Digital Shift And Diversified Fees Will Drive Strong Bank Performance Ahead

Catalysts

About MONETA Money Bank

MONETA Money Bank is a leading Czech retail and commercial bank focused on lending, transactional banking, and wealth and insurance product distribution.

What are the underlying business or industry changes driving this perspective?

• Accelerating shift of 1.6 million clients toward digital channels, led by Smart Banka usage growth of 11% and rising daily visits, is expected to structurally lower servicing costs and support higher operating leverage, improving net margins over time.
• Robust multi segment lending momentum, with new production up nearly 30% and especially strong growth in mortgages and small business loans, is expanding the loan book at more than 6% and is expected to underpin sustained net interest income and earnings growth.
• Rapid expansion of wealth management and insurance franchises, including 34.6% growth in distributed assets and high double digit growth in opening and trailer fees, is diversifying revenues toward fee income with attractive margins, supporting more resilient earnings.
• Disciplined deposit pricing in a highly competitive market, backed by a strong liquidity and capital position, positions the bank to defend net interest margin and return to deposit growth once unsustainably high offers normalize, helping to stabilize funding costs and profitability.
• Benign credit environment with a record low NPL ratio of 1.1%, modest cost of risk at 16 basis points, and still available management overlays creates room for continued low impairment charges, directly supporting net profit and return on tangible equity.

Assumptions

This narrative explores a more optimistic perspective on MONETA Money Bank compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming MONETA Money Bank's revenue will grow by 7.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 52.3% today to 44.2% in 3 years time.
• The bullish analysts expect earnings to reach CZK 7.5 billion (and earnings per share of CZK 15.61) by about December 2028, up from CZK 7.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 18.2x on those 2028 earnings, up from 13.7x today. This future PE is greater than the current PE for the GB Banks industry at 12.7x.
• The bullish analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.18%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Prolonged deposit price competition from regional and challenger banks offering rates around 4% could force MONETA to either accept continued retail deposit outflows or raise its own rates. This would pressure net interest margin and slow revenue growth from lending.
• If the Czech National Bank keeps policy rates stable for longer while market yields on the medium and long end of the curve remain elevated, the bank may face a squeeze between asset yields and funding costs as older high-yielding assets roll off. This could limit net interest income and earnings expansion.
• The shift of customers from branches to digital channels, combined with a 17% decline in branch visits and rationalization of the physical network, may weaken cross-selling of higher-margin third-party and insurance products, which are already lagging expectations. This could undermine fee and commission income and dampen overall revenue growth.
• Current benign credit conditions with an NPL ratio of 1.1% and cost of risk at 16 basis points are unusually favorable and supported by overlay releases and NPL sales. Any deterioration in the macro environment or employment could normalize impairments from these low levels and weigh on net profit and return on tangible equity.
• Heavy reliance on very high dividend payouts at 90% of consolidated net profit while simultaneously funding strong loan growth and regulatory capital needs increases sensitivity to any negative shock in asset quality or earnings. This could require retaining more capital, limiting dividend capacity and reducing the attractiveness of the equity story for investors, thereby affecting the share price through lower valuation multiples and earnings expectations.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for MONETA Money Bank is CZK205.0, which represents up to two standard deviations above the consensus price target of CZK159.25. This valuation is based on what can be assumed as the expectations of MONETA Money Bank's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CZK205.0, and the most bearish reporting a price target of just CZK125.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be CZK17.0 billion, earnings will come to CZK7.5 billion, and it would be trading on a PE ratio of 18.2x, assuming you use a discount rate of 9.2%.
  
• Given the current share price of CZK188.6, the analyst price target of CZK205.0 is 8.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.