Komercni Banka As

You've been muted. To unmute yourself, press star six.

Welcome from Komerschny Banka and thank you for sharing your time with us today. It is the 6th of February 2025 and we are going to discuss the results of Komerschny Banka Group for the full year and the fourth quarter of 2024. Please note that this call is being recorded. Our speakers today will be Jan Juchelka, Chairman of the Board and CEO of Pomerční banka, Jiří Šperl, Chief Financial Officer and Didier Collin, Chief Risk Officer. Standing by in case of your questions are Jitka Halbová, Chief Operating Officer, Margo Simpson, Chief Digital Officer, Miroslav Hirschl, Head of Retail Banking and David Formanek, Head of Corporate and Investment Banking. As usually, we will begin with the presentation of results, which will be later followed by questions and answers session. During the presentation part, all participants will be on a listen-only mode. We would appreciate if you could keep your microphones muted during the time. And now let me ask the CEO, Jan Juchelka, to begin the presentation. Thank you.

All right. Thank you, everyone.

Sorry, I have an issue. Can you please unmute yourself?

Sorry, did you hear anything or nothing?

Nothing, nothing.

All right, so I will repeat my opening speech. Thank you very much. Welcome everyone. Thank you for giving us the opportunity to stay in front of you together with the leadership team of Komachi Banka and read you through the presentation of Q4 2024 results and the entire year 2024 results. Before we jump into the pages, just let me say that we highly appreciate your work when covering KB shares and also having the opportunity to see the reaction of the market on today's presentation. We are very glad for this level of trust. Speaking about Commercing Banka in 2024, we were more or less all over the place. We were still at the beginning of the year, in the first quarter, in charge of paying secured receivables for the clients of Sberbank on behalf of the guarantee fund of the financial markets here. We started at the beginning of the year a huge migration wave of our retail clients from the old world to the new world. And I'm glad to say that we achieved more than one million users in the application KB+. We continued our intensive investments into technologies and innovations, and in parallel with that, we were able to grow the NPS also on the new application. In September 2024, there were huge floods in the country, we were at hand to our clients, either retail or corporate, in postponing the repayments, in taking care of the insurance claims together with our sister company, Komeční pojišťovna, and we donated almost 15 million CZK through our foundation of Komeční banka. In 2024, we remained one of the largest taxpayers in the country, And in 2024, we have also made significant steps forward in the transformation of retail banking from organizational and operational point of view, as well as in the transformation of Modra Pyramida Building 7 company, which in fact became the only center of expertise for housing loans in our group and took over the entire responsibility for the customer journey related to housing. So let me invite you to the kickoff page. I will be very brief. All the hard work which I have just described was translated into growth of deposits of our clients by 2.3% on a year-over-year basis, client loans by 2.5%, inside which the new sales of housing loan sales totaled at 34.1%. which means that the clients are back to ask for housing loans, mortgages, and the clients are back reacting also on the decreasing prices. Other assets under management grew by 11% in total. Inside this category, the mutual funds by more than 20%. So continuous dynamic growth of the assets under management outside the balance sheet of the bank. Insurance premium written, the life insurance grew by 2.9%, out of which risk life insurance by 13%, and the non-life insurance by 18% on year-over-year comparison. We like this double-digit growth, and it just confirms strong position of Komercní Polišťovna at the Czech market. Komercní banka remained one of the best capitalized companies and banks in the economy. The total capital ratio remains at 18.77%, core tier 1, 17.64%. From liquidity perspective, again, confirmation of strong position of LCR, 166%. NSFR, respectively, 131%. All of this inside, let's say, very comfortable territory of loan-to-deposit ratio of 82.9%. it was translated into a very strong income statement. The group net income is at the level of 17.2 billion CZK. We contributed in the fourth quarter, which was the biggest, or let's say the strongest quarter ever in the history of the bank, from revenues perspective. And one of the strongest for net profit contribution point of view. So the contribution to the total net income was 4.7 last year, before 2024. Earning per share 91.3%, sorry, 91.3 CZK. which we proposed as board of directors of Komerský bank to be entirely distributed in the form of dividends. Cost of risk remained extremely low. The high quality of our assets brought us to 11 basis points at the end of the year of 2024. Cost to income ratio was compressed below 50 at the level of 48.2%. Whereas in the fourth quarter, it was at the level of 43.6. ROE on standalone basis delivered by KB to the markets is 13.7% and... 0.1%. Komercní banka, as part of its decision... Please, can you confirm you can hear me? Because... It's changing somehow the picture. I don't see the presentation now. So let me just use.

We can see the presentation and we can hear you.

I don't see the presentation. Sorry. I need to open another. Yeah, I can see it now. So you can still remain in the highlights. Okay. So here, just last sentence, as part of our decision-making process, We finalized the disposal of headquarter building in the center of Prague, the Václavské amnesty 42. The buyer was city of Prague. So we are confident the house will be serving the Prague citizens down the road. Obviously, whatever you see as a reported number versus recurring number, the difference between those two goes to the account of the net profit realized through this disposal. Comerční banka grew its number of clients migrated from the old to the new world above one million users. Comerční banka was also awarded as a responsible bank of the year in 2024. Komeční was the supervisory board of our bank, re-elected my person for the next term starting August 5th of 2025. And as I mentioned already, we are giving back to the market the entire net profit subject to the approval of supervisory board. and the general assembly of the shareholders. We can move to the next page, please. Macroeconomic environment. I would say it was framed by pretty well-known indicators, i.e. rather mediocre growth, but still growth of Czech GDP, accompanied by a continuously tight labor market with very low levels of unemployment below 3%. Inflation seems to be under control, if I may say, back to the corridor where the central bank wants to see it and is further compressing and is being followed by the reaction of Czech National Bank to the levels of 4% which is minus 300 bps on a year-over-year comparison. Czech Koruna remains vis-à-vis Euro at more or less flat at 25.2 Czech Koruna per Euro and 24.2 Czech Koruna per USD. So on that front, no big drama has been happening. And I'd say this level of Czech crown is somehow at least helping the traditional exporters amongst our corporate clients. We can probably move to the next page, which is related to loans. The gross loans grew by 2.5%, mainly driven by already mentioned good dynamics of financing for retail, i.e. mortgages and consumer lending respectively, and rather mediocre growth of corporate financing. Inside the corporate financing, what is probably remarkable here is still almost 7% growth of the financing through SGEF leasing, Let me remind that based on our SPA, which we signed with ZGF International, Komerczny should become 100% owner of this company more or less in weeks. What is probably worth to mention and combine a little bit of macro with a picture of the performance of financing for retail by Komerczny Banka is the 34.1% year-over-year new sales of mortgages and building savings loans, combined with a strong demand of people and second, let's say favorable evolution of pricing of mortgages during 2024, which we believe will be continuing also during 2025. Maybe we can go to the next page. Here we are showing the transactions which we have achieved in Q4. You can see that Kometchny was all over the place, accompanying its corporate clients in fulfillment of their projects. We were also at hand to very important and transformative transactions such as Czechoslovak Group and its and its acquisition and expansion of their businesses into the United States. We are also mentioning Slovenske Elektrarnie. There was a total refinancing of the company after putting at work so-called Mochovce 3, which is the newly built and finalized nuclear capacity in Slovakia. Let me also say that Slovakia became emission free energy producer and large exporter of energy after completion of this construction. We are very proud of being close to Slovenske in their construction part and we are remaining their partner when they started to uh operate the new uh the new power plant let's move to next page which is dedicated to deposits the deposits were up but by 2.3 percent what is probably important to say that we very much like the uh distribution of the this growth between current accounts and and remunerated savings so We see that after a few quarters when it was completely different, this time the current accounts are growing by 5%, whereas we see slight decrease in the field of term deposits and saving accounts. Having said that, a Czech retail client has found certain habits to get remunerations from its deposits. Hence, they are searching for more or higher, let's say, returns in the field of investment products. I'm proud to say that the assets under management in mutual funds, which we are selling either through our private banking or together with Amundi grew by 21%. And there was very, I would say, mediocre growth on the KP life insurance reserves and the pension fund company. But in total, it totalled at a double digit growth of 11%. So that's it from my side. I'm handing over to Easy, to our CFO. Thank you.

Thank you very much, Jan. Good afternoon, everyone. Indeed, KB Group delivered extraordinary results in Q4 last year. It is, by the way, the third quarter in a row when net income after taxes is growing, as is visible from the right upper chart. Of course, I'm talking about underlying profitability, right? So without the impact of the sale of Václavské náměstnice, The waterfall chart is visualizing the main drivers of the profitability on full year basis. It is from the chart clearly visible that mainly fees and commissions are contributing positively, growing by almost 900 million check-arounds year over year. Regulatory charges decrease, also contributed positively by almost half a billion check-arounds. which, by the way, was expected. On the other hand, still, NII is on a full-year perspective still in a bit negative territory, but with very good trends, as I will show you in a minute. Naturally, OPEX, and now referring to OPEX without regulatory charges, are increased, not too much. It's around 2.3%, again, details later. But definitely, it is below the inflation. And on top of that, in this situation, we are transforming the bank full steam. And also, cost of risk is higher than in 2023. But here, it's clearly the base effect. The absolute provisions creation was not high in 2024. The point is that in 2023, the cost of risk was around zero, and F-costs did have a comment. So, all in all, this leads to the underlying profits at the level of 14.8 billion CZK, i.e. slightly below the last year. But if you add the profit from the sale of the Václavské náměstí, net income after taxes jumping to 17.2 billion CZK, growing here and here by more than 10% and this of course transposed also to the profitability indicators as already Jan was commenting. So let's move to the balance sheet. The total assets went up by 1.3% It's no surprise that on the liability side, supported mainly by deposits, on asset side placed to the loans, there is one structural change that is worth to comment. Maybe I was touching on this three months ago, but it's a bit of a reshuffle of the investments of the liquidity surpluses, right? In 2024, as is visible from the chart, we are preferring to invest into the Chega Vs, growing roughly by 20 billion cheque rounds, while the volumes of repo with central bank went slightly down. I was mentioning some liquidity indicators, maybe to add LPD on to deposit ratio, so it is still in a very safe territory at the level of 18.3%. That's interesting, Jan. Well, so I see or would like to convey two key messages. On a full year basis, as I was mentioning before, still there is a bit negative. And basically, it is still partially negatively influenced by weaker NIA projects. from investment banking and also by an increase of the regulatory interest costs. What I mean are the instruments for MRL obligations. Currently, we completed it. By the way, we are not planning none for 2025, maybe in 2026. While income from the loans was growing, Again, on a 12-month basis, very solid pace. And here we can see and indicate that both volumes and price effects were positive. On top of my head, the average spread on loans increased by 30 basis points, which is not a kind of magic, but it is to say a bit of a recovery of the trends because in the years before 2024, the spread was going down. And still on a four-year basis, comparison income from deposits is basically flourishing. The positive quarterly dynamics I was referring to before is shown at the bottom right chart. And it's my kind of pleasure to say that Q4 is another quarter. And here it is in this case, it is the third one. in a role of growing and what is, from my perspective, even more positive is that so-called core NII, core net interest income, i.e. income from the loans and deposits are already fully contributing positively quarter over quarter And mainly the income from the deposits growing dynamically. Of course, what helped was kind of improvement of the structure. And basically the lower cost of funds in the environment of declining of the market interest rates. All in all, this transpose into NIM slightly growing quarter over quarter. It is by 10 basis points to the level of 174%. Still, year over year, it is slightly negative. But already now, I can indicate that in 2025, we are expecting 20%. and are gonna guide the slight increase of name by comparable 10 basis points like was the case between Q4 and Q3. Fees and commissions. Without any doubt, the best quarter in the history of the bank, of the group. It's 2.4 billion on a quarterly basis. This led to the full-year growth of double-digit, more concretely 13.7%, with two main drivers, and probably not surprising. First, fees from cross-selling up by 23% due to a very dynamic growth of the non-bank assets under management, S is one of the strategic priorities of the bank. And second, a very successful specialized financial services fees generated in Q4 due to services with a high value to our corporate clients. And Jan was mentioning some of these transactions already before. In terms of financial operations, it is also adding good increments. So it's another quarter above 1 billion check rounds. I remember that I was commenting three months ago that Q3 results in this category was significant. historically the highest, so we are not so far from this very good result. And what is also positive is that both components are contributing still at a quarterly perspective. On the full year basis, the income is, and it is by chance, right, Absolutely the same like one year ago, i.e. 3.832 million check rounds. And what is, again, worse to mention is that the structure has changed that. And I can say that in a very positive direction, because the growth on a yearly basis, it is very much influenced by net gains on FX from payments, i.e. mainly FX transactions on structural books, while capital markets is going a bit down. And last, before passing over to Didier, is cost side. As mentioned before, the costs were growing by 2.3% year-on-year, i.e. below inflation. Personal costs growing a bit faster by 5% as an implication of the annual salary increase, I think, as of April the first last year at offset partially by the decrease of the employees in 2024. In terms of GAE, and again, excluding Resolution and other similar funds, it's under very prudent control, so growing only by 2%. What supported the cost side was Resolution and similar funds, as I commented before. And again, no surprise on depreciation and amortization growing still low teens, double digit, as a mirror of activation of the new assets, like related to the transformation, mainly new digital bank. All in all, this led to cost-income ratio at 48.2%. Again, now I can indicate that cost income targets for 2025 are going to continue this positive trend, i.e. South. So that's from me now, and I'm passing over to Didier. Didier, please go ahead.

Thank you, Régi. Good afternoon, everyone. Turning to the asset quality in the fourth quarter, there's probably one main takeaway, which is the improving trend in the default rate for the three portfolios, which were a little bit under pressure in the recent quarters, namely the consumer lending, the small business lending, and the SME lending portfolios. So in the fourth quarter, we have started to see the favorable reversal of the default rate. And second point, without any change from the previous quarters, is the continued resilience of both the large corporate and the portfolio, large corporates being near zero default level. mortgage loan portfolio being very close to the historically low point, which we reached in 2022. So, translating this default rate input or drivers into the IFRS 9 risk classification of the loan book, in fact, as you can see on the slide, The key word is stability. The exposure classified in stage two grew very moderately. And what is very important to keep in mind and hasn't changed in the recent quarters is that the intensity of migration between those asset classes, S1 and S2, continued to be very low in the first quarter further confirming the stability and the resilience of our non-defaulted portfolio. The exposure or part of volume classified in default in stage three remain very stable quarter on quarter. So this, in fact, is clearly illustrated by very stable stage two ratio fluctuating within the 14 to 15% range. A slightly contracting NPR ratio or ratio going under the level of 2% in the first quarter. And the provision coverage for this defaulted portfolio, in fact, was very stable in the first quarter due to the limited provisioning activity in the first quarter. Turning to the cost of risk overview for the fourth quarter on the next slide, and starting with the quarterly view, we, in fact, reached a lower level than we expected and a low level of 40 million shekron. And behind this low level, in fact, you have three main supporting favorable risk drivers. The first one is the one I just mentioned, which is the default rate contraction for the recently more sensitive portfolio, consumer loans, small business, and SME. The second one is in the fourth quarter, we started to record a better rating distribution for the non-defaulted small business portfolio, which produced some favorable effect into our quarterly cost of risk. And finally, the better outlook for residential listed prices generated some technical IFRS 9 release last quarter. So in terms of structure, we booked 150 million cheque round for the corporate segments. And in fact, this quarterly creation was concentrated on one single non-defaulted client situation. So again, a good sign in terms of the overall resilience of our loan book. And the creation for coming from the retail portfolios was way below the average, the quarterly average at 90, 90 million check run. And we also booked in provision release almost 200 million cheque round coming from those technical IFRS 9 recalibration coming from this better outlook in the area of residential real estate prices. One world on our so-called inflation or post-inflation overlays, we kept them stable through the first quarter as it was announced to last November and this stability approach is being reassessed in the context I just mentioned which is the context of resilience and stability of our default rates which will generate some potential release in the next three years under our central macroeconomic scenario. One word on the table, which is at the bottom of the slide on the right hand side, showing to you the structure of the full year cost of risk for 2024 at 11 bps. In fact, you see that the defaulted portfolio contributed for only one basis point, which is the best illustration of our strong loan recovery performance last year, both for the corporate and for the retail portfolio. And the 10 pips on the non-defaulted is a good illustration of our prudent approach regarding the provisioning of the non-defaulted part of the loan book. And one short final word for this cost of risk section on the guidance for 2025. In fact, we will guide you at levels of cost of risk, which are expected to be way below the cycle level, which is anywhere between 20 and 30 bps. And this has three underlying elements. One, which is a situation that we had mentioned to you last November, which is the favorable evolution of one of our corporate client situation, which will generate a material amount of provision release, most likely in the first quarter. And then two important assumptions. One is that under the central scenario, and as I just mentioned, we plan on gradually reversing our inflation or post-inflation overlays. currently scheduled over the next three years. And the second important and reasonable assumption is in terms of the further stability of our default rates across all portfolios, whether products or client segments. And that concludes this customer reflection. And now I'm handing over back to you, Yerji. Thank you.

Thanks, Didier. Can we move to the next slide? Yes. Well, the capital remains very strong. As of the year end, the capital adequacy is at the level of 18.8%, i.e., as for now, by roughly 210 basis points above the a minimal requirement by CNB. And even above the management buffer, just to remind the management buffer of KB is between 50 and 200 basis points. The bottom chart is describing the capital generation and consumption. So it's clear that the bank created a bit more than 300 basis points of new fresh capital. and at the same time created a dividend provision at the same size. As consumption of capital via risk-weighted assets is marginal, all in all, the capital adequacy is basically flourish, right? In terms of other capital instruments, in 2024, we didn't... need to go and we didn't go on that neither for subject to capital nor for the senior non-preferred loans. And now it seems that it is likely that due to the really strong capitalization this will not be the case neither for the 2025. And this is bringing me to the capital management dividends chapter. Janos already touching the point. So given the very strong capital, as I mentioned before, KB Board of Directors proposes to the annual general meeting payment of dividends versus 70.2 billion CZK, which represents 100% of the consolidated 2024 net profit. This is also the case for the guidance for 2025. To say based on our simulations, the capital adequacy will remain very strong even in 2025, even this year, even if we return the profit to our shareholders. And that's why for 2025, BOD has decided to maintain the dividend payout policy at an exceptional level of 100%. of the attributable net profit generated in 2025. Of course, we're ready during the Q&A session to answer your dedicated questions. And the last slide of the presentation is about the outlook for 2025. Again, Jan was already touching on macros, so let me move directly to the banking market assumptions. It is expected that both loans and deposits are going to grow by mid-single digit. And in both categories, retail is a bit faster than corporates. On this market, KB would like to grow even a bit faster. And again, it's mainly the case of retail as we are around the end of its transformation. So we need now to monetize on the given investments more. In terms of financials, the ambition is high. So we are guiding that revenue should grow by a high single-digit rate on a year-on-year basis. And the main driver here is going to be net interest income. but also other categories, i.e. fees and commissions and net profit on the financial operations will contribute positively. OPEX is expected, and I think here it is a bit of variation versus what we were guiding three months ago for 2025. Expected to fall a bit, low single digit. I think last time we were guiding more or less traditional. And what you can see behind is continuing overall simplification, optimization of the branch network. Number of the branches is going to go down further. And also a related decrease in number of the employees. And in 2025, we are talking about roughly 500 employees and thus to deliver one of the strategic targets in terms of FTEs. Of course, what will also help is, again, resolution fund charges, as was the case in 2024. And here, based on the announcement of the resolution authority, we are expecting it to go down, on top of my head, roughly by 300 million CZK. So, of course, this will help us as well. That's OPEX. Didier was covering credit risk in terms of potential risk of these prognosis or outlook. It's very much about the geopolitical risks. So that's it. I'm stopping now and passing word back to the studio. Thank you for attention.

Thanks to all the presenters. In the next part of our today's meeting, we will be happy to answer your questions. Let me remind you that this meeting is being recorded. If you have a question, please click on the icon with raised hand at the upper part of your screen, and then please wait to be called. If you are connected through a telephone, then I will invite you to ask your question later on. Let's wait a second for the first question and it will be coming from Robert Groza from Pekka OBP. Robert, please go on.

Thank you and good afternoon. Congratulations on the really excellent results. I have a question on fees, on those cross-selling fees, namely how sustainable do you think is that jump and the new level of cross-selling fees. How much of that higher level in business is coming from the changes in the distributed funds? I saw that you distributed a much larger amount of equity and other funds compared to previous quarters. I'm curious to know whether that money is flowing into, I would presume, global funds, or maybe some part of that is also reaching local equity funds. So that would be another question about the sustainability and the outlook for capital market products in general going forward. Thank you.

Okay, thank you for your question. I will start, and probably if Marek will also... We'll continue. The growth in the area of crosslink fees is very much driven by strong sales of wealth management solutions across retail market subsegments. And it is relevant for all subsegments, or what I mean is mass markets, to private banking, including mutual funds, insurance solutions, etc., etc., The assets under management, just to remind what Jan was commenting on before, were growing year-on-year by 11%. The cross-sell fees by roughly on top of my 13.7%. So there is a clear correlation. As you are correctly mentioning, there is one structural change, and that's the client started to listen more to the investments into more dynamic solutions before it was more about the investments into money market funds. And of course, these more dynamic solutions are generating also more attractive fees for the bank. Specifically in Q4, the growth was boosted by reaching the threshold for the performance fees in pension fund of KB. And to say that openly, this is not sustainable, right? So this level of gross fees, this is not a new normal. And you should rather expect a correction in Q1 next year. Thank you. And Mirko, do you want to complete me?

Yes, just a few sentences. Looking at the fees generated by retail, a few comments. We do show quite solid growth of premium insurance. insurance premium double-digit was in life and non-life for a few years already and we still believe that we can keep moving forward there. This is not true to the one that is linked to sort of investment slash saving part of the insurance. It is flat, it was already commented. But I'm speaking about products that are really like insurance slash protection and they are quite promising. And the second, not only volume of investment funds but also the structure as you may have seen it on one of our slides. where we started the year with approximately 25% of products or investments going to equity, and we ended up by 50%. So if you would ask me for a consolidated, compounded view of the whole year, it is probably 40%. And it helps us a lot on fees generation. On the other hand, fees for payment transactions in retail in the Czech Republic are almost non-existent. And if they are still summoned, they will disappear soon. And we need to play smart with pricing for packages or for day-to-day banking solutions. So this is like a very short summary of what I see happening around.

If I may add maybe two more questions about the insights here. Could you share, I mean, I'm sorry if I had missed that, how much of the quarter-to-quarter growth in fees from cross-selling, they jumped from 570 to more than 960, was coming from that performance-based fee at pension fund, that's one. And second, you've mentioned a successful transition of customers and onboarding the new platform. I'm wondering what's the share of fee business being generated by the new platform and how do you see the prospects of this digital distribution different or improving perhaps the overall business performance in the aspects of the digital distribution of various products across the bank?

Well, I will start with the first part of the question, the performance fees. basically coming from all, let's say, companies we are talking about was at the level of 250, 300 million check-arounds. So this part could be attributed as non-recurring. I believe this was behind your question. And the second part I'm leaving to Mirek, Mirko, please.

There's no fee generated by the new platform per se, by the way. It's still a client that we migrate or a client that we acquire there. And the value proposition and the pricing on the market is changing and we do follow the change. As I commented, transactions zero, packages a bit. It is a practice on the market that we have to provide an account free of charge, quite solidly equipped, which is 50% of our production at the moment. be it through acquisition or be it through migration. On the other hand, what we wanted to see at the very beginning is that once we migrate the clients from the old bank to the new one, we keep at least the same revenues. And we do keep at least the same revenues, which is giving us a solid base for Fed's cross-selling and increasing a bit. On the other hand, I don't believe we will achieve a lot more by increasing the price per unit. We will have to achieve a lot more by having more units, be it clients, be it products, be it whatever of this kind. Thank you very much.

You're welcome.

Thank you. So I would invite you to ask your questions using the raise the hand button or you can, if you wish to ask a question through your telephone, please press star and six normally to unmute yourself and you can ask a question. We may have one more from Robert. Rob, would you like to ask one more?

Yeah, sure. I would use this opportunity maybe to ask about your capital distribution plans for the future. As I understand, this higher payout which you foretell out of 2025 earnings is a sort of a sign of an increased confidence in the profitability of the bank I believe and I think I mean if you could maybe if you make comment on a more strategic goals regarding the payouts in the coming years provided that the new online platform delivers and that the competition for BEAT deposit or loans doesn't materially heat up in the Czech banking system So, in other words, the current ROE trend prevails. In such circumstances, would you consider maintaining somewhat higher payout ratios in the subsequent years post-25 than were the average, so to say, norm before COVID tax?

Jan, should I start or you will? Okay. Well, I would say that the fact that we are able to increase on an extraordinary basis the payout ratio in 2025 is saying very much about the very strong discipline in the capital management very much supported by the fact that for the time being, and I was commenting on that before, that the main driver of the growth is going to be retail, of course, with naturally much lower risk rates, while the corporate is going to grow only with the market. In terms of the time beyond 2025, just what I can say is that if we are in the similar situation like now, of course, we are going to sit on shareholders' funds. At the same time, it is a policy of the bank not to guide dividend payouts beyond the next 12 months. So everything I can comment on now. Thank you.

Right. I appreciate the answer. Maybe one more on taxation tax rates. because I believe the 24 effective tax rate was slightly above 15%, whereas the headline corporate tax rate in the Czech Republic is much higher these days. And the average effective tax rate for the bank for the past several years was at the level of 18%. So my question is, With the headline 21% corporate income tax rate, where do you see yourself over the coming few years? Are there ways for the bank to maintain this relatively low tax rate going forward or where do you think you can find yourself with what level of average taxation over the coming year?

Thank you for the interesting question. The answer in one word is no. 15% is not a new normal. Why? Because from this perspective 2024 was kind of extraordinary. Because the income from the sale of Václavské amnesty was net of tax, right? We were not selling the building, it's what we are selling the company. And based on local legislation, tax legislation, this is after some time tests, free of tax. So for the years to come, you can... expect similar effective taxation like it was before 2024, i.e. around 18%, maybe with a slight potential to even improve, but 18% is a good guidance.

Got it. Many thanks.

Thank you. So the next question is coming from the line of Shane Matthews. Shane, please, can you introduce yourself and ask a question? Thank you.

Yeah. Hi, thank you for the opportunity. Shane from White Oak Capital. Just one question. I think the improvement in the deficit structure has been quite impressive. And I think you've been guiding for the past couple of quarters. But I just want to understand the sharp, let's say, improvement, let's say, in the current accounts, improving quite rapidly quarter on quarter. I just want to understand how, let's say, just get a better insight of what exactly drove this, let's say, improvement over the past quarter. And I think you mentioned earlier In the guidance as well, you expect the share of current accounts to be more or less stable moving forward. So, I wanted to get your thoughts around this current account mix, the sharp move, quarter on quarter, and how you're thinking about this going forward.

I can start to touch the question. That's true that the shift between pay deposits and And unpaid deposits in Q4, quarter over quarter, was tremendous. Here, just I would like to remind one thing, i.e., that the end of the year is kind of an extraordinary month, or quarter, if you wish. And it is very much related still to the resolution fund charges. And this leads first to a slide decline on the deposit base. Simply, all banks are demotivating clients to place money within the bank because it is costly. It was the case also one year ago. At the same time, there is a shift between paid and unpaid. I will make some conclusions on that once it is confirmed in Q1. Definitely what I'm expecting during the Q1, that there will be at least partial shift back to the paid deposits. Thank you.

Thanks.

OK, once again, if you wish to ask a question, please raise the hidden button or unmute yourself and ask directly. So it seems the presentation has been Matt NMS from UBS is going to ask his question. Please, Matt, go ahead.

Yes, good, and thank you for taking my questions. Two questions, please. Firstly would be on Didier's comments regarding the release of inflation reserves over, I think you said, three years. Should we think of this as a gradual release over the time period or not necessarily? So what would be the profile? And the second question would be on capital and capital trajectory. Should we expect any meaningful sort of non-organic or regulatory effects in RWA consumption or RWA growth over 2025, or this should be roughly developing in line with long groups?

I will start with your first question regarding these IFRS 9 overlay reserves. And as you correctly mentioned, the release under a central scenario will be gradual over the period 25 to 27. That's currently outlined.

Do you want DJ also to comment on her data sets? I can do that. Go ahead. Okay. Well, of course, as of 2025, there is a new regulatory framework, BASO 4. Here we are just confirming what we were saying, I think, three or six months ago, that the impact of of Basel IV into the capital will be rather minor. In terms of credit risk, on top of my head we are talking about low tens of basis points. On the other hand, there will be even positive impact coming mainly in the area of the market risk. And here, our current expectation is, let's say, high trends of basis points, positive. So that's the second important expectation we are working with. And the third one, which is not very much about the regulatory changes, but about the improvements in our capital management. And that's IRBA on one of our subsidiaries, which is, as Jan was mentioning, becoming soon fully owned by KBN, that's ZGES. And here we are expecting that in, not probably, in 2026, this will, of course, further make capital consumption more efficient. So that's probably three main aspects we are expecting in the years to come.

That's great. Thank you.

Thank you. And there is going to be another question from Shane Matthews from White Oak Capital. Shane, please go ahead.

yes thank you thank you for the opportunity again one more question uh on the nai let's say recovery into 2025 i think last year last two years there's been some negative impact from the hedging income hedging expenses and in last two three quarters this let's say the impact has been less negative over time so this 2025 should we expect this to also as a gradually uh recover and this uh negative impact to also normalize over time so that NAI growth would be driven by two main factors. This edging losses, let's say, reducing over time. And also, let's say, the improvement spreads with the improvement in the mix of the deficits.

Yes, I probably would not make some conclusions on the hedging. You call it hedging losses. Of course, the picture is more colorful, right? Hedging operations are hedging, let's say, the overall structural position of the bank, right? So what is going to be really the main driver of NII, mainly in 2025, are volumes, right? First and second continuing decline of the cost of funds. Maybe to say that in March 2024, the cost of funds was the highest through the cycle. It was at the level of 2.4, and since that time, cost of funds is declining relatively significantly. So for the time being, I'm talking about the whole bank, right? It is different for retail versus CAB, but currently the cost of funds of KB is around 1.5%. we are expecting that this trend is going to continue. In terms of loans, I was touching the past during my presentation, so measured by spreads on stock price in 2024, it increased a bit, simply the banks didn't go down with the loans prices. the same speed like the market rates and we are expecting for 2025 the trends to continue so last year we were talking about three basis points so we are we believe that in 2025 it could continue and to add another around four or five basis points it is of course also consistent with a bit of a change of the structure of the production because the highest growth is expected in consumer financing, consumer loans, where the margins are still relatively the highest. Thank you.

Got it. Thanks. That's very clear. Thank you.

So now let's give a few more seconds to provide opportunity for anyone to ask a question. So the next question is coming from the line of Mr. Josef Karasek. Mr. Karasek, please could you introduce yourself and ask a question?

Thanks for taking the question. I'm just an independent investor, so I have a question. What's your assumption behind return on equity for 2025 and beyond?

We were touching the point last time, so for 2025, It is viewer-guiding between 13% and 14%. At the same time, the original target for 2025 was at the level of 15%. And what we are seeing is that the delivery of this target is expected by one year later, i.e. in 2026. So in 2026, at least 15%.

All right. Thank you. And congratulations for the Q4.

Thank you.

Thank you. We don't seem to have any further questions at the moment, so I would like to ask the CEO for the concluding remark.

Thank you very much. Once again, thank you all for being with us. not only today, but also through your investments or when covering and analyzing KB shares, we very much appreciate that. Our ambition for 2025 obviously is to continue with the migration of retail clients from the old world to the new world, capitalize on the new technologies and organization, which became lighter over time. uh, orchestrating the sales channels in retail, uh, amongst digital brick and mortar branches, um, tight agents, uh, uh, network, uh, and, um, and contact centers, um, uh, which we have at hand combined with the third parties in order to deliver strong commercial and business performance on the side of, um, macroeconomic outlook, we do believe that the Czech Republic will remain a stable country with slightly increased growth compared to 2024. Hence, if we play our role responsibly in the economy of the Czech Republic, we should be able to continue this story of KBS as you see it. Thank you very much again. I'm wishing you all a nice day. And I'm looking forward together with the management team to see you at latest at the occasion of the next quarter presentation. Thank you very much.

Thank you very much. This has concluded the meeting. You can now disconnect. Thank you. Bye-bye. Thank you. Bye.