Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Komercni Banka AS (KMERF, Financial) reported a strong net income of CZK12.5 billion for the first nine months of 2024, slightly higher than the previous year.
- The bank achieved a significant growth in assets under management, with a 13.7% increase, driven by a 25% growth in mutual funds.
- Komercni Banka AS (KMERF) maintained a strong capital position with a core Tier 1 ratio of 17.9% and a liquidity coverage ratio of almost 170%.
- The bank successfully migrated over 800,000 clients to its new digital platform, KB+, and acquired approximately 140,000 new clients.
- The cost of risk remained low at 14 basis points, reflecting high asset quality and effective risk management strategies.
Negative Points
- Net interest income declined by 3.3% year-over-year, impacted by increased costs of senior nonpreferred loans and the cancellation of minimum obligatory reserves.
- The structure of deposits did not improve as expected, with current accounts growing slower than remunerated deposits.
- The bank faced a one-off unexpected default in the SME segment, impacting the cost of risk for the quarter.
- The transformation project, while progressing, has incurred significant costs, estimated in the low teens of billion Czech crowns over five years.
- The macroeconomic environment remains challenging, with the Czech economy growing at a modest pace and companies postponing investments due to external uncertainties.
Q & A Highlights
Q: Could you elaborate on the challenges in improving the current account mix and deposit structure?
A: Jiri Sperl, Executive Director, Strategy and Finance, explained that client behavior in managing current accounts versus remunerated deposits is closely tied to market interest rates. When rates are low, clients don't differentiate much between account types. However, as rates rise, clients shift towards remunerated deposits. The bank expects a delayed adjustment in client behavior as rates decline, which should improve the deposit structure.
Q: Can you provide insights into the 2025 revenue growth expectations and the drivers behind it?
A: Jiri Sperl stated that the bank anticipates high single-digit revenue growth in 2025, driven by improved net interest income, increased client base, and better deposit structure. The bank expects to benefit from the completion of its retail transformation and aims for high single-digit growth in loans, particularly in retail categories like mortgages and consumer loans.
Q: What is the impact of the recent reserve requirement increase by the regulator?
A: Jan Juchelka, CEO, mentioned that the regulator's goal was to lower costs on monetary policy, but the bank has not received a detailed explanation. The increase in reserve requirements is not expected to significantly impact the bank's liquidity or operations.
Q: How is the bank approaching lending to new digital banking clients, given the potential lack of historical data?
A: Miroslav Hirsl, Senior Executive Director - Retail Banking, explained that the bank does not have a specific approach for new digital clients. They assess clients based on available data, including salary information, and apply the same lending criteria as for existing clients.
Q: Can you discuss the cost of the transformation project and how it has been managed financially?
A: Jiri Sperl noted that the transformation cost is in the low teens of billion Czech crowns over five years. The bank absorbed about 60% of this cost by halting investments in the old system, thus managing the financial impact effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
