Hello and good afternoon, ladies and gentlemen. Welcome from Komerční banka and thank you for sharing your time with us today. It is 30th of October 2025 and we are going to discuss the results of Komerční banka Group for the first nine months and third quarter of 2025. Please note that this call is being recorded. Our speakers today will be Jan Juchelka, Chairman of the Board of Directors and CEO of Komerční banka, Jiří Šperl, Chief Financial Officer, and Anne Kouchkovsky , Chief Risk Officer. Standing by in case you have questions for them are Miroslav Hirsl, Head of Retail Banking, Katarína Kurucová, Head of Corporate and Investment Banking, and Margus Simson, Chief Digital Officer. As always, we will begin with the presentation of results, which will be followed by the question and answer session. During the presentation part, all participants will be on listen-only mode.
We would appreciate if you could keep your microphones muted during that time. Now let me ask the CEO Jan Juchelka to begin the presentation. Thank you.
All right. Hello, good morning or good afternoon. Thank you for giving us the opportunity and sharing the time with us for the presentation of Komerční banka results for the first nine months and for the third quarter. Together with me there will be Jiří Šperl speaking and Anne Kouchkovsky , speaking, either for financial performance or for quality of assets. We can jump directly into page number four, please. Komerční in first nine months was growing nicely. It's loan book by 3.6% on year-over-year basis, with a strong driver coming from housing loans. Here we were achieving on year-over-year basis almost 50% growth. We are in nominal values. We are coming back to the record high numbers on that particular product.
Let me also reiterate for the fact that it's Modrá pyramida, the subsidiary which is completely and entirely in charge of this product and that we have in parallel with this strong business performance, achieved super high productivity gain when joining together or merging together the two product lines, the historical product lines, one from the bank, one from Modrá itself. I will come back to it in detail. Deposits were up only mildly by 0.1% on year-over-year basis. The third quarter though injected 2.6% growth. What we are happy to see is that current accounts are growing by 3.2% and we hope it's the beginning of a trend. It's not an ad hoc event. Other assets under management, which in our case is pension schemes, insurance schemes, Amundi products or private banking products, were growing by 6.6%.
Inside this category the mutual funds were growing by almost 10%. The bank remained very strong on capital, so 18.4%. Quarter one was 17.6%. Loan to deposit ratio in very, I would say, safe territory, 82%. Both short term and long term indicators of liquidity being safely high above the required levels obviously and this is something what we will present in detail. There was the asset quality playing important role in the composition of the net profit. The net profit was totaling at CZK 13.6 billion on reported basis. We are growing by 8.3%. If we take out the one-off effect of sale of our headquarter building exactly in the third quarter of 2024, on a recurring basis the net profit would be growing at the level of 35.1%. Cost-to-income ratio, also thanks to very strict cost management, was landing at 46.4%. ROE 14.5% on standalone basis.
What happened also on the side of our business and our financial performance is that we are successfully approaching the very last stage of transferring clients from all to the new world. As of end of September, there was 1.46 million customers already in the new systems, out of which almost 300,000 were newly onboarded customers. Numbers which have never been seen before. In the reality of KB , we successfully continue on that front. We are above one and a half million and we are above 300,000 newly onboarded clients. On the corporate governance side, we have a new Chairperson of our Supervisory Board, Cécile Bartenieff , also recently appointed Head of Mobility and International Banking & Financial Services at Société Générale.
We have announced a new CFO, Etienne Loulergue, to some extent alumni of Komerční banka because he used to serve as Deputy to Jiří Šperl approximately five years ago, will become the CFO of KB Group starting 15th of December of 2025. As we have Jiří Šperl at his probably last presentation of results today, I wanted to thank him warmly for his professional service and I am encouraging everyone around this call to enjoy presentation. Today we were ranked number one cash management bank in Czech Republic by Euromoney survey which was conducted in the third quarter of this year. We can move to next page.
As w e are approaching the advanced stage or very final stage for retail banking of the transformation program. We wanted to refresh everybody's memory of how monumental piece of work is behind us and where is it heading to. Let me say that the leitmotif of our transformation was simplification. The significant simplification of products and the client's proposition, including the same user's environment in the mobile phone, in the desktop solution, and in the branch, i.e., relationship manager solution, is one of those aspects, you know, probably that we have replaced. We have put in place a new core banking system. We have completely created the analytical layer above that. As I have already mentioned, these front-end solutions, including the application which is named KB+ application, is bringing a new customer's experience to either our existing customers or future customers.
When a person is equipped by Bank ID, which is a dedicated digital identity provided by a joint venture established by banks in Czech Republic, the onboarding takes less than 10 minutes and there is fully functional account immediately at hand to the new customer. The account is, depending on the subscription plan, multi-currency. It's covering 15 currencies and it is holding also, I would say, dynamic exchange rate functionality. Inside, we are fully equipped with this mobile application by instant payments in Czech koruna, incoming and outgoing instant currency exchange with preferential rates for those who are paying for their subscriptions. We have term and saving deposits embedded, building savings embedded, domestic and international ATM withdrawals and deposits free of charge, travel and insurance, insurance of personal belongings and payment cards. We have dedicated button for chat and video call. We have virtual assistant inside.
We have debit and credit cards, overdrafts, mortgages, consumer loans, loan consolidation inside the solution. We have pension savings, mutual funds, and investment contracts inside the solution. We have periodic cash flow reviews inside the solution. We will chip in the online brokerage soon in 2026. All of this, because we were launching the new bank in April 2023, was built from scratch in fact as a greenfield solution and I'm very proud of everyone who contributed into this monumental piece of work in favor of our clients. How our clients are liking it. The Net Promoter Score is at 38 positive points. The more they use the application, the higher the NPS score is recorded. It is the number one most downloaded banking application in the country. We are currently beating also the international challengers and all our competitors in App Store and Google Play.
We are getting 4.3 or 4.5 respectively as a feedback on the quality and satisfaction from the users. One of the less attractive indicators but super important for us and even more important for our clients is the vital process availability for KB+ customers, which is achieving 99.8%, and again something that is given or perceived as automatic. I would praise highly everyone who is in charge and who is behind this excellent process stability and availability for the customers. On the side of marketing, we brought to the market amongst the first banks the dedicated bracelet for kids and youngsters where they can get the first impression and feelings about taking care of their own money without using mobile phone, without using any other feature.
We went out with a series of excellent, if not even artistic, set of payment cards in cooperation with students of one of the famous artistic universities in Prague. Obviously, as we are staying the ice hockey bank of the Czech Republic, we are also coming out with a dedicated card, a payment card which is dedicated to ice hockey and ice hockey in combination with the Olympic Games. Next page is bringing us a bit closer to the numbers and graphs related to the transformation story. On the left hand side upper part, you can see that we are sprinting to the finish line of transferring or migrating, if you wish, our retail clients from the old world to the new world. We are almost there.
We are confident that we will be delivering what is the key indicator for that, which is 90% of the total number of our clients, whilst onboarding heavily new clients in the system. The predominant share of mobile banking in the new solution is sort of given, so the numbers are very high. 84% of the total interactions with the bank are done from mobile, only 16% from the PC, and 1% from other channels. We are increasing number of clients interactions, so we have more often and more frequently our clients in the application, which is a great news because it seems that it's designed as more like user friendly. The ergonomy of the solution is better and we don't use it only as a service tool but also as a sales channel.
When speaking about sales through a digital solution, let me bring your attention to the lower part of the lower graph at the left-hand side where we have a school case, if I may say, from both the growth of digital sales and the productivity gain stemming from that. We have started back in 2020 somewhere around 16.5%. If we moved the X close to 2018, it was probably 14% of our capability of digital sales, which was growing and massively growing after the launch of new era of banking in 2023 to today's levels of 54% in parallel with that, thanks to very hard work of our management in Retail Banking. Also in Operations and other parts of the bank, we were constantly pushing down the number of FTEs related to the same activities. Here you see the results as far as digital sales per product are concerned.
You see that, for example, investment contracts are fully digitized by 100%, overdraft, 65% or 66% respectively, etc. When reading from the right to the left, starting recently, we are putting the target numbers for digital sales for each of those products individually. Not always we will be trying to achieve 100%, but what is probably more important, that overall number of 54% will be further growing and it will be us deciding what is the targeted level. Next page, please. When speaking about the transformation, it's digital, it's simplification, but it's also searching for other efficiency gain and productivity gain inside the group. One of them, one of the cases, was the complete adoption of KB Poradenství, which is the network of tied agents originally acting below the name of Modrá.
We were unifying the brand, we were simplifying the product portfolio, we were engaging with the agents and equipping them with the proper proposition, not only from Modrá, but from the entire KB Group. Harmonizing the IT environment for them in order to make them fully integrated into our system. Centralizing everything with this back office on that particular activity and bringing them to the campus of the headquarter of Komerční . We did it also with other companies. Everyone who is 100% owned went through the same process. Modrá on its own went through an incredible story for last couple of years. When we were changing the systems, fully digitizing the customer journey, or almost fully digitizing, because we don't have still digitized solution for the cadastral of real estate, but soon to be there. We have merged everything that was mortgages with Modrá pyramida.
Instead of having two product lines, we are having one product line. The achieved productivity gain will be above 100% once the overall transformation is finalized. SGEF SG Equipment Finance Czech and Slovakia Republic was fully acquired by KB Group. You probably know that above our heads there was the disposal of international by Société Générale. As a result, we are 100% owner. The one group principle will be applied and we will unlock additional potential for both commercial and business activities as well as the synergies on the side of the back offices. We have picked up also Upvest. Why? Because it's a super successful platform for raising money and investing them into real estate development. These guys are able to subscribe high multiples of the previous year and they do it for a couple of consecutive years already. We became 100% owner here.
We can move to the next page. Here I'm bringing you back to the reality of today. Czech Republic is a very stable country from both economic and, I hope, we will confirm also from the political point of view. We are a couple of weeks after the general elections and the new government is to be established. When speaking about the new government, what we hear from the nominees or from the main representatives of the political movements and parties who won the elections, there should be a fiscal stimulus for Czech economy stemming from this new government. We will see how that will work. What we very much see is an investment-oriented or public investment or infrastructure investment-oriented group of people preparing themselves to step into the government.
If you combine that with the expected or already existing fiscal stimulus for German economy, the overall environment of making business in Czech Republic is being improved more or less as we speak. In combination with that the representatives of the. The winners of the general elections are also speaking about compressing the energy prices, which might help also with lower level of impulses towards the inflation. Let's see. At least the first signals are from, let's say, business perspective, pretty promising. The GDP was growing by 2.6% on year-over-year basis. Industrial production was down. A combination of weakening Germany performance plus a bit of mess on the supply chain parts and the impact of tariffs imposed by the United States is bringing a little bit down the industrial production, which is perfectly balanced by strongly growing construction output by 17.1% back in August 2025.
This is stemming from infrastructure investments and also pretty booming investments on the side of real estate housing. Not only that, the unemployment rate remains very low. On the other side, the wages are growing and beating the inflation. So 7.8% nominal growth, but 5.3% real growth of wages in the country, which is also giving the answer of who is the main engine of the growth of GDP, which is the title remaining in hands of Czech households. The inflation, as I have mentioned, was at 2.3% level in September. Czech National Bank is remaining calm for the time being and it's keeping the repo rate at 3.5%, which is - 50 bps on year-to-date basis, but was not changed at the latest pricing session of the board of Czech National Bank. Czech koruna is strengthening vis-à-vis Euro and even more vis-à-vis U.S. dollar.
Probably we can move to next page. This is already the business performance. As I have already mentioned, the gross loans were up by 3.6%. Very strong dynamics related to mortgages and Modrá pyramida loans, so housing loans in general, 55.2%. When you compare Q3 2024 versus Q3 2025, we believe that the fine-tuning of the capacity of processing the new requests combined with the fact that the dynamics of the market will remain strong will bring us to slightly higher market share. As KB Group, the rest of the segments were growing at approximately 2.5%, 2.6%, 2.7%. I would say in general the businesses, the households were taking, let's say, appropriate part of their new financing from KB . When zooming on corporate financing or corporate loans, we are witnessing the growth of 2.7% Q3 versus Q3.
Inside that, these SGEF solutions were growing slightly higher than small businesses and corporates. Next page please. All of this obviously was translated into KB being at and serving and servicing its clients with the main transformative transactions. You can see public sector represented by Elektrárna Dukovany, also private sector represented by almost the entire rest of the transactions you see in front of you, with the exception of two which are municipal driven. Everything that is green here represents the format of green financing or green bonds. We can move to the next page, which is bringing us to deposits. It remains stable, + 0.1%. I would say we would love to see that higher, and we took appropriate measures and established concrete tasks to get a higher portion from deposits.
When decomposing the deposits on the side of the category, we are happy to see that the dynamics of growth of non-paid, i.e., current accounts, is coming back to, let's say, better levels, 3.2%. Whereas the savings accounts are in competition mainly with investment solutions. When speaking about investment solutions, on the left-hand side you see that overall we were growing by 6.6%, the assets under management in mutual funds by almost 10%, whereas the life insurance and pension schemes 2.1% and 2.3%, respectively. Next page is bringing us to financial performance, and it's my pleasure to hand over the word to Jiří Šperl. Thank you.
Thank you very much Jan. Indeed very good financial performance in Q3 and the first nine months of the year. I love to repeat key figures once again. So KB Group generated almost CZK 13.6 billion net profit after tax which is 8.3% more than one year ago. If we put aside the one-off coming from the sale of Václavské náměstí, in head office of Václavské náměstí in Q3 last year, the growth would be even much higher, 35%. It's visible from the waterfall chart on the left-hand side that basically all categories contributed positively. That's true that the highest year-on-year impact is coming from super positive cost of risk, that thanks to excellent asset quality of KB loan portfolio and also due to release of part of retail overnight provisions switched from the creation of the provision in 2024 to net release in 2025 and the impact is massive.
It is around CZK 2.3 billion. It's also very much worth to mention that also the top line was growing in first nine months by almost 30% while costs went down by 4.3% and thus generating very strong positive jobs. Also the quarter-over-quarter perspective, our trend is positive. That's right, upper chart and growing as seen there that is quarter-over-quarter + 3.33%. Naturally the very good P&L result transposed also to the SOL profitability indicators, [Baruta] being at 16.5% with, and this should be reminded as well, at the same time strong CET1 ratio at almost 18%, exactly 17.66%. This is bringing me to the balance sheet evolution. Yes, so the balance sheet shrank a bit year-on-year by 2.3% which is however almost solely due to the variable of repo operations with the clients.
If you compare their balances year-over-year, it would be roughly CZK 80 billion less in Q3 this year versus one year ago. This is basically explaining full variation on the liability side. Still there is now a covered bond worth exactly EUR 750 million that was successfully issued in the mid of October. Of course you will see it in the balance sheet during the Q4 results presentation. On the asset side there are basically no changes in trends, only to mention that the volumes of the Garrison continue to decline a bit year to date as we are preferring for the time being investments into repo with the Czech National Bank and of course swapped into longer longer maturities following the long term duration of our liabilities. Now let me go briefly through the main categories as usual. Also I would say that there are not too many surprises.
The positive trends do continue and will continue including mainly positive jobs generation. Let's start with the net interest income, so to say, despite the fact that NII was, I would say, severely hit by doubling of mandatory reserve requirement as of January 1 st this year it is growing. It is growing solid pace by 3.3% year on year. It's basically the case both for key categories chapters. What I mean is income from the deposits and income from the loans and both growing by roughly 4%. The drivers behind are however a bit different. NII deposit is positively influenced mainly by spread effect by spreads supported by improved structure of the deposits. While the income from loans is driven solely by volumes and the spreads remains basically flattish. The similar trends are visible also from the quarterly perspective. That's right, bottom chart.
On quarterly perspective NII is growing by +1.5%. Name the chart on the upper left hand side. On year to date basis it is 1.70. It is flattish quarter over quarter, but positive year on year by 6 bps which is a positive news after some time. After some time on top of that we are expecting that the trend of the rise is going to continue also in Q4 this year. I can touch it during the Q & A if needed. Let's move to the fees income. Income from fees and commissions is also growing by +3.4%. There are again usual suspects in terms of growth. That is mainly fees from cross selling and specialized financial services both growing on nine months basis by 13 %- 14%.
In the era of the cross sell fees it is a reflection of both volume growth of non bank assets under management but also improved structure which is still continuing improving. What I mean is that there is kind of maneuver from more money market type of mutual funds to more dynamic quarterly perspective. That's right, bottom chart it's growing 1.3 quarter- over- quarter and here almost solely supported by the cross sell fees. At the same time, we also see first signs of improvements on the deposit product fees where the income from new packages tariffs are classified. The mirror, of course, can be seen in the transactional fees financial operations, growing pretty dynamically year-over-year by 7.6% again on a nine months basis.
Here it is solely influenced by the capital markets activities and mainly boosted by interest rates of hedging activities, while the FX income from the payments is more or less flattish. That's the blue part of the chart. The dynamics is even higher on a quarter basis, growing by a strong 15.4%. Here both elements contributed strongly, including also the effects from the structural book growing by a strong 10%. The jump in FX income from the structural book was somehow expected due to the seasonality or seasonally strong FX convergence, as I was somehow indicating already three months ago. Finally, before passing to OpEx, on a nine months basis OpEx is declining strongly by 4.3% year- on- year, supported basically by all components except depreciation and amortization. Let's go briefly into the structure.
Personnel expenses, it's almost all done or covered by the increased efficiency of the bank and thus decrease the number of the employees. Year on year, the number of FTEs is by almost 6% lower. Second, administrative costs also declining by - 4%. Here, that is not the main candidate or driver of the decline. The savings go across all main categories, skipping regulatory funds. It was already commented in detail during the Q1 2023 presentation, and the exception is depreciation and amortization. Again, here, no surprise, it is still reflecting mainly investments in digitization and our transformation in a more general sense. All in all, this led to the further improvement of cost-to-income ratio today, and here commenting nine months basis as well, of 46.1%, while one year ago it was 49.2%, and that's the output of the positive jaws.
As I was commenting briefly before, having said that, simply the trends are further continuing even in this chapter, and a good evidence is that the quarterly cost-to-income ratio, that's the very bottom part of the chart, that the quarterly cost-to-income ratio in Q3 this year is the lowest at least since the last two years. Now let me pass the word to Anne, who is going to comment. Quality of the assets and cost of risk. Thank you.
Thank you. Good afternoon to everyone. As it was mentioned, the loan portfolio grew up by 3.6% and this is in the context of a very stable credit risk profile. This is attested in the several metrics. First of all, you see that stage two is now below 10%. This is obviously driven by the release of the inflation overlay that was put on the retail in 2024. We decided to release in Q3 the parts related to the small business segment. We also have a very, I would say, stable NPL share at low level which is at 1.8% this quarter, and together with this NPL provision coverage ratio, very stable as well, it shows that the portfolio is well performing, well covered, and demonstrating the asset quality.
If I go in more, I would say, maybe brief details in the segment on SME and small business and consumer loans, it's very resilient portfolio, and mortgage loans and large corporates, we are in the low, even zero default area. If we can move to the next slide, cost of risk, as it was mentioned, it's a release of cost of risk at CZK 328 million this quarter. I already mentioned, and it was also mentioned by [Yevge], that it's very well driven by the release of this overlay that we had on the retail, but it's also driven by some successful recovery on the non-retail exposures which led us to recover 100% of our exposure and consequently release the provisions.
All in all, we end for the nine months at cost of risk of -20 basis points, and for the next quarter we intend to continue to release the remaining part of the inflation overlay on the retail, which is still in place for consumer loans, that will be then released for the fourth quarter and will lead us to the minus low teens in the cost of risk for the full year. Probably, as we do not expect, as attested by the portfolio quality, any big event before the year end. That's about it on my side.
Yes, thank you Anne. Let me complete the presentation with last two slides. First one focusing on the capital. Capital remains very strong at 18.43%. There is a slight decline year to date mainly due to the slight negative impact on OCI related to the release of the provisions as commented by Anne, so called lack of lack of provisions. Still, however, the capital adequacy is safely in the upper part of our management buffer, maybe better said almost at the upper edge of the management buffer despite accruing 100% profit as a dividend and under new methodology, i.e. Basel, Basel IV, also unreal aricosa is safely within regulatory limits at 28.8 and this is bringing me to the full year outlook as usual. There are not too many changes in the macro. Only two slight adjustments.
First, no cuts of repo rate is expected by the end of this year, which was the case three months ago in terms of outlook, and second, there is slightly positive adjustments in the economic growth from 1.9% - 2.1% this year and also for next for the years to come. In terms of banking market growth, we keep fully the guidance that is both lending and deposits at the mid single digit pace. In terms of growth of KB, we stick to the original guidance at lending side, i.e. mid single digit. In terms of deposits, we have downgraded the guidance from mid single digit rather to low to mid single digit. At the same time, the structure of the deposits is expected to improve further. Revenues and OpEx are basically confirmed.
Maybe one comment to the top line, probably more precise would be to say lower edge of low to mid single digit growth. OpEx as confirmed, i.e. impairment, mid single digit decline, decrease, and finally cost of risk guidance, briefly touched that before, but it significantly improved from around zero three months ago to the level of Longines. That's it. Now, before passing water back to studio, probably let me use this opportunity and to say also a couple of words on my side. First, thank you Jan for your kind words and thanks also to all you connected. Indeed, this is my last earnings call in a position of KB's CFO.
I have to admit that it has been a great 10 years serving at this position and I truly appreciated every opportunity to meet with you and discuss the bank's performance and from time to time also everything around. As Jan mentioned, Etienne will be stepping into the role as my successor starting mid December and I don't have any doubts he will successfully takeover. He knows the bank perfectly well and has all the qualities needed to help lead KB towards, how to say that, towards its bright future. Again, all the best in this exciting position. Thank you all once again and now returning the word to Juchelka.
Okay, thank you, thank you Jiří Šperl. I will just conclude the call, or the presentation part of the call, very quickly. We can say that the combination of strong capital base, the already delivered very strict management of costs, the fact that we are approaching the very final stage of the transformation, and we have fully functional, very stable, and attractive solution for our retail clients, combined also with the operating efficiency, further simplification, and scalability of the new digital platform, will create a good base for improvement in the commercial momentum of the bank. Further on, we believe that the cost of risk, which is in negative territory and is commented by many of you as a good contributor but not a sustainable contributor into the profitability, will turn into an enabler for further commercial and business growth in the next months and quarters.
We will also free up additional energy and time of our bankers. They were super busy with assisting our clients with migrating from the old to the new world. They will now put all their energy on sales and servicing the clients in day-to-day reality. This is what is somehow framing our hope and determination for the next steps, which will be driven by our activity and our full dedication to further grow the bank on the side of business and commercial and financial performance. Thank you very much. I'm giving back the words to Jakub Cerný and we are ready to answer your questions. Thank you.
Thank you to all the speakers. Let me add that we have been also joined by the Chief Operations Officer. We have the complete Board of Directors with us today and you can ask them as well. It means that in the next part of today's meeting we will be happy to answer your questions. Let me remind you that this meeting is being recorded and if you have a question please click on the raised hand icon on the top bar of the screen and then please wait to be called. If you are connected through a telephone please wait to be invited to ask a question later on. Our first question comes from the line of [Martin Ms.] from UBS. Martin, please go ahead.
We cannot hear you, [Martin].
Can you hear me now?
Yes.
Excellent, perfect.
Good afternoon from my side as well. First of all, I wanted to say thank you to Jiří for years of hard work, transparent commentary, and help you provided to analysts in the capital markets and will be daily missing you. My question would be on loan growth. It's good to see that there's acceleration quarter on quarter and also year on year in loan growth. I think you're being quite clear that that's a focus area for the second half of the year. Jan, to your comments about freeing up time for the bankers, certainly starting to be visible and sales volume of housing loans visibly picking up. I'm wondering if you could give us perhaps some flavor of what you're seeing in the last quarter of the year and expectations also going into 2026.
Can we expect this momentum to continue and maybe also see a much awaited recovery in business loan volumes? I think Jan, last quarter you were quite positive about potential infrastructure projects and lending towards that. When can we see that in the numbers? Thank you.
I can probably start and then my colleagues Heads of Business Lines will complete me. A couple of comments on first nine months of the year, I would say that the retail owners were growing relatively, relatively strong. It's mainly the case of mortgage loans. I agree with you that there is a space for improvement in the era of consumer loans. That's one thing. In terms of corporate loans, the growth was a bit subdued, but at the same time we are expecting by the end of the year a relatively dynamic move. Why? Because the pipeline is relatively rich and strong, and I'm sure Katarína is going to comment on that. In terms of 2026, you know, we are providing the detailed guidance at the end of the year results, so i.e. end of January next year.
I can indicate that the strategy of KB is very much growing, and it will be very much the case for retail as currently all of the tools are available. Retail is going to beat market shares, growing mid to high single digit. In terms of corporate, it will be more about sticking to the market shares, at the same time gaining a bit, but definitely not as dynamic as retail in 2026. Now I'm passing forward to my colleagues who will probably go into deeper details or compliment me. Thank you.
If I may add a few words on the corporate. Not to repeat what was already said, we do see strong pipeline. We are actually seeing acceleration in the lending business for the SMEs. We are pretty confident towards the year end. In terms of the large corporates, it's kind of a little shaky market because we are seeing a strong and very lively bond market, which is nice on the fee side also for us, but it also has a negative impact because some of the loans are being refinanced by the bonds issued by the big groups. There is a strong pressure on the margins arising from the higher competition on the bond side.
On the large clients, we are optimistic more towards the next year because, as you mentioned yourself, there is still quite a huge infrastructure project loading up in Czech Republic and we are confident to be participating in those. That should be definitely very nice contributor to the large segment of our clients in terms of both volumes and profitability.
I will probably add one sentence. You probably saw the pages with the tombstones that we were the instrumental bank when financing the preparation of the new nuclear project of the country under the name of EDU II together with other banks. We were, let's say, the main driving force there. There will be more to come on the side of the energy sector. You might recall that there were two large transactions, one of them concluded at the beginning of the year where the state was taking over part of the storage capacities and transmission of gas, whereas ČEZ, as the majority state-owned company, was taking over GasNet, which is the regional distribution of gas, etc. We are around these transactions. We will be continuing with that.
What is slightly delayed on that front is the transfer transport-related infrastructure project, which partly, maybe also because of the elections, is a little bit lagging behind the original schedule and original calendar. The rhetoric of the new representation, or the majority in the Parliament at least, is that they will continue intensively on that front. You want to be part of it as well.
Thank you, that's very helpful. Can I have a follow-up? Perhaps as you mentioned, the new forming government, can you share your thoughts on probabilities around a more effective banking tax?
Yeah, with strong disclaimer that we don't have the crystal ball and we don't see the future. The reality is that we don't evidence any strong push on that front or any traces of planning or projecting that into the budgetary exercise or in the preparation of the budget. The Czech Banking Association is obviously acting preventively and trying to get the right feeling about that because rightly you are picking up one of the potential risks for the entire market. For the time being, we don't see anything happening.
Very clear. Thank you very much.
Thank you. Our next question comes from the line of David Taranto from Bank of America Securities. David, please go ahead.
Good afternoon. Thanks for the presentation and taking my question.
I have a quick one.
Are there any regulatory headwinds or tailwinds o n the capital side over the next year?
Anything that could affect the board's appetite t o sustain the 100% payout aside from the internal capital generation?
Should I take it down or you will? There was a big methodology change starting this year, I mean implementation of Basel IV. Probably you notice that at the end of the day the impact of Basel IV for KB was basically neutral. Having said that, almost all components of that have been incorporated even before. For the time being, we are not expecting any regulatory changes. With the same disclaimer like Jan was mentioning before, we do not have a crystal ball, but concurrently nothing is on the table. Maybe here to mention that Basel IV was implemented starting from 2025, but not fully. That is, it was related to credit risk and operational risk, but still the capital needs for market risk is coming and you will see that at the beginning of next year.
I can just indicate that the impact will be rather positive. Thank you.
Thank you. Thanks.
Thank you. The next question comes from the line called MC. I'd like to ask you to introduce yourself and then ask your question.
That's Mastercard now.
Yes, sorry, it's Marta [ Oscarowa] from IPOPEMA. Sorry for that. I have two questions.
We cannot hear you, sorry.
Marta, could you unmute yourself?
Sorry.
Yes, I think that it's. Do you hear me now?
We can hear you now.
Yes.
Okay, so first of all thank you EG for your transparency and your hard work. Two questions from my side. First on the deposit market and the situation right now. Could you please discuss this? We hear from the competitors that there is increased competition on this market and KB itself lowered its outlook for deposit growth this year. Could you please discuss this development in the context also of potential pressure on the margin? The second question is on the cost of risk. Could you please disclose how much of the management overlays related to retail segment you still have on your book to be released in the fourth quarter? Just related to that, would you say that 2026 outlook would still be below the through the cycle level in terms of cost of risk? Thank you very much.
If I may, I will start. I will start again about the deposits and again no doubts, my colleagues will compliment. That's true that the growth of deposits in first nine months or even a year-over-year was rather subdued. We are partially commenting on that like three months ago and by the way, it was the case both for retail and corporate and one of the reasons on the retail side was that the branch network was heavily, heavily migrating according to the plans succeeded. We are getting or the migration is going to be completed by the end of the year. I'm talking about individuals but of course it was about not negligible capacities on the other side for corporate and that's probably what you are referring to. There was in first half of the year specifically very fierce competition on the market.
Our interpretation at the time was that this was linked to the fact that not all incorporated the impact of the doubling of obligatory reserves as of January this year into the client rates, client rates, pricing. Now it seems it is going to be normalized and I believe that at the end of Q3 we can see all the first fruits of the change. The Q3 dynamics is much higher on top of my head it is around 2.2-2.6% where key segments are growing and to be frank we expected that this trend is going to continue. Maybe to mention here one more point. This was also visible in the market shares for last three months. I don't have in front of me September 1st they should be available by the way today but August, July and June KB was gaining market shares in terms of deposits.
Now I let my colleagues comment further. Thank you.
On retail side I don't have much to it, maybe to give you a few details from inside the structure of the deposits. We are doing pretty well on unpaid deposits, current account balances, and use related in the presentation. Recently, we stabilized the development of term deposits. We are now like flattish to slow growth again. We are doing really, really well saving accounts, and I have to admit that some time ago we probably slightly underestimated the role saving accounts play in collection of deposits. It was all fixed, and now we can see basically week by week how well we accumulate deposits on saving accounts. I have a few more bullets to shoot to make it even faster. I'm rather on optimistic side for deposit development on retail.
In more general terms, what we see, what is happening on the deposits, we can probably confirm what you heard from the other players. The hunt for the deposits is more visible on the market. Plus, the clients have changed their management of spurred money, if I may say. They do search for returns. By definition, we are in the Czech Republic; they are searching the safe returns, if I may say. So, saving accounts highly probably will be the field where the whole battle will be happening at the highest intensity. There was also one sub question on overlays and cost of risk until the year end. I don't know, Anne, if you want to react on that.
Yes. Your question was the remaining part on the retail, right. I don't know if the amounts were mentioned earlier, but yes, it was mentioned earlier. We have remaining CZK 100 million if I'm not mistaken. Jiří, please help me because I'm still struggling a bit between Euros and Czech koruna. Sorry as I just joined two months a go.
As I said, it is on the consumer lending and we intend to release, and then we have still an overlay on corporate, which is in a bigger, bigger amount. This is under discussion because it was created as well on inflation assumptions that are not today really relevant, but still, given the very unstable environment we are living now in, we intend to keep overlay on the corporate part. I cannot really comment because it's really under discussion on the, I would say, which amount, but it should be more or less the same as we have today, but on different assumptions, broader assumptions like more international geopolitical instability, tariff threats, not only inflation.
Exactly. As Anne was commenting on that, maybe let me complement by two, three sentences because one of the questions was for the years to come. Of course, it is not sustainable to be in naturalist part era sustainably. Starting from 2026, we are getting back to normal cost of risk. That is radical creation. Some of you might remember that according to a risk appetite statement, some are calling that like through the cycle cost of risk. We are targeting 25 basis points, but it's very likely will not be the case for next year. If I should indicate, you should rather expect, let's say, high teens in terms of bps.
As it was mentioned by my colleagues from Business, we want to push on some segments that are by definition creating more cost of risk, which is small business. I mean SMEs in the corporate and consumer lending in the retail. That's why we expect to go back more in our limits that are in the risk appetite of the bank.
Okay, thank you very much.
Thank you. We don't seem to have further questions asked through the platform. I would like to invite participants who are connected through a telephone. If you wish to ask a question via telephone, please unmute yourself by pressing star and six, and then ask your question. Of course, if anyone is interested to ask a question through the platform, please use the raised hand button. Marta, you have a follow up?
Yes, please. If you could discuss the outlook for remaining part of the year for NII and if you could be kind enough t o t ell us if there is any change for 2026 going forward.
Yes, I was talking to Muta. Maybe again I will start probably. Let's start with the main drivers which are first, growing of the client base. Further growing of the client base. Of course, critical will be to make them active first. Second, material increase of the digital sales. Third one I would mention would be the continuing change in the structure of our deposits in favor of current accounts. At the same time, let me be very clear that we are not aggressive in that regard. Of course, five years ago the current accounts portion in the total deposits was 80%. Now we are closer to 50% and are rather using very conservative assumptions. On top of that, we are expecting continuing growth of the volumes basically in line with the dynamics visible in Q3 and it is relevant both for loans and deposits.
Probably last point to mention is slight improvements of NIM. If I'm saying slight compared to, let's say, year-over-year, it will be around, let's say, 5 basis points plus minus, plus minus, and the main drivers here will be already mentioned improved structure of the deposits. That's 2026. For 2026, the story is a bit similar, i.e., the main driver of the growth in the area of net interest income will be volumes. As I was mentioning before, a very dynamic growth of both loans and deposits. Also, we will see there, let's say, output, so results of the improved structure of deposit because it is in the P&L for the time being only partially, so in 2026 we should see more visible impact.
In terms of NBI, we are expecting mid to high single digit, and of course the main driver of that, at least in absolute terms, will be income from net interest income. I'm not sure that did it help or. Okay, seems. Yes.
Y es, thank you very much. Thank you.
Seems so, yes. Let's wait a few moments. If anyone has another question either through the platform or directly asking via telephone, does not seem so. I would like to hand back to Jan for a concluding remark.
All right, thank you everyone for being with us today. It was a big pleasure for us to share with you our views on not only the results but some of the key aspects of making banking business in the Czech Republic in the context of the macroeconomic reality. We do believe that going forward towards 2026 there might be new impulses for the entire market and we want to play a significant role as we have done until now, obviously. Thank you again for very precise questions. You somehow spotted the main aspects or points of our interest or of not only interest but of our activities. We will definitely hunt for higher volumes on both the side of financing, as I will just repeat the words of Anne, mainly in those categories where we are lagging behind our natural market share.
It's more like consumer lending and financing the small businesses and mid caps. On the side of hunt for deposits, we will definitely continue making our improved propositions for the clients and work on the appropriate balance between paid and unpaid deposits. Speaking about all the means how to get there is mainly, I would say, favorable starting point on the side of cost of risk. The normalization Anne is mentioning is simply stemming from the fact that we are constantly flying below our line of risk appetite statement. We have space to grow and the space to grow is mainly in the categories I have already mentioned. Let me also reiterate on the fact that we have made very hard work and series of unpopular decisions on the side of cost management during 2025.
Some of the effects will be visible a bit later than in the third quarter, but I need to thank all of my colleagues who have implemented the necessary measures on keeping the positive jaws in place. We feel strong on that discipline and we will continue working on it further on. We are very much looking forward to meeting you a quarter from now or at your request, anytime in between. You would be interested in knowing more about Komerční banka. Thank you very much for paying attention to our bank and we are super committed and we are looking forward to speak to you soon. Thank you.
Thank you very much.
Thank you. This has concluded our call today. You can now disconnect.
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