Moneta Money Bk

Dear ladies and gentlemen, welcome to the conference call of Moneta Money Bank regarding third quarter 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. Tomasz Sporny, Mr. Carl Norman Effect, Mr. Jan Briczek and Mr. Jan Novotny. May I now hand over to Mr. Sporny, who will lead you through the conference call. Sir, please go ahead.

Good morning, ladies and gentlemen. I have the pleasure of presenting yet another quarter. So if I can ask you to turn attention to page two, where we summarize key highlights of our performance. At the end of the third quarter, we generated year-to-date profit of 4.2 billion. The profit increased 6.6% on year-on-year basis. The net profit so far translates to return on tangible equity, which is nearly 20%. It's 19.8%, so we have a slight increase. in the return ratio. Majority of the result is driven by operating income performance, which increased by nearly 5% to a level of 9.5 billion. On the performance of the third quarter, we've also put together an outlook for the rest of the calendar year. And currently we are targeting not only affirming the guidance that we provided at the beginning of the year, but we increased the targeted net profit to 5.6 billion for the full year. From balance sheet perspective, our total assets reached $448 billion. This is an increase of nearly 9%. The loan portfolio remains stable. However, if you look at it in more detail and we will, you see that the lending activity is reinvigorated and we look with confidence towards the end of the year and towards 2025. The funding base of the bank increased substantially at the rate of 8.6% and reached at the end of the quarter 444 billion. Continuing on page three, we look at capital and some other important aspects. From capital perspective, we are at 19.2% capital adequacy ratio, which we consider sound and solid. With respect to excess capital over the OCR, we hold 7.2 billion of surplus capital. If you look at it from perspective of structure of the excess capital, 5.3 billion is against tier one and 1.9 billion is related to tier two. We've also improved the morale ratio of the bank on standalone basis. The ratio now stands at 28.1% and this was accomplished on the basis of morale bond issuance in the amount of 300 million euro. We issued the bond in early September. And lastly, We managed to decrease or the regulator decreased our pillar two requirement by 30 basis points to a level of 2%. Just from context of longer perspective, before the pandemic, we had 1.9. So this is also This also normalizes in time based on strong recurrent profitability based on solid capital position and large Surplus Capital. We've elected to propose three crowns per share extraordinary dividend, which should be decided upon in the upcoming general meeting, which will be held in late November. And if approved, the payout will then be before the end of this year. Turning to macroeconomic environment on page five. The economy is improving. However, the growth of the economy is substandard. If you look at the GDP growth in relative terms, we've had two quarters of growth coming from negative territory in the third quarter of 2023. The projection for this year is overall growth of 1.1%, which is probably a bridge too far, but we will certainly see at the end of the year. From perspective of Czech Republic's indebtedness, the ratio is relatively stable at 43.4, and the state budget deficit for this year is projected at 282 billion crowns. Currently, the deficit, as at the end of September, stands at 182 billion. For the next year, the Czech Parliament just approved the main, let's say, constraints of the public finance and the deficit should be at the level of 241 billion in 2025. And we continue to enjoy low unemployment, which obviously is good for for our business. Turning to page six, we look at inflation and interest rates. Inflation has been coming down, the reported number, 3.5% at the end of September. The full year should come in at the level of 2.6% for 2024. On the basis of declining inflation the central bank cut the rates seven times and currently the key rate stands at 425 basis points and you can see the impact of the cuts on short end of the yield curve in the graph below. Nonetheless, the governor of Czech National Bank warned that there are at least two factors that might impact the further cuts. One is being the absolute and relative size of the deficit and second, evolution of Inflation within the segment of services and the price increases there seem to continue throughout the current year. Now, how are we performing against the market? So we provide you with a brief view on page seven. This is our performance against the deposit market where Moneta produced growth of 7.1% against the market growth of 5.6%. I would call this broadly with the market the slight over performance in the retail and lagging somewhat lagging in the commercial deposit segment, but this is mostly due to our pricing policy conscientious. tactical decisions we've taken during the past three quarters. Turning page to the lending market. Currently, we are underperforming the lending market. We grew 50 basis points against the market performance of 4.6%. This is mainly attributable to our performance in 2023. where we really drove through the year with a foot on brakes. Nonetheless, when we look at the performance year to date later on in the presentation, you see that we We have reinvigorated the lending growth and we look with confidence towards the year end and particularly towards 2025. Now let me go into the operating platform of the bank. Starting with the overall view, we currently have a customer base of 1.6 million rounded up. The customer base continues to grow, albeit at a slower pace. The pace of growth is 2%. This is obviously connected to the interest rate environment and to the cuts that we have done on the deposit gathering price cuts on the deposit gathering side of our business. Branch Network, we have 134 outlets. What is perhaps more important than the 12-month evolution is that we've elected to close 11 outlets this year. This will be accomplished by the end of the year and help us to manage the cost base of the bank. And it's also a reaction, as you will see later, on evolution of the branch traffic and utilization. We continue to share ATM infrastructure with three other banks, so we have a very strong position in terms of ATM footprint throughout the country. With respect to the employment of here you can clearly see that on the front line we have slightly less people and we have taken on more people into namely enabling functions this is due to the digitization of the bank and higher demand for people within within management of the digital of the digital platforms that we operate and This is natural when you look at the digital on page 11. If you look at it from customer perspective, registered into the digital channels, this is nearly 1.5 million with a very solid growth of 8%. If you were to dissect this number into growth of users in the key platform, which is the mobile banking platform we operate, the growth there is 13% of registrations. The digital channels have become the primary channel how the bank and customers interact with each other. On average day, we have 676,000 visits and the growth here is fairly significant. is fairly strong at more than 13%. But perhaps more importantly, where we experienced the biggest growth is on servicing transactions. Nearly 17 million transactions since the beginning of this year. and this constitutes a very high growth of more than 25% and this obviously takes away traffic from both branches and our contact center and you will see that on the following pages. Additionally, we have relatively good growth in sales. relatively good growth in sales transactions and very solid growth in loan applications and in payments as well. Now turning page to the branch network, we see fairly robust decline in branch visits, nearly 15%, 1.2 million visits year to date. So if you put it in the context of the digital channels, it's actually quite interesting from that perspective. We are trimming down the staff at the branches and you can see that the biggest impact that we have, and this is due to the shared infrastructure on ATMs, is a very strong decrease of cash transactions. This is deposits, withdrawals. at the branch level. Solid growth in, on the other hand, we have still solid growth in loan applications within the brick and mortar network and usage. Well, the usage of the branch network is about one third of our customer visits uses it. Nonetheless, again, the usage of the network is declining by a robust 10%. Turning page to page 13. In the contact center, if you look at the inbound traffic, this testifies both the inbound traffic and the email communication that the traffic is declining and this is as a result of the success of the digital channels. Again, we are trimming down the staff somewhat and client service level is satisfactory even though we are on the contact center in order to have slightly uh let's say to have constrained capacity in order uh to convince our customers to use to use self-care in the in the digital channels on insurance we have again uh fairly good uh performance and solid growth on this dimension of the of the contact center. Then if we turn page, this is the last one on the operating platform, page 14, the ATM network, the biggest accomplishment of this year is that we have shared deposit facility with two banks, it's Commercny and Airbank, with the third bank, Unicredit, will come online during 2025, but having more than 40% market share in the deposit machines helps us to transfer the deposit flows from the branches into the deposit ATMs. If you look at the ATM infrastructure, withdrawals are declining. overall and the deposits are growing at a robust rate of more than 20%. And again, even the ATM network has lower traffic of service transactions as the digital channels are taking that away. And with that in mind, I guess the most important message here is that we are on track with respect to the guidance, with the performance across all of the major lines. generating profit of 4.2 billion and being confident that we can reach 5.6 billion net profit for the calendar year 2024. And apart from that, we will initiate shareholder distribution in the amount of three crowns per share subject to approval. This shareholder distribution will not impact the 2024 dividend which we accrue at 90%. And now my colleague Jan Fricek will walk you through the details of the P&L. Thank you very much. Thank you, Tomas.

Good morning, ladies and gentlemen. I'm on page 16 and it's my pleasure to walk you through the profit and loss development section. Let me repeat the key financials. This year, Moneta delivered net profit of 4.2 billion so far, which represents earnings per share of 8.3 crowns and return on tangible equity of 19.8%. Operating income of 9.5 billion crowns is up by 4.6% year-on-year, and this was mainly achieved through the 14.5% growth in net fee and commission income. On the cost base, we report a broadly stable balance year on year of 4.2 billion, which represents cost to income ratio of 44%. The cost of risk line, we incurred net cost of 351 million. corresponding to 18 basis points of the average loan portfolio. And this is nearly at the midpoint of our original guided range, 10 to 30 basis points. So altogether, net profit of 4.2 billion is up by 6.6% year on year. And such a strong profitability enabled us to increase the minimum guidance on the net profit by 400 million to 5.6 billion, as mentioned before. Moving forward on page 17, we provide the detail to the net interest income development, which is up by nearly 5% year on year. And you can see that the improvement further accelerated in the third quarter, which is up by 9.2% against the second quarter. This also resulted in the net interest margin improvement to 194 basis points in the third quarter. Drivers of the growth are explained on the right side, starting with the lending interest income being up by 4.5% year-on-year, supported by loan portfolio yield up by 20 basis points. Treasury income decreased by 21% year-on-year, which reflects declining two-week repo rate. However, almost all missing treasury income was offset through lower cost of funding stemming from our repricing effort on the deposit side. Moving forward, on page 18, Net Fee and Commission Income Development in the third quarter, We achieved a growth of 10.6% year on year, predominantly due to improved performance in distribution wealth management products, which you can see in the top right corner. And I will provide more detail on page 19. Firstly, the outstanding amount of distributed wealth management products expanded year on year by 63.2%. And this great expansion was delivered on a basis of 17.2 billion of volumes distributed this year, which is by 118% more than the volume distributed last year. Such a significant balance sheet, such a significant outstanding amount expansion together with increased opening fee resulted in a commission income growth by 122% or 282 million year on year, which you can see in the bottom left chart. On page 20, we provide more detail to the distribution of insurance products. First of all, this year we generated commission income from this franchise of 900 million, which is almost the same result as delivered last year. However, I have to point out that last year the result was greatly supported by the extraordinary bonus of 267 million. If adjusted for that, recurrent income increased by 19% year on year. And this was achieved through improved performance in distribution of all insurance products in our offer, which you can see in the numbers on the right side. On page 21, We can continue with the net income from financial operations being up by 4.5% year on year. The growth was achieved predominantly due to better margin on client FX conversions together with the extraordinary gain on bond sale, which is higher this year against the last year. On the other hand, the result was partially impacted by a lower result on derivatives. And on page 22, we complete this section with the OPEX. As mentioned before, cost-based remain broadly stable of 2 billion. What is important, three out of four categories are reporting declining trend. The most pronounced is visible on regulatory charges being down by 91 million year-on-year. On the other hand, personal costs increased by 6.3%, which was mostly driven by higher sales incentives this year, reflecting improved performance in the sales force and also higher or increased average salaries amid persisting inflation on labor market. However, I would like to point out that personal costs incurred this year are nearly at the same level as reported for the comparable period of 2022, where the compound annual growth rate over the last two years stood at 60 basis points only. This almost zero inflation was achieved through the 10% reduction in the number of FTEs, which we realized in the first half of 2023. So with that, let me hand over to my colleague, Jan Novotny. Thank you.