Moneta Money Bk

Dear ladies and gentlemen, welcome to the conference call of Moneta Money Bank regarding 3Q2023 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 listen-only mode. Today's speakers are Mr. Thomas Sperney, Mr. Carl Norman Fecht, Mr. Jan Frischek, Mr. Jan Novotny, and Mr. Andrew Gerber. May I now hand over to Mr. Sperney, who will lead you through the conference call. Sir, please go ahead.

Good morning, ladies and gentlemen. I have the pleasure of opening today's conference call. We begin with summary of the bank's performance. First, I will cover the performance of the third quarter 2023. So this is page two. During the quarter, we generated net profit of nearly 1.5 billion. We consider that good performance amidst the operating environment and circumstances. Perhaps more important is the fact that if you look at our operating income, The operating income category grew by 5% quarter on quarter. Here I would like to comment the fact that on a net interest income, which is probably the most watched category of income, we have managed to both meet and exceed the forecast that we for the quarterly basis. On net fees and commissions, we've had a good run. The category is growing at around 3% quarter on quarter and other income is also quite satisfactory. On the other hand, if you look at our operating cost, it has decreased by 7% on quarterly basis, and the cost of risk is within expectations of the management. Now, if we turn to page three, we look at the year-to-date result. On the net profit basis, year to date, Moneta generated 4 billion of net profit. Albeit, this is slightly lower than the previous year. It's 3.7% lower. We consider this, again, a good result, especially in view of the original guidance and in view of the upgraded guidance. Again, if you look at the key categories on operating income, we see stability. That number comes 0.7% lower than last year, but we consider this actually an excellent, excellent result. If you look at the operating expenses, they're 1% higher. So we consider that stable. And this is due to the fact that the bank suffered significantly higher mandatory regulatory contributions. Cost of risk at 172 million negative. Again, this is below the original expectations and according to expectations that we had. at the end of the second quarter. The year-to-year comparison is obviously colored by the fact that in 2022, we still had benefits from upgrading COVID-related exposures, hence we released provisions. The provisioning line is now negative. On page four, we highlight key developments of deposits and loans. Our deposit base reached 393 billion. This constitutes annual growth of 20, nearly 23%. This is in line with our strategy to expand both the volume of funding that the bank commands and to attract new customers into the franchise. and I think on both dimensions we were successful as the bank managed to attract 154,000 new customers. On the loan portfolio, the performance is according to our operating plan where we sought and targeted stability in the loan portfolio. We had 270 billion and middle growth with a slightly changing composition of the loan book, more towards small business and SME. As a benefit of the larger customer base, we have an excellent liquidity. This is observable from the relevant ratios. and lastly part of the free liquidity had been invested into government bonds as we enjoy on government bonds tax exempt income which helps us to manage the amongst other the tax line. Then if we turn to page five, a couple of brief comments with respect to the operating platform. As you see, we operate 140 branches. We have made a decision to close additional six units and we will achieve that by the end of the year or in early first quarter 2024. Our cost performance had been greatly enhanced by the fact that we adjusted the level of resources in the bank. We currently employ 2,533 full-time equivalents and this is in line with the target of restructuring measures that were enacted in September 2022 and targeted 2500 level of employment. We also enjoy cost efficiency from ATMs as we have entered into and continue to be in alliance with three of our competitors. So the reach of the bank and the cost behind the reach is managed with respect to ATMs And lastly, we have continued success in attracting new users and customers into the digital platform. Andrew will speak of that. And you can see a notable shift of growth into the smart bank mobile banking application of the bank. Now, if you bear with me for a couple more minutes, I will briefly cover our view of the macroeconomic environment. So we are on page seven. If you look at the GDP growth of Czech Republic, it actually is negative for two consecutive quarters. We are in a recessionary environment and the expectation for this year on the overall growth is nil. So the picture is not particularly optimistic nonetheless. Looking at unemployment, the unemployment has been quite stable. The last published figure is 2.6. Expectation by the end of the year is 2.7. I am a bit more optimistic, personally, because the labor market still is quiet. In many industries, people are looking for people and are not able to staff the positions, and this goes across the board pretty much. So I am a bit more optimistic on the unemployment by the end of the year. On government debt, we see continually increasing indebtedness. However, there seem to be a glimmer of light at the end of that tunnel as the government was able to pass so-called consolidation package and this reflects into the expected public deficit for 2024. For 2023, the expectation is negative 295 billion. Next year, the expectation is at level of 255 billion. So there will be a relatively material decrease of the deficit. The expectation is that one quarter of the decrease will come from high receipts to the treasury and three quarters of the delta will be the result. of implementation of the consolidation package. What is also important is that this week the parliament approved the main lines of public budgets for 2024. So now the discussion will not be about the size of the budget, but rather allocation of the public finance amongst the various ministries. On page eight, we cover inflation and interest rates. If you look at inflation, the monthly inflation, Now, the year to year inflation is still double digit. We expect that October inflation will have some negative development due to specifics related to 2022, but also due to weakening of the Czech crown against the major pair of currencies and this will probably reflect itself. On the two-week key rate, there's nothing to report other than Central Bank recently made a statement that the Board of Governors will discuss strategy of decrease of the rates so our in-house Expectation or rather a prayer is that the rates will be cut early next year, not during this year because it would have some negative impact on our 2023 guidance, but we believe that we can manage that. Contributors to inflation, housing and energy and services. This is obvious that the pressure remains there and on the swaps and bond yields would be observed on the medium to long end of the curve volatility, which is persisting at the level of 15 to 30 basis points. on weekly basis accompanied by weakening of the local currency. With that I will ask Andrew to give you a view on evolution of the digital and physical distribution platforms of the bank. Thank you for your attention.

Thank you Tomáš and good morning ladies and gentlemen. So in the next pages, we'll go through a brief update on the digital and physical distribution capabilities of the bank, starting on page 10, where you can see the development of the digital platforms. Mobile banking continues to grow rapidly. We attracted 199,000 new users in 2023, and the mobile banking channel is becoming the predominant channel, processing 75% of all transactions. Overall, the growth in digital users was 8.4% year over year, reaching 1.3 million. And this was driven by a combination of our deposit gathering activities and a deliberate effort by the bank to push more of our clients into our mobile banking applications. At the same time, on the right hand side of the page, you can see the development of digital transactions, which grew 18.6% year over year. And this is double the rate, more than double the rate of growth in the number of users, which I think speaks to the effectiveness of our digital strategy in engaging customers and increasing transaction activity. Moving to page 11, you can see that online plays an increasingly important role in deposit gathering. In the top right chart, you can see the development of balances on deposits originated online, which grew 48.6% year over year to 110.7 billion. and below that you can see that the online originated deposits now represent 30% of the overall deposit base. Of course, branches continue to play an important role in deposit gathering and also grew 19.3% year over year with balances of 256.8 billion. Going on to page 12, we look at the number of visits and payment transactions in each of the channels. Overall, the number of visits to branches continues to decline, down 13.4% year over year, whilst the number of visits online increased 22.3%. And likewise, for payment transactions, we see branch-based payment transactions decreasing 16.6%, whereas online continues to grow up 17.3%, and is really now accounting for the vast majority of all payment transactions. On page 13, we look at the loan origination where you can see that in a tighter credit environment, the online distribution has slowed more rapidly than branch-based. Overall, branch new lending units were up 0.8%, whereas in the online channel, we declined 10.4%. And I think this reflects the different nature of the lending that we're doing in each of the channels where the online tends to be Smaller loans taken for shorter duration, and this type of lending seems to have been more dramatically impacted by the change in the credit environment. On the lower half of the page, at the same time, if you look at the volume, you look at the lending development in volume terms, you see the picture's a little bit more balanced, where the branch-based lending volume was down 0.8%, whilst the online was down 0.9%. More balanced picture there when you look at it in terms of volumes. Going on to page 14, we look at the cash handling through the branch network and ATMs. Overall, the volume of cash withdrawals is decreasing, driven by branches down 17.8%. 17.8% and partially compensated by ATM withdrawals, which grew 4.5%, but from a much lower base. And likewise, with respect to deposits of branches, they decreased 23.7%. And again, partially offset by growth in ATM deposits, which are up 27.2%, albeit again from a very low base. And then overall, as Tomasz mentioned originally, as Tomasz mentioned earlier, as we see the changing customer behavior, we're reviewing the operating platform of the bank and we decreased the branch network by 14 branches year over year and correspondingly the staffing of the front office positions by 5.6% as we continue to adjust the operating base of the bank to reflect the changing customer behavior. So overall, I think our digital channels continue to develop strongly, especially in deposit gathering. In lending, we see a more muted development, but we think this will change as the credit environment changes. And we continue to manage the network tightly in order to ensure efficiency and good customer service. So with that, I will hand over to Jan Freecek, who will take you through the P&L section.