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Czech Banks Quarterly

Jiří Staník
July 12, 2022

Czech banks decreased net profit 47.9% yoy to CZK 47,470 ths in the fourth quarter of 2020 and generated ROE of 28.7%.

Operating income fell 10.8%, cost to income dropped to 40.6% and banks' share of bad loans grew to 2.96%.

CSOB generated the biggest profit while Expobank Czech Republic produced the biggest loss in 4Q2020.

Revenues & Margins

Czech banks reported a net profit of CZK 47,470 ths in the fourth quarter of 2020, down 47.9% when compared to previous year. This implies ROE of 28.7% in 4Q2020. In the last twelve months, profits fell 43.6% yoy to CZK 127,209 ths and ROE reached 19.4%.

CSOB generated the largest net profit in the last quarter (CZK 2,169 mil) followed by Komercni Banka and Ceska Sporitelna. At the other end of the scale was Expobank Czech Republic with a reported loss of CZK 99.7 mil:

Revenues decreased 10.8% yoy to CZK 180,429 mil in the fourth quarter of 2020:

  4Q2019 4Q2020 Change 1-12/2019 1-12/2020 Change
Renenues 202,177 180,429 -10.8% 500,733 459,331 -8.27%
Net Interest Income 39,928 33,604 -15.8% 155,084 139,046 -10.3%
Net Fee Income 8,108 30,948 282% 33,051 53,950 63.2%
Other Income 194,069 149,481 -23.0% 467,682 405,381 -13.3%
Costs 77,717 73,306 -5.68% 195,744 186,494 -4.73%
Staff Cost 43,589 42,552 -2.38% 107,686 107,023 -0.616%
Operating Profit 26,887 94,214 250% 112,093 167,370 49.3%
Cost of Risk 0.166% 3.22% 3.05 pp 6,592% 67,274% 60,682 pp
Pre-Tax Profit 109,210 57,433 -47.4% 269,408 153,376 -43.1%
Net Profit Bank 91,105 47,470 -47.9% 225,386 127,209 -43.6%
ROE 18.2% 28.7% 10.5 pp 37.6% 19.4% -18.2 pp
NIM 1.94% 1.63% -0.315 pp 7.12% 6.02% -1.11 pp
Cost To Income 46.7% 40.6% -6.09 pp 39.1% 40.6% 1.51 pp

Net interest margin decreasing 0.315 pp to 1.63% as asset yield grew by 6.01 bp to 9.03% and cost of funding increased by 1.96 bp to 3.12%. Fees added 17.2% to total revenues and increased by 282% when compared to last year:

Cost Efficiency

Banks operated with average cost to income of 40.6% in the last quarter as operating costs fell 5.68% yoy. Staff accounted for 58.0% of operating expenditure with a total of 40,713 employees in the sector. Banks paid their staff 4.58% less than last year with the average monthly cost of CZK 86,451 per person:

While Moneta Stavebni Sporitelna was the most cost efficient based on the cost to income ratio in the fourth quarter of 2020 (with 28.2%), Hypotecni Banka operated with the lowest operating costs when compared to a sum of loans and deposits, i.e. when utilization of both assets as well as liabilities is taken into account (0.266%):

Commercial banks generated operating profit before provisioning of CZK 94,214 mil in the fourth quarter of 2020, up 250% when compared to last year. Ceska Sporitelna generated the largest operating profit in the fourth quarter of 2020 (CZK 5,461 mil), whilst Fio banka was operating with the highest operating margin when compared with risk weighted assets (8.27%):

Asset Quality

Provisions have "eaten" some of operating profit in the fourth quarter of 2020 as cost of risk reached 3.22% of average loans. The volume of non-performing loans increased by 14.9% qoq to CZK 99.0 bil and represented 2.96% of total loans at the end of December. Provisions covered 83.2% of NPLs, up from 76.2% a year ago:

Within the sector, Moneta Stavebni Sporitelna had to create the most provisions in the fourth quarter of 2020 relative to its loans (4.33%) and Wustenrot Hypotecni banka the least (-1.04%). In terms of overall asset quality, Banka Creditas was operating with the highest share of non-performing loans, some 17.5% of customer loans at the end of December:

Profitability

The three largest banks created 13.4% of sector's total profit in the fourth quarter of 2020, down when compared to 14.5% seen three years ago. In terms of revenue and operating profit, the trio generated 14.2% and 13.2% of the total:

Overall, Czech banks generated its shareholders an annualized return on equity of 28.7% in the fourth quarter of 2020 and 19.4% return in the last four quarters. When equity "adjusted" to 15% of risk-weighted assets, the return on equity would have reached 56.5% in 4Q2020 and 37.3% in the last twelve months.

Wustenrot Hypotecni banka generated its shareholders the highest return in the last quarter (ROE of 18.3%) followed by Fio banka (13.8%) and Moneta Stavebni Sporitelna (12.6%). When adjusted for the same level of equity (i.e. 15% of RWA), Fio banka, Stavebni Sporitelna Ceske Sporitelny and Moneta Stavebni Sporitelna would have made it to the top of the list:

Loan Growth & Market Share

Loan Growth & Market Share

Loans decreased by 0.651% qoq to CZK 3,596 ths during the fourth quarter of 2020. This implies an annual growth rate of 4.20% in the last 12 months:

Mortgage loans grew 7.98% yoy in the last 12 months and were up 2.30% qoq in the last quarter. At the end of December, mortgages formed 39.9% of total loans. Consumer loans increased 0.348% qoq (up 1.82% yoy) and represented 11.8% of total bank loans while corporate loans fell 3.33% qoq and were up 0.280% yoy to CZK 1,123 bil (or 31.2% of loans).

Banka Creditas has grown the fastest in relative terms within the last quarter (21.1% qoq), followed by UniCredit Bank Czecho-Slovakia and Air Bank. In absolute terms, however, UniCredit Bank Czecho-Slovakia the largest piece of the pie when compared to the previous quarter (CZK 68,271 mil or -290% of the market net increase) followed by Raiffeisenbank Czech Republic and CSOB:

Overall, CSOB remains the largest lender with 26.0% of the market followed by Ceska Sporitelna with a 20.8% market share and Komercni Banka (18.9%). At the end of December 2020, most of CSOB's loans came from residential mortgages (49.0% of total). Corporate loans formed 32.1% and consumer loans represented a further 3.65% of the total loan book:

Deposits & Market Share

Customer deposits decreased 6.99% qoq to CZK 5,162 bil during the fourth quarter of 2020. This means an annual growth rate of 8.92%, which is above the average growth of 6.35% we have seen in deposits in the last decade:

As partly seen above, households deposits grew 3.25% qoq and 12.2% yoy in the last 12 months and represented 59.2% of total customer deposits at the end of December 2020. Corporate deposits decreased by 1.17% qoq (or 14.9% yoy) and made up 619% of total.

Hypotecni Banka appears to have grown the fastest in deposits in relative terms last quarter compared to the next bunch of Czech banks (258% qoq), followed by MONETA Money Bank and Fio banka. In absolute terms, when compared to the previous quarter, however, most new deposits went to Raiffeisenbank Czech Republic (CZK 10,567 mil) followed by Air Bank and mBank Czech Republic:

Overall, Ceska Sporitelna remains the largest deposit collector with a 21.2% market share followed by CSOB (20.8%) and Komercni Banka (17.6%):

At the end of December 2020, customer deposits in the Czechia reached 90.7% of GDP, up from 67.4% seen a decade ago. Loan to deposit ratio accounted for 69.7% in the Czechia at the end of fourth quarter of 2020, down from 72.8% a year ago and 78.0% in 2010. When comparing only household loans and deposits, the ratio was 60.8% at the end of December 2020:

Capitalization & Adjusted ROE

Capitalization

Czech banks operated with capital adequacy ratio of 24.4% at the end of the fourth quarter of 2020, up 3.07 bp when compared to the same period of last year. Sector's Tier 1 ratio reached 23.6% and equity accounted for 18.6% of loans. This is up 5.70 bp and down %down bp when compared to five years ago.

Hypotecni Banka reported the highest capital adequacy ratio (45.9%) followed by Modra Pyramida Stavebni Sporitelna (29.0%) and Expobank Czech Republic. Wustenrot Hypotecni banka and Moneta Stavebni Sporitelna managed to operate with relatively low capital ratios of 13.7% and 14.8%, respectively:

Fio banka achieved the highest ROE in the last three years (41.3%) followed by Air Bank (17.2%) and Stavebni Sporitelna Ceske Sporitelny (16.0%). When adjusted to the same level of capital (15% of risk-weighted assets), Fio banka would be the most profitable with a ROE of 30.9% in the last twelve months:

Jiří Staník
Jiří Staník
CEO & Founder
He spent nearly two decades analysing companies in the region of Central and Eastern Europe, primarily in the area of financial services. Jiri built and headed Equity Research at Wood & Company, a Central European brokerage firm, and got several awards (such as The Best Equity Research or The Best Analyst by Euromoney).