Despite the waiver of VAT on energy, the data released in December will show inflation close to 6%. The average wage is growing at a decent pace, but most of it is being wiped out by inflation. Industry is still in decline. Retail sales excluding the automotive segment will remain at similar levels as in previous months, but car sales alone are likely to decline further.

Despite the waiver of VAT on energy, the data released in December will show inflation close to 6%. The average wage is growing at a decent pace, but most of it is being wiped out by inflation. Industry is still in decline. Retail sales excluding the automotive segment will remain at similar levels as in previous months, but car sales alone are likely to decline further.

Wages: We expect growth in average nominal wages to have decreased to 5.5% yoy in 3Q, from 11.3% in 2Q. While the slowdown we estimate is due to a higher base in 3Q20, when the economy partly recovered, the fading of second-round extraordinary payments to healthcare workers in 2Q21 will also have had a significant effect. We therefore forecast public-sector wage growth to have slowed from 17.7% yoy to a still-decent 5.9%. Wages should continue to rise rapidly in the healthcare and education segments, while public administration is likely to see subdued wage development. While we expect that wages in the private sector continued to rise qoq in 3Q, we estimate that the pace of growth slowed to 5.3% yoy, from 8.8% yoy in 2Q. However, elevated inflation is likely to have reduced growth in real wages in 3Q to just 1.4% yoy from the previous 8.2%.

Retail sales: Real sales are affected by a number of opposing influences, and their currently variable development corresponds to this. Consumer sentiment declined from September to November. It is negatively affected by the rapid pace of inflation, which also limits real purchasing power. On the other hand, the development of the labour market, in the form of increasing employment and pressure on wage growth, as well as the favourable financial situation of Czech households, is a positive factor. Credit card transaction data even point to sales expansion. Concerns about Covid and the possible negative impact on the economy did not intensify until November. For October, we expect a month-on-month stagnation of real retail sales without the inclusion of the automotive segment. In the case of car sales, we again expect a significant decline of around 2% mom (SA), i.e. similar to previous months. Such a development is indicated by the decline in car registrations, mainly due to their actual shortage, long delivery times and higher prices. In a year-on-year comparison, this would mean an increase in retail sales of 4.7% excluding car sales and, with their inclusion, a decrease of 1.1% yoy. The deterioration of the Covid situation indicates rather weak results for the rest of the year. But the Christmas season is crucial for many retailers, so the impact on the economy can be significant. In any case, we are likely to see strong growth in online and mail order sales.

Industrial output: The month-on-month increase in car production of 15.7% (SA) in October suggests total industrial production for the month may increase. However, we saw similar information on car production growth in September, but the monthly statistics subsequently showed a strong decline in total industrial production of 3.2% mom. The problem is that the previous decline in car production had been extremely strong and thus affected subcontractors. According to AutoSAP statistics, the year-on-year decline in car production in the Czech Republic slowed in October, but still reached a strong -47%. The leading indicators from industry show an improvement in confidence in November, but in October there was a significant deterioration in both confidence indicators and the purchasing managers' index. In summary, we expect another – this time slight – month-on-month decline in industrial production of 0.2% in October. In year-on-year terms, this would mean a decrease of 8.5% and, after adjusting for calendar effects (missing one working day), 5.6% yoy WDA. The partial resumption of production by car manufacturers and the November increase in industry confidence offer a chance for improvement in the winter months. The risk is a worsening of the pandemic situation. However, the main obstacle is the lack of components for production. Our full-year estimate of industrial production growth is 8.5%. Such a result looks good at first glance, but it is only in comparison with last year's decline. Otherwise, this year's industry performance can be described as weak.

CPI inflation: The growth rate of consumer prices remains elevated, and November is unlikely to bring about a significant change. Weekly surveys show further increases in gas station prices. After a two-month reduction, we expect a slight rise in prices for food as well. In addition, higher energy prices will have a very strong effect on inflation in the winter months. In November, for many customers of bankrupt suppliers, energy prices increased by hundreds of percent, and they were forced to spend some time with the supplier of last resort. In an effort to mitigate the impact on the population, the government waived VAT payments for energy in November and December. However, there is considerable uncertainty about the statistical capture of the impact of these opposing forces on final prices for consumers. Thanks to the waiver of VAT payments for energy, we expect only a relatively small month-on-month increase in consumer prices of 0.1% in total. Year-on-year inflation should thus remain just below 6%. Sooner or later, higher energy prices will be reflected in inflation, but the key question is how the rest of the consumer basket, i.e. core inflation, will develop. We expect core inflation of 0.6% mom in November, i.e., a similar pace as in previous months. However, the biggest questions relate to January, which traders often use to adjust price lists. We expect the annual inflation rate to rise to almost 7% at the beginning of next year. We do not expect a significant slowdown until the second half of next year, which will be helped by the expected improvement in the supply of components and materials. On average, inflation should be close to 5% next year. The risk is that supply-side problems will last longer and then inflation could easily rise well above 7%.

Moneta announced that PPF has adjusted the terms of the acquisition of the Air Bank Group.

The total purchase price for the Air Bank Group remains unchanged at CZK25.9bn. This will be financed by at least an 80% capital increase (issue of new shares);the rest will be paid from excess capital.

Moneta announced that PPF has adjusted the terms of the acquisition of the Air Bank Group.

The total purchase price for the Air Bank Group remains unchanged at CZK25.9bn. This will be financed by at least an 80% capital increase (issue of new shares);the rest will be paid from excess capital.

Issuance of new shares

Moneta will issue 255,500,000 new shares at a price of CZK82. This will gain CZK20.951bn. The total number of shares will thus increase to 766,500,000.

Moneta will offer all shareholders new shares in two rounds. In the first, the new shares would be offered on a pre-emptive basis to all shareholders for CZK82 per share in proportion to the two existing shares one new share. If the new shares are not subscribed, they will be offered to all shareholders in the second round at a price of CZK90 without a limit. Unsubscribed remaining shares undertook to buy PPF for CZK90.

General Meeting

The transaction must be approved by Moneta's shareholders at the general meeting, which is convened on 20 December. As with the previous vote, 50% of the shareholders present must approve the acquisition and 75% of the shareholders present must give green financing, i.e. issue of new shares. In order for the general meeting to have a quorum, at least 50% of all shareholders plus one share is required. The proposed dividend of CZK3 will also be approved at this general meeting. Furthermore, for next year, Moneta will propose to the shareholders a dividend of CZK7 (gross yield 7.8%), but this will not be voted on at the general meeting until the first half of next year.

Conclusion

The total purchase price has not changed compared to the previous proposal. In addition, at the previous general meeting it was approved by the shareholders, i.e. they were satisfied with it. We expect that the price will again be approved at the GM on 20 December. What is changing is the number of newly issued shares, which will decrease to 255.5m against 291.375m. The price of new shares also increased slightly to CZK82 per share from CZK80. However, we perceive the proposal that all shareholders will be able to participate in the subscription of new shares as the most important difference, at a price that offers about 8% discount compared to yesterday's closing price. In the previous proposal, they were to be issued only in the hands of PPF, and this is also, from our point of view, the reason why the entire transaction at the previous GM was rejected. We assume that the new proposal will attract many shareholders. But we will not dare to predict how the vote will turn out.

The proposed dividend of CZK7 for next year is also positive, offering a high yield of +7.8%.