ERSTE, Komern banka and Moneta are involved in a blunder that must not be repeated

The domestic banking sector is still full of policy on the introduction of foreign tax on profits. Zkonodrc’s weights caused sharp drops in share prices to crash the stock market. ERSTE (RBAG.CZ) shares have fallen by 5.7% since the end of June, Komern banka (KOMB.CZ) has written off 13.4% over the same period, and Moneta (MONET.CZ) is trading less than 16% lower. What is the reason for extraordinary profits and what can be expected from the near future?

The Czech National Bank recorded a total volume of over 3.1 trillion crowns in circulation. This is an average decrease of 0.45%. Since the beginning of the year, the total volume of domestic household debt has decreased by 0.8%. et the consumer changes his purchasing habits both because of high inflation and also because of high annual rates. They concluded that the volume of short- and medium-term debt between years decreased by 21.5% and 4.9% to 2.3, respectively. 3.05 billion crowns. Despite rising rates, mortgages remain popular, their volume grew by 3.7% to 2.5 trillion crowns. From the beginning of the year to the end of the period, a volume increase of only 0.25% was recorded. It is necessary to change that until the summer season, the trend of the volume of short-term and medium-term heat waves was increasing. At the turn of the century, there was a hole and a bottom, when the 2T Repo rate reached 5%.

It is therefore evident from the public data that the banks record less income from the loans provided, but the banks’ revenues are increasing accordingly. In the current year, all banks listed on the stock exchange achieved a compound annual income growth rate (CAGR) of three-digit values. ERSTE shows 169%, Komern banka a total of 201% and Moneta only grows by 31%. The only reason for the year-on-year increase is the annual deposit thanks to the savings and term deposits. As of today, Moneta offers an annual interest rate of 5.3%, while Esk spoitelna (ERSTE) offers 4.25% and Komern banka 4%. The high growth in the needs of ERSTE and KB is thus caused by the growing difference between the number of clients in the leading banks and, consequently, their loans at NB.

It is expected that the rates will be higher due to rising inflation, although the new governor of NB, Ale Michl, will generally reject this monetary policy tool. The driving force of the central bank could be the increasing pressure from the US Fed, from which it has already been written off. The American economy continues to show its strength, which was confirmed by relatively good results from the American service sector. If NB did not respond to the dollar’s message, this would weaken the koruna and make it more expensive to import commodities, which are traded in dollars (e.g. oil).

Another reason for rate hikes is the fact that the foreign exchange reserves available to the NB are limited. The Czech National Bank intervened again in favor of the koruna in the Czech Republic, and the volume in the Czech Republic reached EUR 10 billion. In the last few months, NB sold it for EUR 20.5 billion (about 504 billion crowns). The intervention of the central bank is gaining momentum, however, there is a risk that without an increase in annual rates, the foreign exchange could soon run out.

Current data indicate that the rate was restrictively equal. The proof of this statement is the decelerating inter-month growth in the volume of short-term and medium-term debt, which primarily belongs to financial goods or residual consumer goods. In Vienna, a month-on-month decrease in the volume of short-term debt granted in crowns was recorded by 2.1% to 2.3 billion crowns.

The increase in annual rates caused the client’s inability to pay and thus caused the growth of non-performing assets on the banks’ balance sheets. The bank’s liquidity will increase and will threaten the company’s profitability through an increase in operating expenses. On the other hand, the spread between the annual rate provided to the bank by NB and the rate offered by the commercial bank to consumers is widened. It seems that the only aspect that could be behind the further devaluation of domestic banks is such an unusual tax. The state is considering an additional tax on financial institutions, because with rising rates, competition stopped working and an oligopoly was created. Large commercial banks offer low prices for years on account of their growing income from year to year.

The national budget council works with variants of 40%, 50% or 60% taxed financial institutions, which should add an additional 39-59 billion crowns to the national budget. In response to these initials, the shares of domestic banks moved in a different direction and provided long-term investors with things that did not occupy complicities. The Austrian subsidiary ERSTE has fallen by about 45% since the beginning of the year and its valuation has reached the level of 2003. Komern banka has written off 39% since January 1 and is now trading as it was in March 2004. Moneta is the youngest of the listed banks . The company’s shares have fallen by 22% since the beginning of the year, and its listing is expected to be an IPO in 2016.

Fellowship

P/E 7/9/2022

P/E 7/9/2021

P/B 7/9/2022

P/B 7/9/2021

ERSTE (RBAG.CZ)

4.12

11.40

0.47

0.78

Komern banka (KOMB.CZ)

6.80

17.75

0.89

1.32

Moneta (MONET.CZ)

6.82

16.06

1.29

1.59

Comparative valuation of banks listed on the BCPP. Source: Bloomberg

All those banks traded on the stock market crash because of rising interest rates. The performance of these companies is now increased by inflation. If consumer prices continue to rise, banks can look beyond rates and spit out capital through accounts. The first commercial bank increased in retail can show the performance of, for example, companies dealing with wealth management or the area of ​​mergers and acquisitions. No stock will develop in line with market sentiment, and even a strong fundamental will not help them beat market performance. In addition, it should be emphasized that ERSTE, unlike Komern banka and Moneta, is oriented towards the entrance and south-east of Europe, which entails additional risks. The indisputable fact is that the valuations of these companies are close to historical lows.

Tom Black

He became interested in financial markets during his studies at the gymnasium. At that time, he also gained his first experience with journalism, when he worked as a commentator for a long time under the head of the Institute of Economics. Tom Cverna mainly talks about fiscal policy or stock markets. Among his main interests are five fundamental analyzes of the company and the market. Since June 2022, he has been working as a trainee market analyst at XTB.

XTB

XTB, as a leading European broker, was founded in 2004 and is one of the largest brokers in the world with offices in 13 countries, including the Czech Republic, Slovakia, Great Britain, Spain, Germany, France and Chile. The Prask office has been here since 2008. It is regulated by world supervisory bodies such as the British FCA, the Polish KNF or the Cypriot CySEC. Since 2016, the company has been listed on the Varavsk stock exchange.

Things at https://www.xtb.com/cz.

The article is in Czech

Tags: ERSTE Komern banka Moneta involved blunder repeated

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