This report analyses the performance of the Bank for the 3Q2014. You will find all the necessary details regarding volume growth, market share, margin and asset quality development in the Bank.
The key highlights are:
Raiffeisen Spořitelna's net profit rises 3.4%...
Raiffeisen Stavební Spořitelna reported a net profit of CZK 94.1 mil. in 3Q2014, up 3.4% yoy compared to the same period last year. The improvement was driven purely by savings in non-personnel costs and depreciation.
Otherwise, the bank faces challenges on all fronts. Margins remain under pressure, volume growth stays negative and asset quality continues to deteriorate, albeit at a slow pace. As a result, ROE settles below 10%.
...on the back of cost savings
The development on the cost side appears to be the only tangible positive the bank has achieved this quarter. Operating costs dropped CZK 3.9 mil, or 3.0% yoy. However, this was achieved purely in the area of non-personnel costs, namely depreciation (down 42.1% yoy) and other costs (down 6.1% yoy).
Personnel costs, on the other hand, increased 9.8% yoy. While the number of employees remains stable, an 11.5% yoy and 2.0% qoq increase in average staff costs per employee stands behind the growth.
Such an aggressive wage growth seems to go against development in the sector. As ČMSS continues to cut wages and staff, Raiffeisen has become the best-paying employer among the bulding savings banks.
But revenue margin falls further...
But it is the revenue side which is a bigger problem. The bank is exposed to the sector which is not growing. Loans and deposits fell a further 0.9% qoq and 0.3% qoq, respectively in the third quarter in spite of Raiffeisen's rising market share on the lending side.
The bank is also relatively less exposed to loans, which account for only 49% of total assets (compared 74% at ČMSS, for example).
This is translated into one of the lower net interest margins among the building savings banks.
...so asset quality trends matter even more
Although Raiffeisen's asset quality is not bad (NPL ratio accounts for 3.51% while the provision coverage is the highest within the building societies at 70%), the combination of the negative trends in both the volume of NPLs and declining interest margins intensifies the issue.
Loan provisions have been eating more than a fifth of the bank's gross operating profit, therefore asset quality trends should be watched carefully in the coming quarters.
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