Moneta Money Bank’s Stock Performance

MONETA Money Bank was founded in 1998 in Prague, in the Czech Republic. It is a retail and expanding small and medium enterprise (SME) bank. MONETA holds a universal banking license and offers a range of retail and SME-focused financial products and services.

The company has a network of 229 branches and operates through various distribution channels, such as the internet, its call center, auto dealers, brokers and roughly 4,700 leasing partners. MONETA and its subsidiaries offer a range of services including current accounts, savings accounts, term deposits and transactional banking products including payment services and debit cards, consumer loans, credit cards, overdrafts, mortgages and auto loans, auto leases and other products such as sales of investment funds.

Will the MONETA Money Bank stock perform well?

MONETA Money Bank’s share price return was 66% in the last three years which is behind the market return in the same period. Over the last year the stock has increased 19%. The stock has added Kč1.4b (Czech Koruna) to its market cap in the last week of October 2023 but has its underlying performance been driving long-term returns?

A popular held opinion among investors is that share prices do not necessarily reflect the value of a business. One way to assess how market sentiment about a specific company has changed over time is to compare the earnings per share (EPS) with the share price.

MONETA Money Bank increased its EPS by 21% per year over three years, pushing the share price higher. The EPS growth is around 18%, which is also the average annual increase in the share price. This indicates that sentiment and expectations remained similar, with the share price reflecting the EPS growth.

Investment returns of MONETA

When looking at dividends, it is important to take into account the difference between total shareholder return (TSR) and share price return. The TSR includes the value of any spin-offs or discounted capital raisings, together with any dividends, considering these are reinvested. The TSR provides a clearer picture for stocks that pay a dividend. For MONETA, the TSR in the last 3 years was 104%, which is better than the share price return. The company dividends paid have increased the total shareholder return.

The bank’s TSR for 2023 reflected the market average, at 31%. This gain is quite positive, and the year’s return is better than the average return over five years, which was 9%. Even if the share price growth slows down from here, there’s a good chance that this is a business worth watching in the long term. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important.

Czech banks to be hit as central bank stops paying interest on reserves

Analysts said that Czech banks may see billions in profits cut following the central bank’s key decision. According to Reuters, in September 2023 it was announced that the Czech National Bank had decided to stop remunerating required minimum reserves. The change is said to affect Czech banks, with the Czech Republic’s third-biggest bank saying that it expects to see a material impact from the move. MONETA Money Bank also forecast a fall in net increase in October when the change took effect. The two banks were the biggest fallers on the Prague Stock Exchange, dropping more than 2% after the release of the news.

The Czech National Bank (CNB) decided to rescind paying interest on banks’ compulsory minimum reserves from the 5  of October. The decision will likely reduce the costs of implementing Monetary policy and follows a similar move by the European Central Bank in July.

Komercni Banka said its required amount of minimum reserves for the current maintenance period was at around 19.6 billion Czech crowns ($861.12 million). The bank explained that cancelling the remuneration of the required minimum reserves would push interest income lower by 115 million crowns ($5.05 million) per month. The bank had stated that it saw a 3% drop in its first-half net profit, to 8.1 billion crowns. Net interest income was down by 10% to 12.8 billion crowns.

MONETA projected that the change would cut interest income by about 120 million crowns in 2023 and 450 million in 2024. Its first-half net interest income reached 4.2 billion crowns this year.

Since the middle of 2022, the central bank has kept its main policy rate (CZCBIR=ECI) at 7.00% but has said that discussions on whether rate cuts could begin would commence in the autumn. Banks were asked to keep at the central bank as reserves a portion of liabilities. The central bank explained that the required minimum reserves can act as a liquidity safeguard to ensure the smooth flow of interbank payments.

According to banking association forecasts, policy rates will be at 7% this year and 5.5% next year. With this in mind, analysts have noted that the change to the banking sector will result in losses of up to 2.1 billion crowns this year and 6.6 billion in 2024.

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