Komerční banka Group Financial Results as of 31 December 2018
Komerční banka reports improving revenues in 2018, much progress on transformation
Prague, 7 February 2019 – Komerční banka reported today its unaudited consolidated results for the year 2018.
Total revenues increased by 3.7% to CZK 32.2 billion. Within this total, net interest income was higher by 7.3% from the year earlier due to growth in the volumes of deposits and loans, as well as higher market interest rates that positively influenced yields from financial assets. Net fees and commissions were lower by 1.0%, as an expanding share of customers used account packages with a range of services and transactions included for a flat fee. Net gains from financial operations were strong, at CZK 3.2 billion, but this amount was still off by 10.2% because the prior year’s result had been boosted by clients’ exceptionally strong currency hedging activity linked to discontinuation of currency interventions by the Czech National Bank (CNB).
Recurring operating expenditures were up by 1.9%,1 at CZK 14.5 billion, driven by personnel expenses and depreciation. Administrative costs, meanwhile, were lower year on year. Reported operating costs, including various one-off items both this year and last, were up by a slight 0.9% to CZK 14.6 billion.
The quality of the loan portfolio remained excellent, positively influenced by the late-expansion phase of the business cycle. KB recorded a successful recovery performance and low client loan default rates, permitting a net release of loan loss provisions in the amount of CZK 0.6 billion (compared to CZK 0.4 billion a year earlier).
Recurring attributable net profit (i.e. excluding one-off items) reached CZK 14.8 billion, which was 5.8% more than in 2017.
KB recognised several one-off items in the comparison periods of both 2017 and 2018.2 When these are included, the reported net profit attributable to shareholders was almost stable (−0.6%), at CZK 14.8 billion.
Lending to clients increased by 4.7% to CZK 634.6 billion.3 Within this total, financing of housing from KB and Modrá pyramida expanded by 4.6% and consumer lending by KB and ESSOX grew also by 4.6%. Business lending was up by 5.5%.
Deposits from clients climbed by 5.2% year on year to CZK 795.6 billion.4 The volume of KB Group clients’ assets in mutual funds, pension savings, and life insurance rose by 2.2% to CZK 167.5 billion.
The capital adequacy ratio reached a strong 18.5%, and Core Tier 1 capital stood at 17.9%.
“Komerční banka is committed to sharing the value generated from its operations with all key stakeholders, including clients, employees, shareholders and our society. We are proud to see improvements in client satisfaction levels across all customer segments and that we are leading the market in satisfaction indicators of corporate clients. We are developing a non-discriminatory corporate culture and creating hundreds of purposeful new jobs each year. For a number of years, KB has been listed among the largest taxpayers in the country. We are dutiful in respecting the principles of responsible business practices and lending, and the Bank and its employees engage in numerous charitable activities. Furthermore, KB is developing a robust and diversified business model able to support our clients while sustainably generating good returns for the Bank’s shareholders for years to come. The excellent financial results achieved in 2018 were due to solidly developing revenues in combination with disciplined costs management. The quality of the loan portfolio was strong and the cost of risk even extraordinarily low, as both benefitted from the economy’s being at its cyclical peak. The changes we have made and which will continue in 2019 will allow KB to maintain a leadership position in terms of client service quality, innovativeness, efficiency and safety.”
The Bank had 48,265 shareholders as of 31 December 2018 (up by 1,155 year on year), of which 42,907 were private individuals from the Czech Republic (greater by 1,038 from the year earlier). Strategic shareholder Société Générale maintained its 60.4% stake while minority shareholders owned 39.0% and KB held 0.6% of registered capital in treasury.
In accordance with its intention announced in February 2018 regarding the share of 2018’s net profit to be paid out in dividends, and in view of KB’s 2018 result, capital position and outlook for growth in risk-weighted assets and capital requirements, Komerční banka’s Board of Directors has decided to propose to the Supervisory Board a dividend payment of CZK 9,693 million. That would come to CZK 51 per share and put the payout ratio at 65% of KB Group’s attributable consolidated net profit. The corresponding gross dividend yield based on 2018’s closing share price is 6.02%. The distribution of the year’s earnings, including the decision on dividend payment, is subject to a vote of the Annual General Meeting.
KB management strives to maintain the Bank’s capital structure so that it is safe, efficient and adequate with respect to applicable and anticipated regulations. Considering the current state of affairs, KB management intends for 2019 to propose distributing as dividends 65% of attributable consolidated net profit earned in the year, subject to no significant changes in regulatory requirements.
- - -
1 Excluding the impacts (before tax) in 2017 from revaluation of a headquarters building of CZK 242 million (a negative item, i.e. increasing costs) and in 2018 from creation of the restructuring reserve for branch optimisation of CZK 295 million (a negative item, i.e. increasing costs) and from release of over-accrued amounts for corporate services of CZK 193 million (a positive item, i.e. decreasing costs).
2 In 2017: revaluation and sale of head office buildings with a positive net impact of CZK 896 million. In 2018: finalisation of the sale price for KB’s former stake in Cataps with a positive net impact of CZK 82 million, creation of a restructuring reserve with a negative net impact of CZK 238 million, and release of over-accrued amounts for corporate services with a positive net impact of CZK 156 million.
3 Excluding volatile reverse repo operations with clients but including debt securities issued by KB’s clients and held by the Bank. Inclusive of repo operations, lending rose by 4.8% year over year to CZK 636.6 billion.
4 Excluding repo operations with clients. The total volume of ‘Amounts due to customers’ moved up by 6.6% to CZK 812.5 billion.