Czech economic growth to remain relatively weak this year While we estimate GDP growth at 0.9% in 2024, we expect it to accelerate to 1.5% in 2025. In our view, the only source of economic growth this year will be domestic demand, driven mainly by a continued recovery in household consumption. By contrast, industry is likely to contract for the third year in a row, contributing to a lower export performance of the economy.

Inflation to stabilise close to the 2% target in 2H25 The first half of the year could be marked by higher volatility, but inflation should remain safely within the CNB’s tolerance band. We expect inflation to be 2.2% in 2025 as a whole and to fall to 2.1% in 2026. Our expectation for easing inflation is based on cheaper energy, subdued consumer demand and weak industrial output. On the other hand, food and housing prices are likely to rise more sharply.

Czech economic growth to remain relatively weak this year While we estimate GDP growth at 0.9% in 2024, we expect it to accelerate to 1.5% in 2025. In our view, the only source of economic growth this year will be domestic demand, driven mainly by a continued recovery in household consumption. By contrast, industry is likely to contract for the third year in a row, contributing to a lower export performance of the economy.

Inflation to stabilise close to the 2% target in 2H25 The first half of the year could be marked by higher volatility, but inflation should remain safely within the CNB’s tolerance band. We expect inflation to be 2.2% in 2025 as a whole and to fall to 2.1% in 2026. Our expectation for easing inflation is based on cheaper energy, subdued consumer demand and weak industrial output. On the other hand, food and housing prices are likely to rise more sharply.

CNB to resume interest rate cuts this year This should be driven by an optimistic inflation outlook and a weak economy. We expect a 25bp cut at each meeting from February to June, after which the repo rate should have reached the 3% terminal level.

Market rates close to the normal CZK IRS with shorter maturities could still fall slightly with further monetary policy easing by the CNB, while the longer end of the curve should stabilise roughly around the current levels, in our view.

The koruna caught between a strong dollar and a recovering economy We expect the slow recovery of the Czech economy, the narrowing interest rate differential and strong USD to postpone any marked appreciation of the CZK vs EUR until the second half of this year. The currency should then be supported both by developments in global FX markets and by a gradual strengthening of Czech economic growth.

Moneta reported 4Q24 net income of CZK1.57bn, beating the consensus by +7.0%. This resulted in a RoTE of 22.1%. Strong fees and commissions as well as stable costs led to a +21.4% yoy increase in pre-provision profit to CZK 1.9bn, beating the company’s consensus by +3.2%. The very low cost of risk is surprising-- it was only 5bps in 4Q24, which had a positive impact on net income. The proposed dividend of CZK10 per share is in line with estimates and represents a gross yield of +7.2%. Moneta raised its outlook for the next years by a high +15% on average.

Moneta reported 4Q24 net income of CZK1.57bn, beating the consensus by +7.0%. This resulted in a RoTE of 22.1%. Strong fees and commissions as well as stable costs led to a +21.4% yoy increase in pre-provision profit to CZK 1.9bn, beating the company’s consensus by +3.2%. The very low cost of risk is surprising-- it was only 5bps in 4Q24, which had a positive impact on net income. The proposed dividend of CZK10 per share is in line with estimates and represents a gross yield of +7.2%. Moneta raised its outlook for the next years by a high +15% on average.

Total operating income for 4Q24 increased by +11.3% yoy to CZK3.4bn. This was +2.0% ahead of the Moneta consensus. NF&C were strong due to very successful sales of investment products. They grew +22.8% yoy to CZK814m. Net interest income was up +11.4% yoy to CZK2.4bn. This was due to a decrease in funding costs. As a result, NIM increased to 2.0% (1.9 in 3Q24). Operating expenses were almost stable yoy (CZK-1.5bn, +1.0% yoy). A slight increase in personnel expenses was offset by a decrease in admin expenses. Profit before provisioning of CZK1.9bn is +21.4% better yoy. The cost of risk is very low at CZK-35m. This corresponds to only 5bps. This is due to the quality of the loan portfolio. The NPL ratio fell to a historic low of 1.3%. The effective tax rate was slightly higher than our forecast (15.3% vs. 14.0%). Net profit for 4Q24 of CZK1.57bn increased by +28.0% yoy. This was ahead of the company's consensus (+7.0%) and our estimate (+7.2%). This corresponds to a RoTE of 22.1%.

The loan portfolio grew by +4.5% to CZK276bn. Deposits amounted to CZK430bn (+7.7% yoy).

Moneta's Capital adequacy ratio is a strong 18.2%. Excess capital amounts to CZK5.5bn.

Dividend: Moneta is proposing a dividend of CZK10 per share. This represents a payout ratio of 88% and a gross yield of +7.2%.

Guidance: Moneta's management has raised its forecasts for the next few years by an average of +15%. This year, net profit should reach CZK6.0bn (previously CZK5.3bn), revenues CZK13.6bn (CZK12.8bn) and costs CZK-5.9bn (CZK-5.9bn). RoTE is expected to be 20% (previously 17%).