Komercni Banka (KMCA) - 3rd Quarter Results - comments
RNS Number : 5911Q
08 November 2012
Komerční banka gains in deposit balances and loans volume
NetprofitreachedCZK10.9 billion for first three quarters 2012
Prague, 8 November 2012 - In an environment where individuals and businesses
were seeking certainty and stability in their financial affairs, the volume of
Komerční banka Group's business activities continued to increase through the
first nine months of 2012. The volume of loans provided to KB Group clients
rose by 6.2% year on year to CZK 462.3 billion. Growth in the volume of
deposits from clients reached 3.1% year on year, bringing the total to CZK
568.3 billion. KB Group reported a solid level of free liquidity which allows
it to provide continuous support to the clients. Total net banking revenues
climbed by a slight 1.5% to CZK 24.7 billion, reflecting growth in KB's
business as well as certain one-off items. Operating costs grew by just 0.4%
to CZK 9.9 billion. Quality of the lending portfolio remained high, and the
cost of risk from lending was at a low CZK 1.3 billion, representing a 3.5%
increase. KB Group reported a net profit of CZK 10.9 billion for the first
nine months of 2012, which was a significant gain of 55.1% as the prior year
result had been affected by the impairment of Greek government bonds.
Main events of third quarter 2012
· Komerční banka's business grew successfully, deposit and loan volumes
· Number of clients in Penzijní fond KB increased by 5% year on year to
· The Czech National Bank awarded Penzijní fond KB a licence to provide
services related to individual retirement savings as well as the supplemental
pension savings in the reformed pension system effective in the Czech Republic
from 1 January 2013.
· Komerční banka enabled its clients to pay for their purchases by mobile
telephone using NFC technology or by contactless credit cards, thus providing
the fastest and most comfortable payment means ever.
· KB won several awards, including the title Best Bank 2012 from the daily
newspaper Hospodářské noviny. Komerční pojišťovna and Modrá pyramida, too,
were recognised with significant awards.
Comment of the CEO
KB Group's performance was generally successful in the challenging
macroeconomic context. In response to the uncertainty caused by slowing export
demand and turbulence in domestic politics, Czech customers and business are
more cautious. Clients often are postponing long-term investments and plans,
thus reducing the demand for loans despite the extremely low interest rates.
Due to stable and long-term relationships with its clients, KB continues to
strengthen its position on the Czech market and helps clients in financing
their export activities as well. It is clear that in order to restore
confidence in the economy the prepared structural reforms should be finalised
and implemented promptly so that they begin to manifest their benefits as soon
as possible and halt the rise in costs to businesses induced by regulation.
From KB's perspective, a proper start of the new pension system from 1 January
2013 is especially important. That step will create conditions to improve
people's financial security in old age even as it boosts the capital strength
of the Czech economy.
Chairman of the Board of Directors and Chief Executive Officer
Comments on business and financial results
The published data are from unaudited consolidated results under IFRS
(International Financial Reporting Standards).
BUSINESS PERFORMANCE OF KB GROUP
Although the Czech economy did not suffer problems with its external balance
through the first three quarters of 2012, the demand for its exports did slow
gradually due to the situation in Western Europe and domestic demand did not
yet begin its recovery. During the first nine months, Czech National Bank
lowered its two-week repo rate twice, in June and September, to 0.25%,
followed by a further cut in November, to 0.05%. Also yields from the Czech
government bonds reached their all-time lows. Perceived as a relatively safe
currency, Czech koruna (CZK) appreciated by more than 3% against USD and EUR
since the beginning of the year. In this environment, volume growth in loans
was stable year on year because the healthy Czech banking sector presented no
obstacles to funding viable projects. Quite the contrary, growth in deposits
was underpinned by clients' desire to boost their reserves against future
risks and to accumulate funds for future implementation of projects presently
Development of clients portfolio and distribution networks
As of the end of September 2012, KB Group was serving 2.5 million clients on a
consolidated basis. Standalone KB recorded 1,605,000 clients (+0.5% year on
year), of which 1,343,000 were individuals. The remaining 261,000 customers
comprised entrepreneurs, businesses and corporations (including municipalities
and associations).Modrá pyramida was attending to 616,000 customers, and the
number of pension insurance participants at Penzijní fond reached 521,000.
ESSOX's services were being used by 273,000 active clients.
Komerční banka's clients had at their disposal 400 banking branches (including
one in Bratislava), 702 ATMs, and full-featured direct banking channels
supported by two call centres. The number of clients using at least one direct
banking channel (such as internet or telephone banking) reached 1,104,000 at
the end of September 2012 and corresponds to 68.8% of all clients. Customers
held 1,635,000 active payment cards, of which 209,000 were credit cards. The
number of active credit cards issued by ESSOX came to 152,000, and consumer
financing from ESSOX was available through its network of 2,800
merchants.Modrá pyramida's customers had at their disposal 225 points of sale
and 1,260 advisors. SG Equipment Finance (SGEF) was providing its leasing
services through nine branches (two of which are in Slovakia), as well as
through KB's network.
Loans to customers
Total gross volume of loans provided by KB Group expanded year on year by 6.2%
to CZK 462.3 billion. Lending to individuals grew, as did that to corporate
clients and small businesses.
The increase in lending to individuals was driven by demand for mortgages,
which remained solid thanks to the extraordinarily good affordability of
housing that is attributable to a combination of low interest rates and
diminished property prices. The overall mortgage portfolio enlarged by 10.6%
to CZK 130.5 billion. Sales by Modrá pyramida's network contributed to
the mortgage growth following enhancement of the product portfolio offered by
agents of Modrá pyramida with mortgages. This effect was partly offset by a
slight 2.8% decline in the volume of Modrá pyramida's loan portfolio, to CZK
49.8 billion. The outstanding volume of consumer lending provided by KB and
ESSOX continued to decrease (by 1.0% to CZK 27.4 billion), but there were
signs that the bank's consumer financing may have bottomed out during the
first half of the year.
The overall volume of loans provided by KB Group to businesses expanded by
6.6% to CZK 249.9 billion. Of this amount, lending to small businesses rose by
5.9% to CZK 28.7 billion. The volume of credit granted by KB to corporate
clients in the Czech Republic and Slovakia climbed by 7.2% to CZK 198.5
billion. Factor finance outstanding at Factoring KB grew by 17.6% to CZK 2.8
billion, and SGEF's credit and leasing totals outstanding declined by 0.2%
year over year to CZK 19.9 billion.
Amounts due to customers and assets under management
The total volume of deposits rose by 3.1% year on year to CZK 568.3 billion.
Deposits at KB from individual clients increased by 2.3% to CZK 160.5 billion,
and deposits from businesses expanded by 2.5% to CZK 298.5 billion. Saving
accounts constituted the most dynamic product in the overall deposits
Client assets with Penzijní fond KB grew by 6.1% to CZK 31.7 billion. The
deposits book at Modrá pyramida gained 1.7% year on year to reach CZK 70.9
billion. The volume of technical reserves in life insurance at Komerční
pojišťovna rose by 19.7% to CZK 27.6 billion.
The ratio of net loans to deposits reached 78.4%.
New products and services (in third quarter 2012)
The Czech National Bank awarded alicence to Penzijní fond Komerční banky for
the business of KB Penzijní společnost, a.s. Komerční banka Group is ready for
the start of the reformed pension system in the Czech Republic effective from
January 2013. KB Penzijní společnost will offer systematic savings for
pensions in the second and third pillars of the pension system with the aim of
enhancing clients' welfare in their retirement years.
In the banking technologies area, Komerční banka advanced substantially in
contactless payments. Since August, KB has enabled clients to pay for their
purchases using mobile telephones with NFC technology. In September,
contactless versions of all credit cards were included into the offer, thus
allowing users to pay at merchants swiftly just by waving their cards over a
reader at the point of sale. KB has been gradually equipping merchants with
new terminals accepting both contactless cards as well as payments by mobile
In co-operation with Rosbank from Société Générale Group in Russia, KB started
to offer its clients the made-to-measure 'Russian payment' current account.
This account provides favourable conditions for incoming and outgoing
payments, and it guarantees same-day crediting for selected types of payments
between KB and Rosbank.
Recognitions and awards (from third quarter 2012)
KB Group companies were presented several honours that they appreciate as
confirming their reference position on the Czech financial market. Among the
most important is the title Best Bank 2012 from the daily newspaper
Hospodářské noviny. In this same competition, Komerční banka took a place on
the podium also in the category Friendliest Bank 2012 while both KB and Modrá
pyramida ranked amongst the top three in the category Banking Innovator 2012.
In the Sodexo Employer of the Year competition, students named KB the Most
Desired Employer of the Decade.
Komerční pojišťovna was named the Best Insurance Company in the Czech Republic
for 2012 by the magazine World Finance, following the earlier success of
Penzijní fond KB in the pension funds category.
FINANCIAL PERFORMANCE OF KB GROUP
Total net banking income increased by a slight 1.5% year on year through the
first nine months of 2012 to CZK 24,730 million. Growth was driven by income
from financial operations, which itself was influenced by several one-off
items. Interest income remained almost at the same level as last year while
fee income continued to decline.
Interest income was driven by higher loan and deposit volumes. On the other
hand, the net interest margin slipped to 3.2% from 3.3% in the previous year
under the pressure of continuing downward movement in market interest rates.
Some negative effects were seen, too, due to aggressive competition, and
particularly in the area of savings accounts. Net interest income thus
remained almost stable, diminishing by just 0.1% year on year to CZK 16,500
Net income from fees and commissions slid by 5.7% to CZK 5,264 million.
Influenced by rollout of the MojeOdměny reward scheme, lower average prices
and higher acquisition commissions related to strong sales of pension fund
policies in the current pension scheme, fees for account maintenance and for
transactions decreased. Loan fees increased, boosted by rising number of
mortgages. Revenues from trade finance services rose slightly.
Net gains from financial operations improved by 30.4% to CZK 2,870 million,
driven by solid demand from clients for hedging of financial risks and in the
area of debt capital markets. The overall result, however, was affected by
one-off items that had been recorded in the first half, among which there were
positive impacts from an adjustment in the portfolio of Penzijní fond KB made
in the first quarter, which reflected changes brought about by the pension
reform, as well as selling of the equity interest in Bohemian-Moravian
Guarantee and Development Bank (CMZRB) in the second quarter. On the contrary,
sale of the remaining Greek and Portuguese government bonds in the second
quarter had a negative effect.
Operating costs were up by a slight 0.4% year on year to CZK 9,861 million.
Within these, personnel costs grew by 2.6% to CZK 5,066 million as the average
number of employees rose by 1.0% to 8,776. General administrative expenses
decreased by 1.8% to CZK 3,513 million. Savings were achieved in many areas,
most notably in information technology and communications costs. In September,
a network was completed of seven centres for centralised processing of cash.
Spaced across the Czech Republic, these help to improve the efficiency of
processing and transporting cash within KB. Depreciation, impairment and
disposal of fixed assets was lower by 1.5%, totalling CZK 1,282 million, due
to lower amortisation of certain intangible assets.
Gross operating income in the first three quarters of 2012 increased by 2.1%
year on year to CZK 14,869 million.
Overall risk costs diminished by a significant 76.0% year on year to CZK 1,345
million, due to the fact that the impairment of Greek government bonds of CZK
4,299 million had been recorded in the second and third quarters of 2011. The
total cost of risk in relative terms decreased to 40 basis points in
comparison with 181 basis points from 2011's first nine months. Net creation
of provisions for loan losses grew by 1.8%, affected by growth in the
portfolio's overall size as well as by the continued improvement in loan
portfolio quality. KB had succeeded in both comparison periods to restructure
certain defaulted corporate exposures, and that had led to release of the
Income from shares in associated undertakings climbed by 40.6% to CZK 90
million. The share in the profit of pension scheme beneficiaries was down by
13.7% to CZK 427 million. This item will next year cease to be part of the
consolidated income statement, because, as part of the pension reform, assets
of the clients in pension funds will be separated from those assets belonging
to pension companies.
Income taxes rose by 57.4% to CZK 2,075 million.
KB Group's consolidated net profit for the first three quarters of 2012
reached CZK 11,113 million, which was 54.1% more than in the previous year. Of
this amount, CZK 195 million was profit attributable to holders of minority
stakes in KB's subsidiaries (+14.7%). Profit attributable to the Bank's
shareholders amounted to CZK 10,918 million (55.1% higher year on year).
The comparison period in the balance sheet under IFRS is the end of the
previous year. Therefore, unless otherwise indicated, the following text
provides a comparison with the close of 2011.
KB Group's total assets as of 30 September 2012 increased by 2.2% year to date
to CZK 771.5 billion.
Amounts due from banks decreased by 23.0% to CZK 78.0 billion. The largest
component of this item is loans provided to central banks as part of reverse
repo operations, which were lower by 42.7% at CZK 33.8 billion.
Financial assets at fair value through profit or loss grew by 48.0% to CZK
51.7 billion. That portfolio comprises the Group's proprietary trading
Total net loans and advances expanded by 2.5% to CZK 445.4 billion. The gross
amount of client loans and advances increased by 6.2% to CZK 462.3 billion.
The share of standard loans within that total climbed to 91.9% (CZK 424.8
billion) while the proportion of watch loans was 2.4% (CZK 11.3 billion).
Loans under special review (substandard, doubtful and loss) comprised 5.7% of
the portfolio with volume of CZK 26.2 billion. The volume of provisions
created for loans reached CZK 17.4 billion, which is 4.7% more than at the end
The portfolio of available-for-sale securities expanded by 11.6% to CZK 140.6
billion. The book value of shares and participation securities in the
available-for-sale portfolio is negligible since KB's second-quarter sale of
its stake in CMZRB. From the CZK 140.6 billion total volume of debt
securities, Czech government bonds represented CZK 95.6 billion and foreign
government bonds CZK 24.3 billion.
The volume of securities in the held-to-maturity portfolio was down by 1.9% to
CZK 3.3 billion. This portfolio consists entirely of bonds.
The net book value of tangible fixed assets climbed by 14.3% to CZK 7.9
billion, primarily due to recognising the new KB headquarters building.
Intangible fixed assets decreased by a moderate 0.1% to CZK 3.8 billion.
Goodwill, which primarily derives from the acquisitions of Modrá pyramida and
SGEF, remained unchanged at CZK 3.8 billion.
Total liabilities increased by 0.5% in comparison with the end of 2011 to CZK
676.3 billion. Amounts due to customers grew by 1.4% to CZK 568.3 billion. The
outstanding volume of issued securities rose by 4.8% to CZK 19.2 billion. The
Group's liquidity, as measured by the ratio of net loans to deposits, reached
78.4% (82.9% excluding client assets in Penzijní fond KB).
Shareholders' equity, which expanded year to date by 16.3% to CZK 95.2
billion, was primarily affected by the generation of net profit, increase in
the available-for-sale portfolio revaluation reserve by CZK 5.0 billion, and a
CZK 3.3 billion rise in hedging instruments. As of 30 September 2012, KB held
in treasury 238,672 of its own shares, representing 0.63% of the registered
Comprising solely of core tier 1 capital, regulatory capital for the capital
adequacy calculation reached CZK 53.9 billion as of the end of September 2012.
KB Group's capital adequacy, as well as the core tier 1 capital ratio under
Basel II standards, stood at a high level of 14.5%.
Annualised return on average equity for the first three quarters of 2012 came
to 17.0% while annualised return on average assets was 1.9%.
Net profit adjusted for one-off effectsdeclined by 1.5%. Excluding one-off
items, adjusted annualised return on average equity was 15.3% and adjusted
annualised return on average assets 1.8%.
Changes to the Corporate Governance in third quarter 2012
The composition of Komerční banka's Board of Directors changed with effect
from 1 August 2012. The Supervisory Board elected Pavel Čejka and Karel Vašák
as new members of the Board of Directors. Pavel Čejka is in charge of Strategy
and Finance, Operations, Information Technology, Project Organisation and
Management, Support Services, and Investment Banking Operations. Karel Vašák
is in charge of Top Corporations and Investment Banking. The former members of
the Board of Directors, Jan Juchelka and Patrice Taillandier-Thomas, moved to
pursue other duties within the Société Générale Group.
With effect from 1August 2012, Komerční banka broadened the competences of
its ombudsman, who addresses contentious issues between certain companies in
the KB Group and their clients. Clients of Komerční banka, Komerční
pojišťovna, Modrá pyramida stavební spořitelna, Penzijní fond Komerční banky,
ESSOX and (newly) Factoring KB and SG Equipment Finance Czech Republic can
seek help from the ombudsman. Komerční banka's ombudsman is Dr Joseph
Franciscus Vedlich, LLM.
ANNEX: Consolidated results as of 30 September 2012 under International
Financial Reporting Standards (IFRS)
Profit and Loss Statement 9M 2012 9M 2011 Change
(CZK million, unaudited) year on year
Net interest income 16,500 16,519 -0.1%
Net fees and commissions 5,264 5,585 -5.7%
Net gains from financial operations 2,870 2,201 30.4%
Other income 96 71 35.2%
Net banking income 24,730 24,376 1.5%
Personnel expenses -5,066 -4,940 2.6%
General administrative expenses -3,513 -3,576 -1.8%
Depreciation, impairment and disposal of fixed
assets -1,282 -1,302 -1.5%
Operating costs -9,861 -9,818 0.4%
Gross operating income 14,869 14,558 2.1%
Cost of risk -1,345 -5,598 -76.0%
Net operating income 13,524 8,960 50.9%
Profit on subsidiaries and associates 90 64 40.6%
Share in profit of pension scheme beneficiaries -427 -495 -13.7%
Profit before income taxes 13,187 8,529 54.6%
Income taxes -2,075 -1,318 57.4%
Net profit 11,113 7,211 54.1%
Minority profit/(loss) 195 170 14.7%
Net profit attributable to the Bank's
shareholders 10,918 7,041 55.1%
Balance Sheet 30 Sep 31 Dec Change
(CZK million, unaudited) 2012 2011 year to date
Assets 771,470 754,810 2.2%
Cash and balances with central bank 8,557 16,980 -49.6%
Amounts due from banks 78,045 101,393 -23.0%
Loans and advances to customers (net) 445,428 434,386 2.5%
Securities 195,587 164,260 19.1%
Other assets 43,853 37,791 16.0%
Liabilities and shareholders' equity 771,470 754,810 2.2%
Amounts due to banks 34,660 37,454 -7.5%
Amounts due to customers 568,329 560,700 1.4%
Securities issued 19,217 18,338 4.8%
Other liabilities 54,109 50,465 7.2%
Subordinated debt 0 6,002 Repaid
Shareholders' equity 95,155 81,850 16.3%
Key ratios and indicators 30 Sep 30 Sep Change
2012 2011 year on year
Capital adequacy (CNB, Basel II) 14.5% 16.0% q
Tier 1 ratio (CNB, Basel II) 14.5% 14.7% q
Total capital requirement (CZK billion) 29.6 28.4 4.5%
Capital requirement for credit risk (CZK
billion) 25.0 23.6 5.8%
Net interest margin (NII/average
interest-bearing assets), annualised 3.2% 3.3% q
Loans (net) / deposits ratio 78.4% 76.1% p
Loans (net) / deposits ratio excluding
pension fund client assets 82.9% 80.3% p
Cost / income ratio 39.9% 40.3% q
Return on average equity (ROAE), annualised 17.0% 12.2% p
Return on average assets (ROAA), annualised 1.9% 1.3% p
Earnings per share (CZK), annualised 385 247 55.8%
Average number of employees during the period 8,776 8,688 1.0%
Number of branches (KB standalone in the
Czech Republic) 399 396 +3
Number of ATMs 702 690 +12
Number of clients (KB standalone) 1,605,000 1,597,000 +0.5%
Business performance in retail segment - overview 30 Sep 2012 year on
Mortgages to individuals - volume of loans outstanding billion 11%
- number of
loans outstanding 108,000 10%
Building society loans (MPSS) - volume of loans CZK 49.8
outstanding billion -3%
number of loans outstanding 128,000 -10%
Consumer loans (KB + ESSOX) - volume of loans CZK 27.4
outstanding billion -1%
Small business loans - volume of loans outstanding billion 6%
Total active credit cards - number 209,000 -3%
- of which to
individuals 160,000 -1%
Total active debit cards - number 1,425,000 -2%
Insurance premiums written (KP) CZK 4.8 billion -11%
Financial calendar for 2013:
13 February 2013: Publication of FY 2012 and 4Q 2012 results
7 May 2013: Publication of 1Q 2013 results
1 August 2013: Publication of 1H 2013 and 2Q 2013 results
7 November 2013: Publication of 9M 2013 and 3Q 2013 results
This information is provided by RNS
The company news service from the London Stock Exchange
QRTLLFFRLVLDIIF -0- Nov/08/2012 07:00 GMT
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