PKO Bank Polski SA (PSZKF) Q3 2024 Earnings Call Highlights: Record Profits and Robust Growth ...

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Fri, Nov 8, 2024, 12:03 AM 4 min read

Customer Growth: Over 240,000 new customers year on year.
Savings Portfolio: Grew by 14% to EUR 579 billion zlotys.
Financing Portfolio: Increased by over 9% to 285 billion zlotys.
Total Assets: Grew by over 8% to $512 billion.
Tier One Capital Ratio: 17.35%, 600 bps above the dividend criterion.
Non-Performing Loan (NPL) Ratio: Decreased to 3.47%, with a 12 basis point improvement.
Basic Income Growth: Increased by over 20%.
Interest Margin: Increased to 4.76%.
Net Profit: 6.9 billion zlotys for Q3; 10.4 billion zlotys excluding extraordinary events.
Return on Equity (ROE): 19.3%; over 28% excluding extraordinary events.
Cost of Income Ratio: Below 30%.
Cost of Risk: Decreased by 4 basis points to 43 basis points.
Retail Banking Portfolio Growth: Increased by 35%; cash loans up nearly 40%, mortgages over 30%.
Market Share in Mortgages: Almost 26%, with a growth of 1.6 percentage points.
Market Share in Cash Loans: 19%, with a growth of over 1 percentage point.
Credit and Loan Volume Growth: Increased by over 14%.
Mutual Funds Dynamics: Over 40% year on year, exceeding 50 billion market share.
Corporate Banking Growth: Close to 2% year on year; 9% growth in mid and large corporate segments.
Net Profit for Three Quarters: 6.850 billion zlotys, 42% increase year on year.
Extraordinary Items: 3.8 billion zlotys this year, compared to 3.42 billion last year.
Interest Rate Result Growth: Over 24% year on year.
Commissions and Payments Dynamics: Almost 14% year on year.
Cost Efficiency: Improved by almost 2 percentage points year on year.
Bond Issuance: EUR 750 million in senior non-preferred securities; 1.5 billion Polish zlotys in Tier 2 on the national market.
Cost of Risk Trend: Decreasing, with a year-on-year drop of almost 15%.
Legal Risk Coverage: Almost 120%.

Warning! GuruFocus has detected 1 Warning Sign with PSZKF.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

PKO Bank Polski SA (PSZKF) reported a record high net profit of 6.9 billion for the third quarter, with a potential of 10.4 billion without extraordinary events.
The bank experienced a dynamic growth in customer numbers, with a significant increase in the portfolio of savings and financing.
Retail banking showed strong performance with new sales in cash loans and mortgages, leading to a market share increase.
The digital mortgage process has been successfully implemented, significantly reducing the time to approval and attracting new customers.
PKO Bank Polski SA (PSZKF) maintained a high return on equity (ROE) of 19.3%, with a potential of over 28% without extraordinary events.

Negative Points

The bank faced significant burdens from extraordinary items, including provisions for CHF loans and credit vacations.
There is a slight increase in the temperature of the corporate loan portfolio, indicating a potential rise in defaults.
The legal risk costs remain significant, although the trend is decreasing.
The interest rate environment poses challenges, with potential impacts on profit margins as rates change.
The bank's cost of risk, while under control, still requires careful monitoring to maintain stability.

Q & A Highlights

Q: How is the interest rate result expected to evolve given the changes in deposit structures? A: Krzysztof Dresler, Vice-President of the Management Board, explained that the preference for liquidity among customers influences the deposit structure. With high interest rates, there's a tendency for time deposits to increase. However, as rates decrease, savings accounts become more attractive. The bank also observes a shift in customer savings towards investment funds and treasury bonds, impacting the balance sheet mix.

Q: Are there concerns about the provisions for CHF and corporate loans in Q4? A: Szymon Midera, Vice-President of the Management Board, stated that while there is an expected increase in the non-performing loan portfolio, it is not anticipated to impact the final results significantly. The provisions are well-covered, and the bank is prepared for any potential changes.

Q: Can you provide details on the distribution of costs between IRS and CIRs? A: Piotr Mazur, Vice-President of the Management Board in Charge of the Risk Management Area, noted that the historical IRS portfolio will continue to impact interest rate costs this year. However, its significant impact should be eliminated by year-end, leaving only the effects of remaining instruments.

Q: How does the recent data on retail sales in Poland affect your macroeconomic assumptions? A: Szymon Midera mentioned that the bank maintains its macroeconomic path despite recent retail sales data. The impact of U.S. elections and interest rate changes are considered, but the bank remains focused on maintaining a balanced approach.

Q: What are the expectations regarding changes in the bank tax? A: The bank is optimistic about potential changes in the banking tax, hoping for measures that support bank development and money allocation. However, they await substantive discussions and final decisions on the matter.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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