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Modra Pyramida Stavebni Sporitelna - Takeaways from 2Q2023 Results

Jiří Staník
August 31, 2023

Modra Pyramida Stavebni Sporitelna's net profit fell 59% to CZK 82.3 mil in 2Q2023 due mainly to an absence of CZK 121 mil extra gain made last year. 

Operating profit fell by a third as revenues decreased 3.04% due to weak interest income and cost rose hefty 21.3% thanks to staff cost. Cost to income therefore increased to 73.4% 

The Bank wrote back another CZK 27.6 mil in provisions, so we expect the NPL ratio fell below 1.0%. 

Loan momentum remains good rising 2.3% qoq, though loan to deposit ratio rising to 166% is something to watch for 

Modra Pyramida Stavebni Sporitelna made a net profit of CZK 82.3 mil in the second quarter of 2023, down 55.8% yoy, or decrease of CZK 104 mil in absolute terms. Excluding CZK 121 mil extra gain from a sale of assets in 2Q2023, pre-tax profit would have increased by 7.4% yoy. Having said that, operating profitability was weak due mainly to lower interest income and cost growth, another provision write-back was the main positive message of the quarter:

Revenues & Costs

Revenues decreased 3.0% yoy to CZK 289 mil in the second quarter of 2023 due mainly to weaker net interest income (down 16.0% yoy). Despite a solid loan growth, the pressure from higher cost of funding stays, so net interest margin decreased 0.168 pp to 0.837% of total assets compared to last year. On the positive note, fee income grew 14.7% yoy and trading/other income was relatively strong. When compared to three years ago, revenues are up less than 1.0% showing the sub-sector remains under pressure:

Average asset yield was 4.06% in the second quarter of 2023 (up from 3.61% a year ago) while cost of funding amounted to 3.44% in 2Q2023 (up from 2.78%). Asset yield increased 3 bp and cost of funds was flattish last quarter, so pressure seems to be easing:

Costs increased by 21.3% yoy and the bank operated with average cost to income of 73.4% in the last quarter. Staff cost rose hefty 31% as the bank added 8.5% more people on its paycheck (total of 347 persons) while non-personnel expenses rose 7.0% when adjusted for the contribution to the Bank Guarantee Fund:

Loans, Deposits and Capitalization

Loan growth remains solid while deposits continue decreasing since the end of 2021. Modra Pyramida Stavebni Sporitelna's customer loans grew 2.3% qoq and 7.78% yoy in the second quarter of 2023 while customer deposits fell further 0.45% qoq and 6.95% yoy. That’s compared to average annual growth of 14.8% in loans and 3.29% decline in deposits seen in the last three years.

At the end of second quarter of 2023, Modra Pyramida Stavebni Sporitelna's loans increased 166% of total deposits and 84.7% of total assets. That's compared to 106% and 72%, respectively, at the end of 2020:

Retail, mostly residential mortgage loans grew 2.30% qoq and were 8.48% up yoy accounting for almost 100% of the loan book at the end of the second quarter of 2023:

We estimate that Modra Pyramida Stavebni Sporitelna has gained 0.03 pp market share in the last twelve months in terms of loans (holding 2.12% of the market at the end of 2Q2023). On the funding side, the bank seems to have lost 0.124 pp and held 0.788% of the deposit market. In terms of mortgage lending, the Bank seems to be gaining market share to over 5.0%:

The Bank made a third consequtive quarterly provision write-back amounting to CZK 27.6 mil in the second quarter of 2023.  

We therefore assume asset quality remains good and share of non-performing loans might have fallen below 1.0% of total loans in June 2023, while provisions might be covering around 50% of bad loans, on our estimates:

We assume Modra Pyramida Stavebni Sporitelna's capital adequacy ratio reached 24-25.0% in the second quarter of 2023, up from 20.4% for the previous year while bank's equity continues falling as a share of loans, as loan books expands:


Overall, Modra Pyramida Stavebni Sporitelna made a net profit of CZK 82.3 mil in the second quarter of 2023, down 55.8% yoy. This means an annualized return on equity of 4.90% in the last quarter or 3.85% when the last four quarters are taken into account:


Even when excluding the one-off gain made last year, Modra Pyramida announced relatively weak set of results in 2Q2023 with operating profit falling by a third. This is due mainly to an ongoing pressure on the interest margin and a hefty increase in personnel cost. Increasing imbalance between loans and deposits (loans to deposits at 166%) funded by Komercni Banka is also something to watch for.   

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).