Slow economic recovery After last year’s stagnation, we expect GDP growth of just 0.7% this year and an acceleration to 1.9% next year. This is a worse outlook than our previous forecast, but we still expect stronger household consumption to contribute to the economic recovery, supported by continued real wage growth. We see industrial activity remaining weak this year.

Inflation to fall below target by 2025 We estimate that inflation will average 2.3% this year and decline to 1.7% next year. We expect it to be pushed below the 2% target mainly by lower growth in core and regulated prices, reflecting an excessively tight monetary policy, still-weak demand and falling energy prices.

CNB to cut interest rates further While central bankers have pointed to a slowdown in the pace of rate cuts, recent data support further significant monetary easing. We expect the key repo rate to end the year at 3.75% and to reach its terminal level of 3.5% in February next year.

Slow economic recovery After last year’s stagnation, we expect GDP growth of just 0.7% this year and an acceleration to 1.9% next year. This is a worse outlook than our previous forecast, but we still expect stronger household consumption to contribute to the economic recovery, supported by continued real wage growth. We see industrial activity remaining weak this year.

Inflation to fall below target by 2025 We estimate that inflation will average 2.3% this year and decline to 1.7% next year. We expect it to be pushed below the 2% target mainly by lower growth in core and regulated prices, reflecting an excessively tight monetary policy, still-weak demand and falling energy prices.

CNB to cut interest rates further While central bankers have pointed to a slowdown in the pace of rate cuts, recent data support further significant monetary easing. We expect the key repo rate to end the year at 3.75% and to reach its terminal level of 3.5% in February next year.

The decline in market interest rates may be over A resumption in the positive slope of the koruna curve next year may be supported by a rise in longer-term foreign interest rates, reflecting concerns about the deteriorating fiscal situation in the major economies.

Better times ahead for the koruna The koruna should be supported by the CNB’s only gradual easing of monetary policy and improving domestic economic fundamentals, as well as by the unwinding of long dollar positions in connection with the start of the Fed’s rate-cutting cycle.

Moneta reported 2Q24 net profit growth of +12.3% y/y to CZK1.4bn on revenues of CZK3.1bn. This is in line with the consensus. On the revenue side, strong sales of third-party investment products surprised. Tight cost control led to lower administrative expenses. Regulatory fees were also lower. As expected, Moneta reiterated its full-year targets.

Moneta reported 2Q24 net profit growth of +12.3% y/y to CZK1.4bn on revenues of CZK3.1bn. This is in line with the consensus. On the revenue side, strong sales of third-party investment products surprised. Tight cost control led to lower administrative expenses. Regulatory fees were also lower. As expected, Moneta reiterated its full-year targets.

Moneta's net interest income amounted to CZK2.11bn. This represents a slight decrease of 2.6% y/y. Interest increased by 7.0% y/y, but funding costs increased by +13.5% y/y despite the quarterly decline. The net interest margin of 1.8% is stable on a quarterly basis (2.1% in 2Q23). Successful sales of third-party investment products increased net fee and commission income to CZK0.752bn (+13.4% y/y). Total operating income reached CZK3.1bn (+2.5% y/y). Total operating expenses of CZK1.353bn (-1.4% y/y) decreased slightly due to lower regulatory fees and administrative expenses. This was offset by an increase in personnel expenses. The cost to income ratio was 43.6%. Profit before impairment and tax of CZK1.752bn increased by +5.8% y/y. Provisions are lower y/y at CZK102m (CZK146m in 2Q23). This is below both consensus and our estimate. The non-performing loan ratio remains low at 1.4%. The effective tax rate was 14.1%. Net profit increased +12.3% y/y to CZK1.418bn. This corresponds to a return on tangible equity of 20.0%.

Customer deposits amounted to CZK426bn, which represents an increase of +15.8% year-on-year. The loan portfolio amounted to CZK272bn (+0.9% y/y). Due to the recovery of demand, the volume of new loans increased by +42.7% y/y.

Moneta has a traditionally strong capital position. The capital adequacy ratio is 19.4%. The Tier 1 ratio was 15.4%. Excess capital over Tier 1 amounts to CZK4.5bn (CZK8.9 per share). Moneta makes a provision for the payment of future dividends amounting to 90% of the net profit (CZK2.4bn or CZK4.8 per share in 1H24).

As expected, Moneta's management left its full-year guidance unchanged. Net profit is expected to reach at least CZK5.2bn on operating income CZK12.4bn. Costs are expected to remain within the range of CZK5.8bn. Operating profit is expected to be at least CZK6.6bn. Cost of risk should be in the range of 10-30bps and the effective tax rate should be 14%. RoTE should be 17.0% or higher.