Moneta Money Bk

Ladies and gentlemen, welcome to the conference call of Monetary Money Bank. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Thomas Dooney,

Good afternoon ladies and gentlemen. I welcome you on our quarterly call. I have our senior management team with me and we will present the results. I would like to start this with page 4. where we started the highlights of the quarter. He has generated net profit after tax of 598 million Czech crowns. This is on the basis of operating income of 2.7 billion, operating expenses of 1.5 billion, and cost of risk of 418 million. The bank continues to generate a very strong growth. If you look at page 5, you will see that on year-on-year basis, our deposit base has increased more than 49%. We have had nearly 44% growth in the lending activity. of the bank. Additional to that, we see a slight increase of MPL stocks which currently stands at 2.8%. The bank additionally continues to have robust capital. The overall capital stands at 18.5% ratio and solid liquidity at nearly 184% LCR. Now, if we could turn into our fulfillment of strategic targets on page seven. If you look at page seven, there's a couple of comments here. The proportion of our retail and small business franchise increased to 71.4% measured by structure of our loan book and the overall composition of our balance sheet. Importantly, on the mortgage market, as of end of February, quite close the numbers are not out. We've increased market share to 7.2%. We are keeping steady. We're maintaining the market share in the unsecured retail market. and again I would put emphasis on a very strong growth in both the asset management where we have reached 3.2% in the distribution of investment funds and we are growing fairly robustly in the distribution of insurance products but the growth of growth is in premium is nearly at 17% year-on-year. Additional to that, we are producing robust growth levels in the small business segment with moderate increase of the customer base and the growth on lending is currently supported by the government schemes which provides state guarantees under these exposures and we see significant improvement in deposit-taking activity, namely through current accounts. In the SME target, likewise, we are fairly successful in distributing liquidity to our medium-sized customers. That activity is, again, embellished by our ability to distribute state guaranteed loans and we also have strong growth in the SME deposit rating mainly again through current income. On the following page we show you the financial and sustainability targets In terms of return on tangible equity, the first quarter came in at 9.7%. This is below our expectations for the year and that's mainly driven by incurring the annual cost of regulatory contributions and booking them in full as we do. The profitability of our business line has improved quarter to quarter and this is by lower cost of funds, which is the result of changing mix of the deposits and also targeted repricing, which is positively impacting our performance. On non-performing loans, as I said, the ratio climbed up to 2.8%. Nonetheless, we are maintaining a very prudent position. The overall provisioning of our loan book spend at 2.6% is one of the highest we believe in the Czech market. And NPL coverage ended up at 94.4%. And on client base, we have steady development. We've added about 2,000 customers in the first quarter. On page nine, I will go the growth rates of the individual targets with respect to our segments on retail. You see that not only we have respectable growth in the overall portfolio, nearly 7% with 69.4% where the organic growth actually 20%. We have phenomenal performance on mortgages, nonetheless we face fairly strong difficulties on the consumer loan portfolio, and this is due to intense competition, dropping demand, and significantly higher extraordinary prepayments of those loans. The organic growth came in at nearly 25% and core growth was at 66%. With small business franchise, again, we had very robust numbers. 16% growth in the portfolio of loans. Deposit taking expanded by nearly 32% and redistributed during the quarter. 1.4 billion loans covered by the COVID state guarantees. We are actually outperforming the market. This is mainly due to the acquisition as the SME portfolio on organic basis dropped or declined by 4.6% year on year. Nonetheless, we are maintaining above the market commercial yields of the portfolio. and are generating solid deposits and redistributed, again, 4.1 billion of COVID guarantees. On the digital front, we provide you here with the shares of digital distributions This is developing nicely. I would put emphasis on the mortgage distribution as our refinance digital platform now constitutes close to 14%, 13.7% of our overall mortgage production. And this platform is getting a very good traction. In terms of risk management, the cost of risk on an annualized basis improves both against the fourth quarter and the third quarter came in at 73 basis points and we have slightly improved the overall coverage by three basis points. On capital, we are carrying 3.6 billion on excess capital This is after subtracting the year end, 2021 year end, the MERL requirement of 4.8 billion. The Czech National Bank is requiring us this year to fulfill 50% of the calculated amount. On the cost control, The cost base expanded by 13.9%. This is due to the fact that we suffer higher regulatory changes through increase of the deposit base. And as I said, we booked the entire amount in the first quarter. Additionally, we see pressure on amortization and depreciation We invest on Thursday in this quarter. We also have full remaining cost of the 2020 acquisition which was missing from the third quarter of previous year. On dividend policy, we have submitted application to Czech National Bank to pay out 1.5 billion according to set of rules communicated to us and we expect the answer at the end of September. With respect to this year's profit, 2021, the bank continues to accrue 80% of its earnings into dividend accounts, not recognizing these into the capital of the bank. We have stable operating platform. You can see that on page 11 where in terms of branches, we closed five units in the first quarter, reduced the high-speed space by about 1,500 square meters. We also continue in modernization of our ATM network. You can see that We have continued improvement in the usage of our digital channels, namely on SmartBanka, and the employment level in the bank remains pretty much flat. Quarter on quarter, we have 3,032 FTEs for APNs of March. Now, let me make a couple of comments on the overall operating environment to start the section on page 13. We face challenging environment with possibility of economic recovery in the second half of 2021. As you know, Czech Republic is now contemplating easing COVID-related restrictions and the easing should come hopefully in the next three months. On the GDP outlook, it's too early to say we show you here what are the forecast by state institutions and by set of analysts pooled in the blue bag. We also experienced a very significant drop in industrial production. which is very important to the country and that reflects negatively into the foreign trade and you can see that the state budget is the only positive contributor to the country's GDP currently the country holds the rating is stable with a stable outlook now on the following page we show you Unemployment, vacancies, state budget and economic activity rate. What is interesting is that the unemployment used to be increasing but only marginally and is expected to decrease in actually second and third quarters as seasonal work will will begin. In terms of unemployment versus vacancies the country still has a positive position having more vacancies than job seekers so what needs to be said here is that if you look at the development in the first quarter both the unemployment number marginally increased but the vacancies actually increased quite faster than the unemployment. So the situation is not altogether that terrible. State budget. This is the same as being reported during the last quarter. The deficit estimated for 2020 is $367 billion check down. The issue deficit is expected to come in at a higher number of $500 billion and the government stimulus into the economy remains on a fairly massive, massive basis. I'm basically seeing We show you the slight decrease in inflation. We also portray the forecasted trends, I mean the expectations of higher interest rates. On the interest rates, what is important is that there is strong consensus that the rates will increase. The X will increase during the fourth quarter. This is 5 out of 6 analysts are forecasting that and the 3 out of 6 are forecasting that that will be followed by another hike in the first quarter of 2022. We observed that in the government bond yields and we also observed that in interest rate swaps. Currency relatively stable, recently strengthening overall trend. Now if you allow me to just quickly catch where Moneta stands against the banking market. We continue to outperform strongly in the deposit market and that goes across the retail and commercial segments. If you look at this chart, we grew approximately six times faster than the market last year. overall growth of 47.8%. We have outpaced the retail market development five times and the commercial deposit market two times. So, Moneta strengthens both volume and market position in terms of compared to comparable period of last year. On page 18, we have the same analysis for the lending market. We have substantially outperformed in lending growth and as I previously commented, this is both due to the acquisition and our organic growth. So the market expanded last year on both on basis of 1.5%. close to 44% and the growth is the most pronounced in the retail market where our rate of growth is 10.5 times and we currently carry portfolio 159.4 billion in commercial we have again outgrown the market and as we are focused on the small business and SME, as I said, this is chiefly due to a factor of the acquisition and our ability to continue in the growth of the small business. On page 19, we show you the pricing situation. We are facing, in the unsecured market, going clockwise, lower demand and a very strong competitive pressure. and we have almost changed our pricing policy and it performs actually below the market in order to keep the unsecured loan books stable. In terms of retail deposits, you can see the effect of repricing and we are coming down to The pricing level of the market on the mortgages, we are pretty much aligned with market pricing, which is around 2%, and on the commercial deposits, we are keeping the position steadily throughout the quarters that we show you here. So this is an update on Moneta's performance against the banking market. And now let me make a few comments about digital distribution. If you look at page 21, We continue to have focus on development of the three dimensions of our digital strategy. First is the credit distribution, second, transactional banking, and third, digital distribution of fee-based products. What is important here? that we are seeking to make improvements to Afinanto, which is a digital mortgage platform, and we are also digitizing actually a consolidation of consumer loans. This has already been put to the market test in recent weeks. and you will continue with providing some other elements of digital capability, namely unbridging loans, which are purpose unsecured loans for for reconstruction and upgrade of residential dwellings. On transactional banking, we are seeking to further digitize the service capability of the bank and amongst other of products because the regulator request that we also focus on this service element. and on fee product distribution we are seeking to improve asset management distribution capability where the results of the first quarter if I remember correctly is seven and a half times bigger than what we were able to deliver in the first quarter of 2020 so we have fairly good commercial traction on asset management and more perspective rate that we see here and we would like to be able to offer also like insurance online as competitive terms. On page 22, we show you how our digital platform continues to develop in importance to the bank's production. So if we go clockwise, You can see a refinancer has a fairly geometric growth in terms of new volume, and it now constitutes 13.7% of the bank's overall mortgage production, while 12 months ago it was barely 4%, so it's more than 3%. in its importance. On small business, we have continually, I would say, steady production, and we have focused on this. This is the most covered by COVID guarantee. This is not a big size, so let's rely on people, you know, front line. In terms of number of current accounts, You can see that the production of current accounts in relative terms increases and also the digital distribution is actually double that of first quarter of the previous year. And here you can see also on asset management the growth of digital distribution where in relative terms it now stands at 12%. On the following page, on page 23, we've experienced Chrome growth in mobile payments and provide you with a portrayal of that. What is interesting on this side of things is that the mobile platform SmartBanka continues to grow at 25% rate. from external evaluation we have one of the best platforms in the Czech Republic on internet banking we do have increasing penetration however from number of number of transactions mobile platform SmartBank is growing in importance and will soon probably in few quarters actually overtake the importance of internet banking, mainly for our customers. On the following page, on page 24, we show you evolution of digital payments from perspective of tokenized cards and from perspective of Apple and Google Pay transactions. This is again linked to our smart bank application and you can see that about one third of our debit card portfolio is actually tokenized into the mobile banking platform and we consider this to be one of the highest rates of penetration in the Czech market and you can also see evolution of payments on the two platforms where the Apple platform is performing very very strongly as it attracts probably more mobile or more digitally savvy customers and on the first slide page in this section page 25 we portray evolution of our organic traffic as we seek to continue to improve Continuously our web presence this supports our commercial results becoming more and more important and I welcome you to look at our website as it changed again in a month of April actually when we seem to optimize the structure of our presentation on the web. Thank you very much. We've made $598 million overall, as my colleagues teach. We face fairly difficult and challenging operating environment, mainly on revenue generation, with a slight improvement and hope, a ray of hope, on the cost of risk, and I will Thank you so much.

Good afternoon ladies and gentlemen. I'm now on page 27. Let me give you a bit more detail about our financial performance. Recurrent profit average of Morata improved in the first quarter by 1.3% through lending growth. However, the reported trend was impacted by one-off gain on bond selling in amount of $277 million realized last year. This gain is reported in line income from financial operations. In the first quarter of 2021, as was mentioned, we delivered a considerable net profit of $598 million, which corresponds to 9.7% of our return on tangible equity. Total cost base is up by almost 14%, predominantly attributable to the acquired entities and costs of their integration, and also regulatory charges. And on the cost of risk line, we recorded improvement by nearly 39%, primarily due to higher anticipatory provisioning accounted for in the first quarter last year following the pandemic outbreak. If you look at page 108, you can see a decomposition of net interest income up by 1.5%. It is attributable to the loan book expansion by 45% and deposit repricing. Both trends are documented in the chart on the right-hand side. Strengthening of the interest income from the launch portfolio growth was partially offset by the yield erosion and its changing product mix towards secure, competitive environment and reduced market interest rates. Further detail will be provided by my hosts Andrew and Jan in the balance sheet section. And the drop in the first category, which combines interest income from address, other assets and liabilities, reflects the monetary policy decisions taken by the central bank in the first and second quarter last year. Now if you click the page, you can continue with the breakdown of net QM commission income. The income size increased by 5.9%, driven by asset management, insurance and building selling products. Main drivers of the expense side increase by nearly 29% are commissions paid to the site agent's network of building savings banks for distribution of its products. And on page 30, we can analyze continued growth of the income side in more detail. The third-party commission income stream expanded by 5.2% amid continuing solid results in distribution of insurance and investment funds. In the first quarter, we expanded balance of asset management by 68% year-on-year, which was enabled by specialized sales force and further amplified by our highly competitive proposition with zero opening fees. The 6.4% growth of the pre-income category was greatly supported by the service in fees, up by nearly 30%, enabled by consolidation of building savings products, generating monthly fees. And on the negative side, the transactional activity slowdown due to pandemic-related restrictions continues and is reflected in the transaction fee income erosion by 23%. And on page 31, by the way, this page concludes this section with the overall consolidated cost-based evolution. The increase by nearly 14% is attributable to consolidation of the acquired entities and 207 million of regulatory charges that went up in line with the expansion of our Bk. However, and this is important, the productivity improvement stemming from successful completion of the integration process already becomes visible. If you compare quarterly costs without regularity charges since Q2 last year, you can see the lowest number reported for the first quarter this year, actually $1310 million. Our cost-income ratio for the first quarter is 256.6%, or 48.8% excluding regulatory charges that are always paid in the first quarter for the whole year. In the rest of the year, we will manage this metric down towards 48%, 49% in line with our guidance for this year. So this concludes the P&L section and I will now hand over to my colleague, Piyang Novotny, who will continue with the balance sheet development.