Moneta Money Bk

Hello ladies and gentlemen and welcome to the conference call of Moneta Money Bank regarding the first half 2024 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. Today's speakers are Mr Thomas Spawney, Mr Karl Norman Fecht and Mr Jan Fritschek. May I now hand you over to Mr Spawney who will lead you through the conference call. Please go ahead.

Good morning. Once again, I have the pleasure to introduce our results. I will start with synthesis of the results which are on page two of our presentation. During the first semester of this year, we have delivered net profit of 2.7 billion. We consider this number to be satisfactory from absolute point of view. and from growth compared to first semester of 2023. The result translates into 20% return, intangible equity. We were able to deliver this result mainly against growth of the operating line of the bank. which came in at 6.2 billion crowns, increasing 6%. We also have been able to grow the balance sheet of the bank, reaching 483 billion. This constitutes growth of 14%. The growth is mainly accomplished through increase of the funding base of the bank, which grew by 14%. and most importantly, the bank returned back to growth on the loan portfolio. It might seem here very low, but year to date growth stands at 3% on the loan book. Now turning away from the bank, a little bit about the operating environment in Czech Republic. So please turn to page four. Czech Republic from GDP growth perspective has returned to marginal growth. As you can see, the The growth is at level of 0.3%, and we hope that the growth will solidify throughout the rest of the year. Unemployment, which is a very important metric for credit quality of the bank, remains low. Nonetheless, we can observe that there is a slight increase in the unemployment figure. On the public deficit front, the government is seeking to stabilize the deficit and decrease it. This is evident from the graph that we present with the number of 252 billion, being the target of the maximum deficit currently. The deficit stands at 178 billion. However, the number is likely to somewhat decrease throughout the second semester of the year. Then if we turn to page five, we have inflation. Here we have inflation and the interest rate environment. Inflation is rapidly decreasing, which is a good news. This is translating itself into the monetary policy. As you can observe here, the Czech National Bank cut the rates five times and we currently stand with the key rate at 475. This is slightly above our expectations in the operating plan. Nonetheless, if you look at the interstate market, the yield curve has flattened considerably, and it seems to be stabilizing. Nonetheless, the yield curve, especially on the medium to long term, is higher than what were the expectations of the market at the end of previous year. Turning to check crown on page six, the currency is weakening against both Euro and the dollar. This is due, we think it's due to the narrowing interest rate differential on the crown, which is for the dollar, in case of the dollar, the differential is negative. If we turn into our performance against the relevant markets of deposits and loans, starting with deposits, we have overperformed the market growth by nearly three times in terms of deposit gatherings. Our growth, based on these numbers, 14.7%. This is measured until May, as we don't have the relevant number for June as of today. We have had double the performance in the retail and we've accomplished significant success in gathering commercial deposits and this is due to the fact that we run a very successful campaign targeting cooperatives and condominiums accounts with an attractive product and that improves our ability to gather sticky, stable funding from that realm. Turning page to our performance against the relevant lending market. You can see that we grew less than 1%. This is impacted by the fact that during 2023, we have significantly changed the lending criteria, made them conservative. Nonetheless, throughout the first semester, we observed significant growth or relatively significant growth of 3%. and we've been growing the same rate at the same rate as the commercial market on the commercial portfolio and we will come to the details of lending activity substantiating that we have significant improvement in that later on in the presentation. Now, let me comment on our operating platform, and I would ask you to turn your attention to page 10. If you look at Moneta's operating platform, it consists of three pillars, digital, brick and mortar, network, and contact center. If we examine the key numbers, the bank is stable in terms of branch network, albeit we've decreased it somewhat. We have continuous solid growth on digital platform users. We keep stable employment against the comparable period of last year, and we enjoy structured advantage of a shared ATM network where we cooperate with Commerční banka, Airbank and Unicredit and throughout the second semester we will actually enable within this network deposit taking functions on nearly 800 ATMs and this will help us to manage transactional costs in the bank. Number of clients stable, growing at a rate of 2.8% and the growth in the customer base slowed down as we are not able currently to provide as attractive deposit offers as we were able to do in late 2022 and throughout 2023. If you look at the digital platform, overall digital is really gaining speed and importance in the bank's operations. On page 11, we show you that we have on a daily basis, nearly 700,000 touch points with customers. This is growing at 14% rate, whilst the digital users are growing at rounded up 10% growth. So this shows that the platform, amongst other, enables our customers to perform more transactions and to perform also more self-service operations. The self-service operations at more than 11 million transactions in the first six months growing more than 25%. This obviously helps us to start thinking about the branch network again and on payment transactions we also have solid growth of 15%. Equally importantly, with respect to lending activity, we've received more than 170,000 loan applications through the platform, which is rounded up 34% growth year on year. The overall sales transactions are growing at 5%. You can claim that this is a slow growth, but I would argue that it is not because throughout 23 and late Significant new account openings due to the attractive rates on certain products. This was the activity increased quite significantly there and obviously with falling rates, we don't have that phenomena. On page 12, we show you how mobile banking platform gains and continues to gain dominance in both transactions and platform users. So the internet banking platform that we have is more and more becoming Utility for small businesses and commercial customers. And we will aim for the development and management of the platform on those relevant segments. On page 13, illustration of the importance of the digital platform in terms of units. If you look at, for instance, at an important category, which is unsecured lending in terms of units, we have more than 70% of applications taken through the digital platform and on the background of pre-approved credits that we make available to our customers. From volume perspective, the consumer lending on digital platform is about 50%. And we see progress, I would claim, against all the product categories, the simpler product, the higher penetration through the digital and the more complex products. Obviously, we have to distribute through the network and its specialized sales forces. On page 14, brief commentary on the branch network. As I have said, the footprint remains pretty much stable. We have 1,100 full-time equivalent employees, slight decrease against the previous year. What is the most notable here is the decreasing intensity of cash transactions put through. The branch network increases with the decrease is quite substantial. It's more than 20%. And if you think about customer touch points, we have two metrics here, about 400,000 customers. of the bank use actively the network. This is 10% decrease year on year. And this is an expected trend. And if you look at the branch visits at 850,000 during the first semester, we effectively are close to that number or are reaching, will reach that number on a daily basis through the digital through the digital touch points. So the change becomes very tangible and we will re-evaluate the network accordingly. If you look at page 15, a little bit on the contact center which had processed in the first semester more than 400,000 inbound inquiries and 85,000 email and digital media and social media inquiries into the bank. Both numbers are decreasing fairly rapidly and this is again testifying that the digital and our effort on development of self service capabilities is working because the traffic is moving into the digital channels. We have stable, stable performance on quality of customer service in terms of customers served and call abandon rate. And lastly, the contact center is delivering a very solid growth on distribution of third party insurance products. During the first semester, it accomplished 70 million in sales. This is measured in lifetime value of those products, which is nearly 25% growth year on year. So this is the opening of the presentation, 2.7 billion of profit, 20% return on tangible equity. And from a P&L perspective, my colleague, Mr. Fricek, will walk you through the individual lines of our P&L.

Thank you, Thomas. Good morning, ladies and gentlemen. I am now on page 17 and will continue with the profit and loss statement. In the first half of the year, Moneta delivered net profit of 2.7 billion, which represents 5.3 crowns per share and return on tangible equity of 20%. Operating income stood at 6.2 billion for the first six months, and this is by 6% better result than a year ago, mostly driven by higher commission income amid continuing success in distribution of wealth management and insurance products. On the cost side, we managed to reduce operating expenses by 2.7% and 2.8 billion for the first half of the year is in line with our full year target of less than 5.8 billion. Cost of risk remain benign at 237 million or 18 basis points of the loan portfolio, which is nearly at the midpoint of our guided range, 10 to 30 basis points. So altogether, our net profit increased by more than 9% year on year or 226 million. And with that, we remain on track to meet or potentially exceed the full year minimum target of 5.2 billion. On page 18, we provide further detail on net interest income. On the left, we report 2.6% decrease year on year. This is predominantly due to lower to weak repo rate. So far, not fully compensated by repricing on the deposit side. However, as you can see, our repricing effort resulted in a turnaround of the quarterly trend in the second quarter. On the right, we report increasing net interest income from lending by 255 million year-on-year. This was supported by higher portfolio yield as well as expanding clone portfolio since the beginning of the year. Below that, net interest income from treasury operations is up year-on-year as well by 191 million. However, reversed trend in the second quarter is a function of decreasing two-week report. And finally, interest expense on customer deposits started to decline in the second quarter as a result of several repricing actions on the deposit base. Moving forward on page 19, we report net fee and commission income, which is up by 13.4% year on year. And this was chiefly achieved by improved performance in distribution of wealth management and insurance products. More detail to that I will provide on the following two pages. If I start on page 20 with the wealth management products distribution on the left, we report nearly 55% growth of the outstanding amount of distributed wealth management products to 48.7 billion reported at the end of June. This significant growth was achieved based on 11 and a 1.5 billion of volume sold in the first six months. And as you can see on the right, this is by 125% more than we achieved in the comparable period a year ago. Strong performance in the distribution together with increased opening fee in the second quarter resulted in 127% increase of our commission income to 333 million generated in the first half of the year. And on page 21, we continue with the insurance products distribution, which is our second key pillar of the commission income growth strategy. We successfully continued in distribution of life insurance with annual premium equivalent up by 25% year on year. and the chart below shows the overall commission income growth by 4.5% year on year to 611 million delivered in the first half of the year. The growth was supported by improved performance across all product categories and that more than offset the decline of the bonuses that we received from our main partners. The amount of bonuses reported in 2023 was supported by a significant one of bonus from NN for granted exclusivity as we disclosed already. On page 22, we newly added the detail of our net income from financial operations, which increased by nearly 40% year-on-year and reached 514 million in the first six months. And this growth was mainly driven by bond sale gain of 59 million realized in the first quarter, together with positive revaluation of derivatives. FX margin reached 351 and is up by 2% year-on-year, supported by higher margin realized on client FX conversions in mobile application, partially offset by lower result on cash FX conversions at branches. And we complete this section with operating expenses reported on page 23. As mentioned before, we managed to reduce the cost base by 2.7% year on year, predominantly due to lower regulatory charges by 91 million or 30% and also savings realized in other two categories, DNA and admin costs by 4.9% or 3.5% respectively. On the other hand, we incur the higher personal cost by 6.1%, and this is driven predominantly by higher sales incentives, reflecting improved performance in the front office and also increase in average salary amid persisting inflation on the labor market. With that, let me hand over back to Tomas.