Komerční banka Group Financial Results as of 30 June 2018

Regulatory announcement

Komerční banka reported today its unaudited consolidated results for the first half of 2018.

Total revenues declined by 1.5% to CZK 15.4 billion. Net interest income, which constitutes the main contribution to revenues, was higher by 3.7% from the year earlier due to growth in the volumes of deposits and loans, as well as higher market interest rates that positively influenced returns from reinvestment of deposits. Despite growing customer numbers and activity, net fees and commissions were lower by 1.5%. Net gains from financial operations were off by 29.4% due to an elevated base from the previous year that was linked to strong hedging activity among clients associated with the discontinuation of Czech National Bank (CNB) interventions.

Recurring operating expenditures were up by 1.7%,1 at CZK 7.5 billion, driven by personnel expenses and depreciation, while administrative costs were lower year on year. Reported operating costs, including various one-off items both this year and last, were down by a slight 0.3% to CZK 7.6 billion.

The quality of the loan portfolio remained excellent, reflecting the favourable phase of the business cycle. Clients’ good repayment discipline combined with KB’s successful recovery performance to create an exceptional situation enabling net release of loan loss provisions in the amount of CZK 0.4 billion.

Recurring attributable net profit (i.e. excluding one-off items) reached CZK 6.8 billion, which was almost the same level (-0.7%) as in the first half of 2017.

KB recognised several one-off items in the first halves of both 2017 and 2018.2 Including these, the reported net profit attributable to shareholders was lower by 12.3%, at CZK 6.8 billion.

Lending to clients increased by 4.2% to CZK 624.8 billion.3 Within this total, financing of housing from KB and Modrá pyramida expanded by 5.9% and consumer lending by KB and ESSOX grew by 5.8%. Business lending climbed by 3.4%. Deposits from clients grew by 4.6% year on year to CZK 806.6 billion.4 The volume of KB Group clients’ assets in mutual funds, pension savings and life insurance rose by 5.5% to CZK 165.9 billion.

The capital adequacy ratio reached a strong 18.1%, and Core Tier 1 capital stood at 17.5%.

“The first half result was underpinned by better interest income and an excellent result in terms of cost of risk. We were able to grow lending to business clients, even though the market dynamics in this segment were rather disappointing. The pace of housing loans was steady ahead of the central bank’s announcement of new regulations,” remarked Jan Juchelka, KB’s Chairman of the Board of Directors and Chief Executive Officer.

“We fully embarked during the second quarter on the new strategic direction formulated in the KB Change plan. We started with the first organisational changes to enhance our efficiency and our ability to more quickly implement technological innovations that will benefit our customers. We have just celebrated opening of the new head office building in Stodůlky, and this provides space for effective work by teams fully dedicated to finding solutions to our clients’ evolving needs. Through the rest of the year, we will populate the new agile teams, open dozens of “Profi” branches for entrepreneurs, and bring several relevant new services to our clients.”

The Bank had 48,205 shareholders as of 30 June 2018 (up by 1,981 year on year), of which 42,879 were private individuals from the Czech Republic (greater by 1,843 from a 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.

 

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1 Excluding the before tax impacts in the first half of 2017 from revaluation of a headquarters building of CZK 242 million (negative, i.e. higher costs) and in the first half of 2018 from creation of the restructuring reserve for branch optimisation of CZK 295 million (negative, i.e. higher costs) and from release of over-accrued amounts for corporate services of CZK 193 million (positive, i.e. lower costs). If these one-off item are included, reported operating expenditures decreased by 0.3% to CZK 7.6 billion.

2 In 1H 2017: revaluation and sale of head office buildings with a positive net impact of CZK 896 million. In 1H 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. Including repo operations, lending rose by 3.3% year over year to CZK 635.2 billion.

4 Excluding repo operations with clients. The total volume of ‘Amounts due to customers’ moved up by 6.4% to CZK 832.0 billion.