MONETA Money Bank: is this another good buying opportunity?

Today we will take a look at another Czech bank, MONETA Money Bank. We will discuss the strong half-year results, news, successes, reasons for the stock's decline, further outlook and future potential. I won't drag this out unnecessarily and we'll get straight to the point.

MONETA Money Bank branch

MONETA Money Bank is a Czech banking institution that was formerly part of the General Electric financial group. It specialises in banking services for individuals and businesses (especially small and medium-sized enterprises).

A number of you have asked for an analysis of MONETA Money Bank, which presented us with strong half-year results, but still saw a decline this year. Before we get into the specific numbers and results, let's look at the reasons for the drop.

Of course, I probably don't need to mention that one of the main reasons is our old familiar windfall tax. Another reason for the fall in this case is the news that the long-awaited merger of Moneta with Air Bank will not happen after all. The merger was supposed to create the third largest bank in the country. It also came off due to the worsening macroeconomic and geopolitical situation, which pulled the stock down at the time.

Moneta's shares have fallen to CZK 73.30 from CZK 93.75 this year.

Now let's move on to the more positive part, which is the very promising half-year results.

Total operating income reached CZK 6.1 billion, up 13.1% year-on-year. Total operating expenses were stable and even slightly down 1.9% year-on-year to CZK 2.8 billion.

MONETA's net profit for the first half of the year rose 100.7% year-on-year to CZK 2.9 billion.

Graphic is from MONETA Money Bank's half-year presentation

I will summarize other important data for you in classic terms:

  • Return on tangible equity reached 22.6% (compared to 11.2% in the comparable period last year).
  • Operating income of CZK 6.1 billion ( 13.1% y/y)
  • Operating expenses were down 1.9% to CZK 2.8 billion, which is definitely good news (the result of stability and good management even in a period of high inflation).
  • The excellent profitability is due to the development of interest rates and excellent cost control. Net interest income thus increased significantly by 18.2% yoy.
  • MONETA Group's surplus capital amounted to CZK 5.2 billion, including CZK 2.3 billion for future dividend payments.

The surplus capital or strong capital position provides a stable foundation for further potential investments in the business itself.

MONETA Group's achievements in the first half of the year

  1. MONETA continues to successfully expand online sales opportunities for most of its products, meaning various types of loans, mortgages, savings, funds and current accounts (this growth is attributed to its market leadership in digitalisation).
  2. The number of users using mobile banking is also growing strongly, leading to an increase in transaction activity.
  3. MONETA has also signed an agreement with KB to share ATM networks in the Czech Republic, which will increase accessibility for clients and support sustainability as it will save resources in terms of premises and service.

According to the data, MONETA had 558 ATMs, and this agreement will expand availability by an additional 863 KB ATMs, which will also reduce energy consumption.

Another important aspect is credit

The development in lending (loan portfolio) is a very important aspect that everyone should keep a good eye on. If loans are shrinking, this can be a major problem for the bank.

  • No need to worry, this aspect is again solid at MONETA Group. The performing loan portfolio (gross) grew by 11.7% year-on-year.
  • The retail loan portfolio grew (y/y) by 12.7%.
  • Commercial loans achieved a y/y increase of 9.4%.

Mortgage loans, on the other hand, fell by 44% y/y, but there is actually nothing to be surprised about here (it is a consequence of rising interest rates).

The quality of the loan portfolio is improving

NPL = non-performing loan

The NPL loan portfolio has been gradually declining, with a drop of CZK 2.5 billion over the last 12 months, which is just as well. Thus, the share of NPL loans in the total portfolio has declined from 2.5% to 1.4% year-on-year. The decrease in the NPL portfolio share was mainly due to the successful sale of these loans with a nominal value of CZK 0.5 billion, the continued good quality of the portfolio, and the continued good payment performance of the loans.

CEO Tomáš Spurný and his comments on the results:

The economic outlook for the remainder of the year is uncertain and is likely to deteriorate due to inflationary pressures at home and in Europe and the continuing effects of the Russian aggression in Ukraine. We do not rule out the possibility that we will need to make additional loan provisions in the second half of this year as well as book additional tax charges. For this reason, we do not plan to update our previous full-year 2022 net income guidance of CZK 4 billion. During the second half of the year, we plan to prepare the MONETA Group for what appears to be an increasingly difficult economic environment and the likely arrival of an economic recession.

  • I should note here that analysts, on the other hand, recommend buying MONETA and give it relatively decent price targets. In some cases, I have even found target prices of around CZK 100, which may be a bit sci-fi, but would certainly make investors happy.

Market outlook for the coming years

Dividend

Source.

At first glance, you might think that this is a volatile dividend that is on a teeter-totter. However, the opposite is true and MONETA offers one of the more stable and fatter dividends. The past years are only a result of the pandemic and measures where the CNB restricted dividend payments due to the effects of the covid pandemic. The last time Moneta shareholders received the full dividend was in 2019. Back then, it was 6.15 crowns. For this year, the dividend amounted to CZK 7.

Finally, let's take a look at some additional and relevant information

There are a few last important points I want to write to you. I like MONETA from an investment perspective at today's prices, even before the fact that it is priced at a slight premium (looking at metrics like P/B, P/E and P/S) to its competitors. However, I don't think this is that much of an issue as MONETA is profiting very well, paying a decent dividend and at the end of the day, the possibility of further dividend increases is in play. MONETA has shown a very promising half year where I was pleasantly surprised in many ways by the very good numbers. Of course, we still have to take into account our old friend the windfall tax and the macroeconomic environment, but with rising interest rates playing into the banks' hands, this only reinforces my belief that MONETA still has a lot to offer.

If you liked the article and are interested in stocks from the Prague Stock Exchange, I will also direct you to my other analysis where I look at and rate KB.

  • How do you like MONETA?
  • Do you invest in it?
  • Is the current share price attractive to you?

Please note that this is not financial advice. Every investment must go through a thorough analysis.

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Of course, I probably don't need to mention that one of the main reasons is our old familiar windfall tax. Another reason for the fall in this case is the news that the long-awaited merger of Moneta with Air Bank will not happen after all. The merger was supposed to create the third largest bank in the country. It also came off due to the worsening macroeconomic and geopolitical situation, which pulled the stock down at the time.

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