Moneta Money Bk

Ladies and gentlemen, welcome to the conference call of Moneta Money Bank regarding full year 2022 financial results. Please note that this conference call will be recorded. This event will have a live presentation followed by a Q&A session. As a reminder, all participants will be in a listen only mode. May I now hand you over to Mr. Sperney, who will lead you through the conference call. Sir, please go ahead.

Good morning, ladies and gentlemen. This is Tomáš Spurný speaking. I have the pleasure to begin our today's presentation. If I may ask you to turn your attention to page two, we start with the summary. During 2022, we were able to generate net profit of 5.2 billion. This translates to 10 crowns, 20 hellers earnings per share. If you look at the geography of the result on operating income, we reached 12.1 billion. This is approximately 100 million better than we anticipated in last February's guidance. On operating expenses, we came in at 5.6 billion crowns. Equally, this is about 100 million better than originally. uh anticipated our operating profit before tax and before cost of charge uh cost of risk at 6.5 billion uh this constitutes increase of nearly 16 percent against the previous year. We generated cost of risk charge for the year in the total amount of 90 million. This is despite the fact that we have created considerable management overlays. in anticipation of current or upcoming likelihood of recession. Likewise, we come in below and significantly below the guidance through excellent performance of our workout team and recoveries, namely in disposal of non-performing receivables. Now, If we go to page three quickly regarding development of the balance sheet, our asset base increased nearly 14% to 388 billion. This is chiefly due to the fact that we have raised 49 billion of additional liquidity into the bank. Hence, the deposit base ended up at 334 billion crowns. Likewise, we strengthen issuance of securities. The year-end issued securities come at 10 billion. We've raised additional 3.9 billion in male eligible securities. Our accounting equity stands at 31 billion, which is an increase of 5.5%. And this reflects both the paid dividend during 2022 and over and above that. We added 20% of our current year earnings into the equity base. Gross performing receivables at 270 billion. This constitutes growth of 5.6% and we will go through the detail of that in a few minutes. Investment securities portfolio increased by nearly 18% to 58 billion as we have purchased Chiefly uh czech government securities but we've also invested into uh some of the male uh issues uh of our competitors now on page On page for the key ratios are net interest margin decline 20 basis points and this is due to concentrated effort together additional additional liquidity part of that was were formed by liquidity concerns this summer when we saw significant outflows from the bank. Secondly, our subsidiary Moneta Building Society or Moneta Stavební Spořitelná is under legislative threat as the government is likely to withdraw support of the interest rate subsidies. Hence, we wanted to build additional liquidity buffer should that business be impacted by the tax policy or rather by the consolidation of public finance in Czech Republic. And today it is confirmed that is likely to take place on productivity, cost of Cost to income ratio improved to a level of 46%. We also exceeded our expectations on the minimum return on tangible equity target. We came in at 18.7% for the full year 2022. Loan to deposit ratio vastly improved to a level of 80%. At some points we were operating the bank with this indicator at level of 94 to 95%. So this is a significant improvement of liquidity position of the bank. And on capital, through MREL issuance and through optimization, we reach 18%. If we turn page to key trends, I've already commented on the improved liquidity. We raised all in all about 49 billion and decreased wholesale cost of funding by replacing it with retail deposits. Capital and real requirement. We fulfilled the requirement that what we believe is a palatable cost. And additionally, we optimized our ways and used some exceptions in the regulations to improve the overall capital ratio. Apart from that, we have focused and will continue to focus on repricing of the loan book. Last year, with respect to the yield on the loan book, we added 50 basis points and we expect at minimum same performance this year, gradually improving. the NII. And with respect to dividend distribution, we exceed the guidance quite significantly and we intend to propose eight crowns per share. This is subject to regulatory acquiescence. We have to file some documents with the regulator in order to receive Go Ahead. And second milestone is the shareholder approval on which is currently planned for 25th of April. If you look at the operating platform of the bank on page six, With respect to branches, we remain at unchanged position of 153 units. Nonetheless, during the restructuring discussions that took place in the bank in the second half of the year, we've decided to exit 14 locations which are peripheral to both distribution and customer service. Hence, we plan that this figure or footprint of the bank will change 240 by the end of first quarter. Additionally, we've entered, as you know, into a shared infrastructure agreement with Commerční banka. Hence, our ATM footprint was enlarged to 1400, more than 1400 ATMs. By the end of first quarter, This year, we shall increase the footprint to more than 2,000 machines, as we have attracted into disagreement AirBank and Unicredit Bank. With respect to employment, we ended the year with 2,700, well, shy one, FTEs. By the end of first quarter, we will come near to our target of 2,500 FTEs as to reflect current business conditions and also the continued drive to achieve higher productivity in the bank. And this will help us in the current year to offset inflationary pressures that we face with respect to our cost base. With respect to total customers of Moneta, we exceeded 1.5 million threshold on gross basis. The bank attracted 170,000 new customers, which is roughly double the performance of previous years. And on our digital platform, we continue to enjoy fairly strong success, namely through the integrated mobile banking platform called SmartBanka, where we exceeded 800,000 users. And I'll come back to it in a minute. Let me comment on the operating environment in the Czech Republic. So turning to page eight, if you look at the GDP expectation, this comes in at 2.5%. Nonetheless, we believe that Czech Republic has entered already technical recession, but the latest reported numbers show 30 basis points decline of the GDP. This, however, so far has not translated itself into higher unemployment, which remains at low level. Nonetheless, the country has a significant structural deficit of public finance and continue to have High deficits for past three years in the current year. The reported number is in excess of 360 billion. The current year 2023, the deficit is supposed to decrease to below 300 billion crowns and the government as of today announced likely changes to real estate tax. Withdrawal of support of the building saving societies and additional tax related measures. So the liquidity gathering exercise that we have endeavored in the second half of the year had proven to be useful. as we will face difficult situation in our subsidiary. And I would like to remind that 10% of our funding comes from Moneta Stavební Spožitelná or Moneta Building Society. If we look at page nine, here we cover inflation, its causes and impact on interest rates. So if you look at the inflation, this is estimated to come in at 15.8%. The chief contributors to inflation are obviously energy prices, which are translating itself into also higher food prices and certain services are getting more more expected. more expensive. With respect to Czech National Bank and the key rates, we have seen in the past two years nine interest rate hikes. The key rate is at 7% and it seems to be held at this level as the Czech National Bank had a policy meeting yesterday and left the rates unchanged. We also illustrate the swap and bond yield curve. My comment here is that if you look at weekly volatility, it has been significant increasing actually during third and fourth quarter where the rates are changing by approximately 20 basis points each week. We have seen weeks where the rates were bouncing 40 to 50 basis points. So the environment is significantly different from what we've experienced in the last five years. Let me provide you also with a quick update on the banking market and Moneta. performance against such. On page 11, we look at the relevant deposit market, which grew at 7% to 5.6 trillion crowns. Moneta vastly outperformed this growth. We have posted growth in excess of 17%. The most notable growth and actually focus of our strategy was to diversify the deposit base into retail deposits. Here we grew at 18% albeit at significant cost and negative impact to the to the NII of the bank. Nonetheless, we've also enjoyed strong growth on the commercial deposit side where rounded up the market grew 10% and we posted growth of 14 and a half. Turning the page to page 12, Let me walk you through the development of the relevant lending market. The lending market expanded at 5.6% to 3.7 trillion crowns. This is the first year where our growth in the loan book, the overall loan book is lower than the market. We post 4.8%. 4.8% growth. We match the market growth on retail. Nonetheless, we have half the market growth on commercial. And this is due to the fact that the lending to commercial entities in Czech Republic is very quickly converting itself to Euro-based loans. Moneta is Czech Crown-based bank. We have not easy access to funding. on that front. And secondly, our prudential policy seeks to avoid underwriting foreign currency loans for entities income matched income in that currency. So we are at a relative disadvantage due to these aspects to underwriting such such lending. A brief comment on digital distribution and service that we provide. If you look at page 14, We walk you through the five year development of our digital digital platforms. And we also try to estimate the impact of various features that we have added over those years. Here I would like to comment that we believe to be at the vanguard of providing digital services to our customers. And that is substantiated on page 15, where we believe to have deliver satisfactory and in some aspects excellent performance. If you look at on the right side of the chart, the excellent performance is on current account and savings account distribution where we enjoy 60 and 35% overall proportion of our product origination is attributable to digital channels. So that's one factor. Second factor is that the distribution of current accounts came in at 50,000 units. This is more than double the previous year. If you look at our lending side, We continue to have growth. We've had 6% growth in digital distribution of consumer loans. This is predominantly done to existing customers of the bank, and we underwrote 6.9 billion. reaching nearly 50% of the overall production being done through digital. Likewise, on small business, the growth of volume constitutes 8.6% year on year, and nearly a quarter of the production to self-employed and small companies is now conducted. through our digital channels. On page 16, we illustrate the growth in the digital platforms where I would focus your attention on the mobile banking platform, which grew nearly 50%. This is now the penetration of the core customer base increased from 39 to 55% of our customers now have downloaded the utility. And if you look at the transaction intensity, it is soon going to be double of what we do on the internet banks. So again, investment into wide and deep functionality of the application clearly bears fruit. On page 17, just very quickly, Our card business and digitization of cards. If you look at growth in card transactions, they are in excess of 22%, which is, we believe, satisfactory performance in its own right. And additionally, if you look at cards that have been digitized, the transactions are growing at more than 80%. So in the midterm, we would like to... We would like to tokenize all cards that we issue and gradually discontinue issuance of plastic, improving ESG or green posture of the bank. And with that comment, I will pause here and hand over to my colleague, Jan Freček, who will walk you through details of our financial performance.

Jan, go ahead. Thank you. Good morning, ladies and gentlemen. I am now on page 19 and will continue with the profit and loss statement. Let me repeat the key financials. Moneta Group reported net income of 5.2 billion, EPS of 10.2 crowns on revenue of 12.1 billion, and delivered return on tangible equity of 18.7%. Revenue growth of 8.5% is driven by higher net interest income, up by 8.2%, accompanied by net fee and commission income up by 12.1%. Cost base of 5.6 billion was kept broadly stable year on year, despite the double digit inflation in the economy. On the cost of risk line, we report 90 million charge against nearly 700 million last year. This favorable result was achieved through solid loan portfolio quality, low delinquencies, and NPL portfolio reduction. More detail will be provided by Norman in the risk section. On page 20, we continue with NII. Firstly, lending interest income in the top right corner is up by half a billion, or 21%, achieved through loan book expansion of 5.6%, accompanied by improved loan portfolio yield by 40 basis points. Treasury income which is reported below, went up by more than 1 billion, supported by the base rate increase by three and a quarter percentage points during the last 12 months. Higher treasury income offset nearly two thirds of the 1.8 billion increase of the cost of deposits. The growth of cost of deposits is a function of the 17% deposit base expansion accompanied by repricing of significant portion of the balance to the current market level. The inflow of new deposits improve our liquidity position and support also our profitability through positive margin analyzed on placing excess liquidity in the central bank. Nonetheless, increased cost of funding led to NIM compression to 2.3% in Q4 against 2.6% reported for the whole year. This is in line with our outlook provided during the third quarter earnings call. Prospectively, we expect the NIM to reach a bottom in the first half of the year at 2.1%, and from the third quarter should start picking up, subject to our ability to reprice deposits down. Reported NIM for the Q124 should be back at 2.7%. On the next page, we continue with the development of Net Fee and Commission income. The 19% growth is driven by higher commissions for the third-party product distribution, together with the higher transactional activity of our customers. On top of that, net fee income reported in Q4 was supported by extraordinary bonuses from our partners. The most significant bonus was linked to completed migration of our payment card portfolio to Visa. The income side is further broken down into categories on the next page. The chart on the left-hand side reports transactional fee income growth of nearly 18%, accompanied by pickups in servicing fees, while predominantly early termination fees are below last year due to limited space for opportunistic refinancing. Third-party commissions on the right-hand side reached $322 million against $283 million last year, Nearly 14% growth was achieved through solid performance in both distributed product categories. Further detail is provided on the next two pages. Income from distribution of insurance policies is analyzed on page 23. The split indicates that about half of the delivered income is generated by distribution of payment protection insurance linked to our lending franchise. Besides that, the main increase year-on-year was achieved in pension insurance distribution, which nearly quadrupled year-on-year. And if you flip the page, we have asset management overview. The income growth of 28% was delivered through outstanding balance expansion by more than 3% and further supported by updated pricing policy. Now we can move forward to the cost section starting on page 25. On the left-hand side, we can collaborate on the year-on-year development. Overall cost base was kept broadly stable against 2021, as well as personal and admin cost categories. A moderate growth is reported in regulatory charges and DNA. Cost-to-income ratio was pushed down to 46%. This outcome required a lot of focus and cost discipline across the bank, offsetting the overall inflationary pressure. Quarterly development is further analyzed on the next two pages. Hence, let me go directly on page 26. On the right-hand side, we report quarterly development of the employment capacity. At the end of the last year, we reported 2,700 FTEs, which is 9.5%. for 282 below last year's numbers. Productivity improvement resulting from the FTE's reduction was critical to compensate for the average salary increase by 7.8% year-on-year and to maintain stability in personal costs. Quarterly development on the left-hand side also illustrates the impact of the one-offs on reported results. These one-offs mainly consist of severance payments and managerial performance bonuses that we typically accrue in the last quarter of the year. And on the next page, we conclude this section with the remaining two cost categories. In the chart on the left, we report administrative expenses adjusted for M&A-related costs that were reimbursed. Almost 17% growth year on year is attributable to higher energy bills together with other facilities related expenditures accompanied by higher cost of cash transportation. Depreciation and amortization charge was up by 7.5% in the last quarter year on year and by 4.4% on full year basis due to ongoing investments into the digital capability and IT infrastructure. With that, let me hand over to Andrew Gabel, who will continue with the balance sheet section. Thank you.