Moneta Money Bk

Dear ladies and gentlemen, welcome to the conference call of Moneta Money Bank regarding full year 2023 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 Spornley, Mr. Carl Norman Fecht, Mr. Jan Frischet, and Mr. Andrew Gerber. Good morning, ladies and gentlemen. I have the pleasure

to open today presentation of our 2023 result and coverage of the fourth quarter of the previous year. If I may ask you to turn attention to page number two, where we have the key highlights of the full year. of the full year. Last year, Moneta generated net profit of 5.2 billion crowns. We have slight improvement or stability if you will. Against the previous year, we performed at a level of 0.3% better. The net result translates into earnings per share of 10.2 crowns per share. And on the basis of the result, as well as strong capital position of the bank, we intend to propose the general shareholder meeting dividend distribution of nine crowns per share. Nine crowns per share constitutes more than 12% increase against the dividend paid with respect to 2022. Additionally to that, we had relatively a relatively good year if you look at the size of the bank. The organic growth brought expansion of more than 18% with respect to the overall asset base of the bank. Our tactical posture on the market was very much geared towards deposit gathering. and hence the funding base of the bank expanded by 20% to the level and reached the level of 415 billion. As anticipated in February, 2023, we were concerned regarding economic contraction in the Czech Republic. We tightened credit standards, And we forecasted that the portfolio will be kept, the lending portfolio will be kept at a stable level, which is the reality we came back with, 263 billion in performing loans or contraction of 2.1%. If we then look at page three very briefly, last year in February 23, we published guidance. Here we have the results against that guidance. We believe we have met it. in all categories. We could discuss that the operating expense in granular view is 5732. So there's a slight overrun against the minimum target nonetheless, given the circumstances of last year. namely the inflationary pressures, we think this is a satisfactory result. With respect to return on tangible equity, we deliver 18%, which is above the target that we have committed to. Now, if I can turn attention to the operating environment brief synthesis on page five, we have a quarterly view of the GDP both in absolute and relative terms. Overall, the year The estimated contraction is at level of 40 basis points, which is somewhat below what we had expected for the year. We thought the contraction would be more significant. If you look at the quarterly view, The fourth quarter came in at 20 basis contraction for the upcoming year. We expect that the GDP will grow at 1.5%. And this is contained in the guidance assumptions that we will cover later. If we look at the government debt and public deficit, you see third consecutive year of public deficit coming down from very high level at COVID and post COVID period. So the consolidation of public finance is ongoing and it had also been reflected in so-called consolidation package. which the current government was able to pass through legislators. The economy also continues to enjoy nearly full employment based on the Eurostat methodology. The unemployment level is at 2.7%. Therefore, We are slightly skeptical with respect to the growth capacity of the Czech economy in the upcoming year. On page six, We provide a brief summary of inflation and interest rate environment. If you look at last year's inflation, double digit figure of nearly 11% or 10.7 to be specific, with the December inflation reaching nearly 7% or 6.9. So clearly the message is positive. The inflation is coming down. It should come down quite considerably throughout 2024. In the table below, we show you the key contributors to inflation on both annual and December. December basis. So the positive news here is that namely food and beverages price increases have been arrested and are abating. We still face housing and energy increase in December, which is not surprising. I would say the positive expectations coupled with the decrease of inflation namely throughout the fourth quarter resulted in market optimism with respect to medium and long-term rates. This is visible from the expectations embedded in the swap market. If you look at the graph, the gray line shows where the expectations were at the end of 22 and the blue line shows the decline in interest rate expectations which we faced. which we face currently and equally importantly the central bank cut the key two week rate by 25 basis points at the end of at the end of December. We expect another cut in the upcoming meeting of the Central Bank on 8th of February. And we estimate that the cut could be 50, 50 basis points this time around. Now, if we turn page to page seven, brief view of the relevant banking market. If you look at the deposit market, it reached 6.4 trillion crowns and expanded throughout the year by nearly 15%. Moneta overperformed in terms of growth, the market rate, namely being successful in deposit gathering on the retail front, where our performance came in at above 80%. 22%, which is almost three times the market growth. We also posted fairly solid performance in our view on the commercial deposit market. Even though we do not have large corporate customers, we managed to grow at 11%, which is roughly one half of the overall market growth. Now, if we turn page, we look at the lending market. Interestingly, despite the relatively negative performance of the economy, which we can call stagnation, I suppose, the lending market grew at 6.4% and reached a level of nearly 4 trillion crowns. Moneta in this respect is a laggard. We contracted the retail book at 3.8% against the market growth due to our due to our very defensive pro-cyclical stance based on our expectations around the economy will perform. Nonetheless, on the commercial side of things, we managed to post a slight growth, which is driven by focusing on small business and high value products in terms of margin both margin and return on equity and this will be visible from later part of the of the presentation so with this respect I will turn over to Andrew Gerber who will summarize for you evolution of our digital and branch-based operating platform

Thank you so much and good morning, ladies and gentlemen. So moving to page 10, I'll start with an overview of the digital platform, which has become a critical distribution and service channel for the bank. Overall, 99% of retail wire transfer transactions are conducted via the digital platform. In 2023, we delivered 64.7 million payment transactions through the channel, up 17.7% year over year. And in terms of servicing, 18.7 million servicing transactions went through the digital platform, up 41.2% year over year, which reflects our continuous build-out of the servicing capability within the digital platform. In terms of sales transactions, the digital platform delivered 670,000 unit sales transactions. This was stable year over year, which reflected slightly weaker performance in terms of lending, which, as Tomasz described, was the result of our more circumspect positioning with respect to the lending market. In terms of users, the digital platform stands at 1.4 million users, which is up 12.8% year over year. We have available for sale on the platform 29 products, and this we continue to build out as we go. And the mobile banking platform continues to be regarded as one of the best platforms in the market with 45 awards receipts since 2016. Moving to page 11, you can see that the digital channels become a key enabler for product sales and a strong complement to the branch network. There are a number of key areas where the digital platform is now the primary sales channel. And there are a number of areas where we continue to make progress. I think the one area that's not on here is mortgages where branches continue to play an important role. But even there, we're seeing our online platforms start to gain significant traction. Going on to page 12, you can see that the digital platform users grew almost 13% year over year. This was driven by rapid growth in mobile banking. What we see is that the internet banking platform as a standalone platform is declining, and more and more users are either using mobile exclusively or more frequently using a computer. of internet banking. And this is evident on the right hand side of the page when you look at the transactions conducted through the digital platform, which grew 17.5% year over year with mobile now accounting for 78%. So we continue to see shift in actual transaction volume into the mobile platform. Moving to page 13, we look at some of the achievements in 23 and the priorities for 24. I'll just touch on a few, and I think the most important in a way is in the title, which is that the digital platform attracted 47,000 new to bank clients. We've been very successful with this platform in the past as a cross-sell platform for existing clients, but it's always been our objective that it should also play a role in acquisition of new clients. And in 23, 35% of the new clients acquired for the bank came through the digital platform, which I think shows the progress we're making there. In terms of other highlights in credit distribution, We had 110% growth of fully online distribution of commercial credit cards, which I think is a great success. And it demonstrates that we now have found a proposition and a distribution platform for credit cards that really works for distributing them online. And this is something we will continue into 2024 and have expanded into the retail segment as well. And I think no presentation these days is complete without some reference to AI. So here I would say we're kind of at the beginning, but we did run some pilots last year. Most importantly, we are experimenting with and AI as a way of streamlining operational processes within the bank. And we ran a pilot on screening of investment calls, which we have an obligation, a regulatory obligation to do. And this looks relatively promising. So we're optimistic that there are opportunities to streamline the operation using new technologies. So looking forward to 24, I think, naturally, deposit repricing is a critical area for us. And here we're focused on personalization and automation of retention. This is really developing more sophisticated pricing strategies for the deposit portfolio as we reprice it. We would like to transform our online currency exchange into a full 24-7 service. in 23 with extended opening hours on the service with pretty good results. So we think there's an opportunity there. And finally, in the context of our overall distribution strategy, I'll mention the omni-channel mortgage platform where What we're planning to do is to take the online platform which we've developed and which has been fairly successful and adapt that in order to allow it to be used also for branch distribution with a view to allowing clients to move seamlessly between the two channels. I think this is particularly important in light of our distribution strategy, where in the fourth quarter last year, we took the decision to step back from distributing through brokers who were particularly important for the mortgage market. And our ability now to get retail, to get the branch network and online working together will be critical to our strategy going forward. So on that note, moving to page 14, I'll briefly cover the branch network, which continues to play an important, however, decreasing or diminishing role in distribution and service for the bank. In terms of branch visits, we saw 1.1 million visits last year, down 5.1%. Cash transactions decreased 18.4% and other payment transactions down 8.5%. On the other hand, in terms of loan applications, we saw 382,000 loan applications via the branch network. This was growth of 7.5%. The number of branches ended the year at 134. This is down 19 units since the end of the previous year. And in terms of staff deployed at the branches, we had 1,143, a decrease of 6.5%. So hopefully that provides a reasonable overview of the operating platform of the bank. And with that, I will hand over to Jan Fricek, who will take you through the profit and loss development.