- Customer Growth: Increased by more than 236,000.
- Financing Volume: Up 9% to PLN 279 billion.
- Savings Volume: Increased by 14.4% to PLN 562 billion.
- Total Assets: Grew by 10% to PLN 507 billion.
- NPL Ratio: Decreased by 3.54%.
- Tier 1 Capital Ratio: 17.15%, 619 bps above the dividend criterion.
- Core Income Growth: Increased by 18%.
- Net Income Margin: Increased by 0.17 base points to 4.48%.
- Net Profit: PLN 4.4 billion, up 115% year on year.
- Return on Equity (ROE): 19%, excluding extraordinary events, almost 30%.
- Cost-to-Income Ratio: Decreasing steadily, below 40 bps.
- Consumer Loans Growth: Up by almost 14% year on year.
- Mortgage Loans Market Share: 25% in new sales.
- Deposits Growth: Up 7.3%.
- Mutual Funds Market Share: Increased by almost 40%.
- Corporate Segment Balance Sheet Growth: 30% increase.
- SME Growth: Two-digit growth in SMEs.
- Leasing and Factoring Growth: Over 20% year on year.
- Net Profit Excluding Extraordinary Items: PLN 6.8 billion for H1 2024.
- ROE Excluding Extraordinary Items: 28.6%.
- Net Interest Margin: Improved despite loan repayment relief.
- Commission Income Growth: 15% year on year.
- Cost Dynamics: 11% increase, with cost income retained at around 30%.
- Provisions for Swiss Franc Loans: Continued provisions impacting results.
Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PKO Bank Polski SA (PSZKF, Financial) reported a significant increase in net profit, reaching PLN4.4 billion for the first half of 2024, marking a 115% year-on-year growth.
- The bank's customer base expanded by over 236,000, contributing to a 9% increase in financing volumes and a 14.4% rise in savings within the PKO Group.
- The bank achieved a high return on equity (ROE) of 19%, with core income growing by 18% and net income margin increasing by 0.17 basis points to 4.48%.
- PKO Bank Polski SA (PSZKF) recorded a 14% year-on-year growth in consumer and mortgage loans, with new sales growth exceeding 32%.
- The bank's digital transformation initiatives, such as the digital mortgage project, are expected to enhance customer experience and streamline processes.
Negative Points
- The bank faces ongoing legal risks related to Swiss franc loans, with provisions overshadowing results and expected to continue impacting future quarters.
- There was a slight increase in non-performing loans (NPLs) due to the reclassification of a major corporate customer, affecting overall portfolio quality.
- The bank anticipates regulatory changes that will tighten capital requirements, posing challenges to maintaining capital adequacy.
- Interest rate cuts could impact net interest income, with a sensitivity of approximately PLN740 million over 12 months.
- The bank's cost dynamics are influenced by investment in human resources and general economic price pressures, with payroll costs increasing by 11%.
Q & A Highlights
Q: Could you comment on the surprising trends in net interest income and margin, and the reasons behind the increase in deposit costs?
A: Krzysztof Dresler, Vice President of the Management Board in charge of Finance and Accounting, explained that managing net interest income involves balancing deposits and pricing to retain customers. The bank optimizes interest costs while maintaining solvency requirements, and plans to continue this trend, leveraging comprehensive activities and fees to adapt to market conditions.
Q: Regarding the cost of risk, is the PLN201 million provision related to CHF-denominated loans due to legal proceedings?
A: Piotr Mazur, Vice-President of the Management Board in Charge of Risk Management, confirmed that the provision is conservative and relates to a separate portfolio under management, with full access to resources and mortgage collateral.
Q: What are your plans for profit distribution and dividend payout in light of ambitious loan goals and excess assets?
A: Krzysztof Dresler stated that the bank will continue its dividend policy, aiming for a 70% payout limit. The recommendation will depend on growth dynamics and capital adequacy, with flexibility to adjust based on situational reconnaissance.
Q: Can we expect similar events impacting interest income from maturing debentures in the coming months?
A: Krzysztof Dresler noted that the bank has a large portfolio of debentures, and hedge accounting contributes to interest costs. This will support net interest income until the end of the year, but no specific forecasts are published.
Q: How sensitive is net interest income to a 100 bps interest rate cut?
A: Krzysztof Dresler indicated that the sensitivity over 12 months is approximately PLN740 million. The bank has aligned its structure to meet regulatory requirements, ensuring stability in interest income.
Q: What was the impact of the NPL portfolio sale on your P&L?
A: Piotr Mazur reported that the sale of a PLN350 million NPL portfolio in Q2 contributed over PLN30 million to the bank's net profit.
Q: Is the increase in NPL rates a trend or an isolated case?
A: Piotr Mazur explained that the increase was due to the reclassification of a major corporate customer, and the overall risk level is returning to pre-COVID levels. The bank remains vigilant but does not see this as a concerning trend.
Q: Any changes in compensation policy affecting payroll costs?
A: Szymon Midera, President of the Management Board, stated that the bank aims to be a market leader and trendsetter, investing in its people. This strategic focus will impact payroll cost dynamics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
