A preliminary estimate of Czech GDP in 2Q published today showed an increase of 0.6% qoq after a previous 0.3% qoq decline. Compared with our forecast of 2.1% qoq growth and the market consensus of 2.0%, this was a significant negative surprise. However, uncertainty of the CZSO estimate remains high and so we can see some data revisions in the future. In yoy terms, the economy recorded record-high growth of 7.8%, which, however, was largely given by the low base of 2020. Economic activity in 2Q reached 95% of its pre-crisis levels (measured against the last quarter of 2019).

A preliminary estimate of Czech GDP in 2Q published today showed an increase of 0.6% qoq after a previous 0.3% qoq decline. Compared with our forecast of 2.1% qoq growth and the market consensus of 2.0%, this was a significant negative surprise. However, uncertainty of the CZSO estimate remains high and so we can see some data revisions in the future. In yoy terms, the economy recorded record-high growth of 7.8%, which, however, was largely given by the low base of 2020. Economic activity in 2Q reached 95% of its pre-crisis levels (measured against the last quarter of 2019).

The economic rebound was mainly due to the rapid easing of pandemic restrictions. While all shops and selected services reopened in May, the economy was functioning almost without restrictions in June. This was reflected in a significant increase in retail sales, which rose 7.3% mom in May, excluding car sales, and reached pre-crisis levels. Although we do not yet know the structure of economic growth, household consumption was likely the main driver. This was supported by both pent-up demand from previous months and the continued growth of household income. The improving outlook for the economy should also be reflected in increased investments. According to our estimate, the contribution of net exports was negative in 2Q, mainly due to higher imports given by the recovery in domestic demand. Meanwhile, growth of exports was hampered by input shortages, which were also evident in weaker results of industrial production. The related outages of car production likely had a strong negative effect.

According to our forecast, the economy will grow 4.2% this year and accelerate to 5.3% in the next. Compared with our last forecast from the end of April, including the growth slightly above 3% this year, this is a significantly more optimistic outlook, which is given by the improved pandemic situation and the increasing vaccination rate. Economic growth in 2H21 is likely to be supported by a further recovery in domestic demand, especially in household consumption and investment. However, their positive effect will be dampened by the fact that a large part of consumer and capital goods is imported from abroad. On the other hand, the biggest risk to our GDP forecast is the already-mentioned problems with input shortages in industry. We write more about our forecasts in the new Czech Economic Outlook, which can be read here https://bit.ly/KB21Q3AJ.

This morning, Moneta Money Bank announced results for the second quarter of this year that are significantly better year-on-year in terms of net profit. This is due to the high cost of risks a year ago. Total income after adjusting for non-recurring items and net profit are above market estimates. Moneta's management slightly reduced the full-year outlook for total revenues, but due to a decrease in risk costs the net profit guidance increased. And that serves as the basis for the dividend payment.

This morning, Moneta Money Bank announced results for the second quarter of this year that are significantly better year-on-year in terms of net profit. This is due to the high cost of risks a year ago. Total income after adjusting for non-recurring items and net profit are above market estimates. Moneta's management slightly reduced the full-year outlook for total revenues, but due to a decrease in risk costs the net profit guidance increased. And that serves as the basis for the dividend payment.

(1) As regards the loan portfolio, Moneta has again outpaced market growth. Total loans increased 9.2%, of which the retail portfolio added 14.0%; commercial loans are stable. The overall growth is driven by mortgages (27.1%) together with loans to small and medium-sized enterprises (20.0%). (2) Total deposits increased 3.9% (retail 5.6%, commercial -0.8%). (3) Net interest income in the second quarter is CZK2.1bn (1.5% yoy), which we consider in line with both the consensus and our projection. The net interest margin remained stable at 2.7% year on year. Total operating income decreased 26.3% yoy to CZK2.7bn. However, a year ago, an extraordinary profit from the acquisition (Wüstenrot) of CZK1.1bn was recorded, which, of course, did not recur this quarter. Without this item, total revenues would have increased more than 5% yoy. (4) Year-on-year, operating expenses decreased 3.7% to CZK1.3bn, mainly due to lower personnel costs. (5) Provisions for non-performing loans were only CZK334m in 2Q, compared to CZK1.85bn last year. Provisions were made last year mainly in the second quarter, due to the situation related to the pandemic. (6) Net profit increased an unprecedented 91.5% to CZK833m, mainly due to lower provisions.

The share of NPL ratio fell to 2.5% from 2.8% in the previous quarter. Total capital adequacy increased to a high 19.2% from the 18.5% achieved in 1Q21.

Full-year guidance of Moneta's management. Total income should now reach CZK10.8bn, which is a slight decrease compared to the original projection of CZK11.2bn. The reasons for the decrease are high competitive pressure, early repayments and non-performing loans due to the pandemic situation. Total operating costs should remain unchanged from the original projection (CZK5.5bn). Unfortunately, operating profit will fall to CZK5.3bn from CZK5.7bn at the same pace as the decline in income. However, the cost of risk will fall to 60-70bbs from 80-100bbs. Based on this, net profit should increase to CZK3.0bn from the original CZK2.8bn. This should be positive for the dividend payment, because the basis for its payment is calculated from the net profit.

As for the dividend, the CNB will decide on the possibility of payment in the fourth quarter. We assume that the restrictions will be withdrawn and Moneta will be able to distribute them. In addition to the dividend, at least part of the excess capital might by also paid, which is CZK8.7bn or CZK17.01 per share.