December results confirmed that Czech industry performed exceptionally well in the final quarter of last year despite barriers to international trade, uncertainty, and structural problems. December industrial production continued the strong expansion seen in November, with most sectors experiencing growth. New orders increased by almost a quarter yoy due to large volume long-term orders from abroad. After stagnating in November, the Czech construction industry also reported growth, particularly in civil engineering. The foreign trade balance showed a higher-than-expected surplus.

December results confirmed that Czech industry performed exceptionally well in the final quarter of last year despite barriers to international trade, uncertainty, and structural problems. December industrial production continued the strong expansion seen in November, with most sectors experiencing growth. New orders increased by almost a quarter yoy due to large volume long-term orders from abroad. After stagnating in November, the Czech construction industry also reported growth, particularly in civil engineering. The foreign trade balance showed a higher-than-expected surplus.

Domestic industrial production continued its strong expansion in December, following November’s sharp increase of 2.4% with a further increase of 0.4% mom. Yoy, it was up 6.8% in December. This was a positive surprise compared to the market consensus, which had predicted growth of 5.2%. Even our more optimistic estimate of 5.9% was exceeded. After adjusting for the different number of working days, the increase was 3.8%. After adjusting for seasonal effects, the industrial production index reached the second highest level in the history of the time series. This shows that Czech industry performed extremely well in the final quarter of last year despite uncertainty abroad, barriers to international trade, and other structural pressures.

Industrial production was up 2.2% qoq in 4Q25, with manufacturing growth even stronger at 2.7%. This marked a sharp turnaround from the qoq decline of 0.6% in 3Q25 and 0.5% in manufacturing. Although sentiment indicators remain subdued at the turn of the year, the development of new orders at least promises further positive industrial development this year.

Manufacturing output rose by 0.8% mom in December, with most sectors seeing an increase in production. The mom improvement was driven by the pharmaceuticals sector (+0.3pp), other non-metallic products (+0.5pp), metal products (+0.3pp), and engineering (+0.2pp). On the other hand, the 1.1% mom decline in car production detracted from the growth. However, this followed a 6.5% increase in November. According to available information, the automotive industry was operating at almost full capacity at the end of the year, but this changed at the beginning of the year. Capacity utilization in 1Q26 fell sharply below 90%. However, this is still higher than in the euro area or Germany. The defense industry contributed significantly to last year’s 1.4% increase in industrial production, which is reflected in a 4.4% yoy increase in the production of fabricated metal products, which also includes the production of weapons and ammunition. The resilience of the domestic automotive sector and the growing importance of the defense sector are contributing to the improved condition of the Czech industrial sector.

The value of new orders in December jumped by 25% yoy. This was influenced by a 40% increase in long-term orders from abroad in the other transport equipment sector. After adjusting for this extraordinary order, according to the Czech Statistical Office, the value of industrial orders in December was 6% higher yoy, which is higher than the 4.1% increase in November. The development of new industrial orders in 4Q25 and the improved assessment of demand in industry portend further growth in industrial production this year, although insufficient demand remains the dominant barrier to growth, according to the CZSO survey.

Strong momentum in industrial production at the end of last year, lower energy prices since January this year, and domestic fiscal expansion are factors that should clearly support domestic industrial production. Another contributing factor is the increase in orders in both the Czech Republic and Germany, which may reflect the first signs of German fiscal stimulus. We expect industrial production to grow 2.5% this year, following last year’s 1.4% growth.

December foreign trade results were pleasantly surprising

The foreign trade balance in December showed a surplus of CZK14.8bn. The result exceeded both our and market consensus. After seasonal adjustment, the surplus was even higher, reaching CZK25.8bn. This represented a yoy increase of CZK7bn. Seasonally adjusted exports rose by 1.7% mom, while imports were down by 0.8%.

The total foreign trade balance without seasonal adjustment was positively influenced in December, mainly by a higher yoy surplus in trade in motor vehicles (by CZK5.1bn) and machinery and equipment (by CZK3.0bn). The deficit in trade in oil and natural gas decreased by CZK2.7bn. The overall balance was mainly negatively affected by trade in electricity, where the surplus decreased by CZK2.8bn. The deficit in trade in computers, electronic and optical devices deepened by CZK1.8bn, and the surplus in trade in electrical equipment decreased by CZK1.5bn.

For 2025, the trade balance showed a surplus of CZK216.5bn, which was CZK4.0bn lower yoy. On an annual basis, exports grew by 2.6% yoy and imports by 2.8%. Compared to 2024, foreign trade was surprisingly resilient despite the tariff wars. We expect similar export and import growth rates this year. According to our estimate, the foreign trade surplus will reach CZK220bn.

The construction industry grew strongly last year

Construction output in the Czech Republic rose by 1.7% mom in December after stagnating in November. For the whole of 2025, after adjusting for the impact of the different number of working days, it was up 9.3%, while in the previous two years it had declined (by 1.4% in 2024 and 2.4% in 2023). Both civil engineering (+10.5% in 2025) and building construction (+8.6% in 2025) contributed to the recovery. This was probably helped by higher government investment in infrastructure and lower interest rates, which contributed to the recovery in the real estate market.

At the very end of last year, civil engineering was the main growth driver. After stagnating in November, its output jumped by 3.9% mom in December. Yoy, it was up by 10.9%. In contrast, production in building construction grew by a modest 0.5% mom, after stagnating in October and November and even declining in August and September. Yoy, it was up 2.3%. Demand for housing is strong, as evidenced by developments in the mortgage market. The problem is therefore most likely to be found in the sluggish building permit process.

In terms of the number of building permits issued, 2025 was by far the worst year since statistics began. A total of 61,600 building permits were issued last year, which is 14.5% less than the previous year. This was probably largely due to problems with the digitization of the building permit process. However, this is not just a one-off fluctuation, but an overall negative trend. The number of building permits issued has been steadily declining for the last four years, at a rate of 5-10% per year (between 2022 and 2024). The same assessment applies to the number of building permits issued purely for residential construction. Last year, this figure reached only 23,000, the lowest since this indicator began to be monitored in 2002. Here, too, there has been a steady decline over the last four years, with the rate even reaching 20% in 2023. However, the change in the structure of the residential market may also have an impact, as the preference for the construction of apartment buildings with a higher number of residential units at the expense of family houses may lead to a steady decline in the number of permits issued. Given the strong growth in real estate prices in recent years, the price of a family house may already be too high for many buyers compared to a smaller apartment.

The main hope for the construction industry is a revival of investment activity. Government investment has been growing at a rapid pace so far, but it is questionable whether this will be slowed down by the change of government and the current provisional budget. On the other hand, the dynamics of corporate investment have been rather weak so far. However, with the economy and industry recovering, this could change, as the overall economic outlook now appears to be relatively positive. We estimate that total construction output will grow by around 2% this year. However, residential construction is likely to continue to dampen this growth, as it can be assumed that the low number of building permits issued will be reflected in construction output statistics with a delay.

Moneta reported a net profit of CZK1.6bn for 4Q25, representing a +1.8% yoy increase. This represents a respectable +3.0% premium over the market consensus. This is mainly due to lower risk costs and effective tax rates. ROTE was 23.4%. At the operating level, the results were more or less in line with estimates. Moneta exceeded its updated full-year guidance. Management proposes paying a dividend of CZK11.50 per share from 2025 profits. In our view, the outlook for 2026 is in line with market expectations.

Moneta reported a net profit of CZK1.6bn for 4Q25, representing a +1.8% yoy increase. This represents a respectable +3.0% premium over the market consensus. This is mainly due to lower risk costs and effective tax rates. ROTE was 23.4%. At the operating level, the results were more or less in line with estimates. Moneta exceeded its updated full-year guidance. Management proposes paying a dividend of CZK11.50 per share from 2025 profits. In our view, the outlook for 2026 is in line with market expectations.

NII for the fourth quarter of last year reached CZK2.5bn, an increase of +1.4% yoy. Although interest income declined, financing costs fell at an even faster pace. This resulted in growth in NII. The NIM remained unchanged at 2.0% on a qoq and yoy basis. NF&C increased by +7.5% yoy, reaching CZK875m. The high growth in other income (+30.3%, CZK262m yoy) was surprising, exceeding the market consensus by +42%. Total operating income reached CZK3.6bn (+4.5% yoy). Compared to the consensus, this is +1.0% higher. Operating expenses increased by +5.2% compared to 4Q24, reaching CZK1.6bn, due to higher personnel costs. Operating profit for the 4Q25 amounted to CZK2.0bn (+3.9% yoy). Compared to the market, this is a slightly weaker result (-1.3%) as the slight increase in costs was unexpected. Cost of risk rose by +191% yoy to CZK102m. However, this growth is due to a very low comparative base. Nevertheless, the cost of risk remains low, corresponding to only 14bps. This reflects the high quality of the loan portfolio. The effective tax rate in 4Q25 was 14.1%, lower than the consensus estimate of 15.3% and our estimate of 15.2%. Net profit for 4Q25 reached CZK1.6bn (+1.8% yoy). This corresponds to a ROTE of 23.4%. Net profit exceeded market expectations by 3.0%. This is due to the lower cost of risk and effective tax rate.

The full-year results show an increase in net profit of +11.9% yoy to CZK6.5bn, exceeding Moneta's updated target of CZK6.3bn by +3.2%. Revenues grew by +7.8% yoy to CZK13.9bn. Costs increased by +2.0% yoy, reaching CZK5.8bn. The cost of risk remained low at 16bps. This is below Moneta's target range of 17.5–22.5bps and our estimate of 20bps.

Moneta demonstrated the high quality of its loan portfolio. The loan portfolio grew by +5.8% yoy and +1.4% qoq. Sales of new loans increased by +21.9% yoy due to strong demand in the commercial and retail sectors. NPLs fell to just CZK3bn. This led to a decrease in the NPL ratio, dropping from 1.1% in 3Q25 to 1.0%. This is the lowest level in history.

Moneta's capital adequacy ratio stands at 18.7%. Moneta's excess capital above the target (15.25%) amounts to CZK5.7bn.

Dividend: Moneta proposes paying a dividend of CZK11.50 from last year's profits. Compared to the market price, this offers a decent gross yield of +5.6%. Shareholders will vote on the dividend proposal at the AGM on April 21, 2026.