19.4%)
Income from share of associated companies 62 69 11.3% 62 69 11.3%
Net profit/(loss) on subsidiaries and associates 0 (43) n.a. 0 (43) n.a.
Net profits on other assets (1) (30) >100% (1) (30) >100%
Profit before income taxes 4,444 3,530 (20.6%) 4,444 3,530 (20.6%)
Income taxes (833) (669) (19.7%) (833) (669) (19.7%)
Net profit for the period 3,611 2,861 (20.8%) 3,611 2,861 (20.8%)
Profit attributable to the Non-controlling owners 50 56 12.0% 50 56 12.0%
Profit attributable to the Group's equity holders 3,561 2,804 (21.3%) 3,561 2,804 (21.3%)
Statement of Financial 31 Dec 2023 31 Mar 2024 Ytd
Position
(CZK million, unaudited)
Assets 1,516,302 1,614,499 6.5%
Cash and current balances with central bank 12,835 23,044 79.5%
Loans and advances to banks 411,644 493,726 19.9%
Loans and advances to customers (net) 833,542 838,935 0.6%
Securities and trading derivatives 217,484 217,961 0.2%
Other assets 40,798 40,833 0.1%
Liabilities and shareholders' equity 1,516,302 1,614,499 6.5%
Amounts due to banks 105,694 100,592 (4.8%)
Amounts due to customers 1,127,228 1,228,555 9.0%
Securities issued 12,431 12,713 2.3%
Subordinated and senior non preferred debt 64,560 66,070 2.3%
Other liabilities 78,106 75,518 (3.3%)
Total equity 128,284 131,051 2.2%
Key ratios and indicators 31 Mar 2023 31 Mar 2024 Change year on year
Capital adequacy (CNB) 19.8% 18.8% q
Tier 1 ratio (CNB) 19.2% 17.7% q
Total risk-weighted assets (CZK billion) 525.0 564.6 7.5%
Risk-weighted assets for credit risk (CZK billion) 429.1 448.7 4.6%
Net interest margin (NII / average interest-bearing assets)(III) 2.0% 1.7% q
Loans (net) / deposits ratio(IV) 80.5% 79.9% q
Cost / income ratio(V) 55.9% 54.5% q
Return on average equity (ROAE)(VI) 11.6% 8.9% q
Return on average Tier 1 capital(VII) 14.3% 11.2% q
Return on average assets (ROAA)(VIII) 1.0% 0.7% q
Earnings per share (CZK)(IX) 75.4 59.4 (21.3%)
Average number of employees during the period 7,541 7,563 0.3%
Business performance in retail segment - overview 31 Mar 2024 Change year on year
CZK bil.
Mortgages to individuals - volume of loans outstanding 278.5 3.3%
Building savings loans (MPSS) - volume of loans outstanding 93.7 8.3%
Consumer loans (KB + ESSOX + PSA Finance) - volume of loans outstanding 38.2 6.5%
Small business loans - volume of loans outstanding 47.6 1.6%
Insurance premiums written (KP) 2,153.4 3.1%
Senior non-preferred loans as of 31 March 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 31 March 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:
1 August 2024 1H and 2Q 2024
results
31 October 2024 9M and 3Q 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) 1Q 2024 1Q 2023
Net interest income income, 25,595 28,632
year to date
Of which:
Loans and advances at amortised cost 66,139 51,842
Debt securities at amortised cost 4,407 3,187
Other debt securities 442 559
Financial liabilities at amortised cost (38,798) (22,194)
Hedging financial derivatives - income 48,102 37,176
Hedging financial derivatives - expense (54,697) (41,938)
(source: Balance Sheet) 31 Mar 2024 31 Dec 2023 31 Mar 2023 31 Dec 2022
Cash and current balances with central banks/Current balances with central 15,640 4,530 9,384 6,167
banks
Loans and advances to banks 493,726 411,644 339,065 233,398
Loans and advances to customers 838,935 833,542 788,248 781,463
Financial assets held for trading at fair value through profit or loss / Debt 22,869 19,621 12,413 9,968
securities
Non-trading financial assets at fair value through profit or loss / Debt 0 0 129 132
securities
Financial asset at fair value through other comprehensive income (FV OCI) / 14,966 16,729 28,826 30,119
Debt securities
Debt securities 152,646 152,238 153,700 139,276
Interest-bearing assets (end of period) 1,538,782 1,438,304 1,331,765 1,200,524
Average interest-bearing assets, year to date 1,488,543 1,266,144
NIM year to date, annualised 1.69% 2.01%
(( 1 )) Including debt securities issued by KB's corporate clients and held by
KB. The volume of reverse repo operations with clients as of 31 March 2024 as
well as of 31 March 2023 was nil.
(( 2 )) Excluding repo operations with clients. The total volume of 'Amounts
due to customers' moved up by 13.8% to CZK 1,228.6 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 fourth quarter showed wage inflation
at +6.3% year on year (down by (1.2%) in real terms).
(( 5 )) Source:
https://ec.europa.eu/eurostat/databrowser/view/EI_LMHR_M/default/table?lang=en&category=euroind.ei_lm
(https://ec.europa.eu/eurostat/databrowser/view/EI_LMHR_M/default/table?lang=en&category=euroind.ei_l)
Data as of February 2024.
(( 6 )) Source:
https://www.cnb.cz/arad/#/en/display_link/single__SCPIMZM09YOYPECNA_
(https://www.cnb.cz/arad/#/en/display_link/single__SCPIMZM09YOYPECNA_) ARAD
statistics of the CNB.
(( 7 )) Source:
https://www.czso.cz/csu/czso/indices-of-realized-flat-prices-4-quarter-of-2023
(https://www.czso.cz/csu/czso/indices-of-realized-flat-prices-4-quarter-of-2023)
Publication code 014007-23, released 15 March 2024.
(( 8 )) Source:
https://ec.europa.eu/eurostat/databrowser/view/prc_hpi_q__custom_10886471/default/table?lang=en
(https://ec.europa.eu/eurostat/databrowser/view/prc_hpi_q__custom_10886471/default/table?lang=en)
(( 9 )) Source of data on banking market developments: ARAD statistics of the
CNB, www.cnb.cz/arad (http://www.cnb.cz/arad) .
(( 10 )) Source of data on banking market developments: ARAD statistics of the
CNB, www.cnb.cz/arad (http://www.cnb.cz/arad) .
(( 11 )) Including debt securities issued by KB's corporate clients. There
were no reverse repo operations with clients to report as of 31 March 2024 or
31 March 2023.
(( 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 1,228.6
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.
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