Komercni Banka Quarterly Net Falls on Greek Bond Holdings

Komernci Banka AS, the Czech unit of Societe Generale (GLE) SA, said third-quarter profit more than halved as the company took a charge for Greek government bonds.

Net income dropped to 1.56 billion koruna ($85 million) from 3.48 billion koruna a year earlier, the Prague-based lender reported on its website. That missed the 1.87 billion-koruna average estimate of four analysts surveyed by Bloomberg. The lender wrote down 2.64 billion koruna of its holdings of Greek sovereign debt.

“The European banking industry finds itself in a difficult situation where macroeconomic challenges are combined with regulatory uncertainties,” Chief Executive Officer Henri Bonnet said in a separate statement. The Czech banking system is “healthy” and Komercni has proven its capacity and commitment to supply credit to the economy, Bonnet added.

Societe Generale SA, France’s second-largest bank, today said third-quarter profit fell 31 percent to 622 million euros ($856 million), hurt by lower trading revenue and a writedown on Greek sovereign debt. The bank also said it won’t pay a dividend for 2011.

The stock rose as much as 3.3 percent and was trading up 1.5 percent to 3,349 koruna by 10:50 a.m. in Prague, snapping a two-day rout.

Komercni hasn’t discussed its dividend policy at the board level and the bank has no comment to give now about a full-year payment to shareholders, Bonnet said at a news conference today in Prague.

‘Very Strong’

The capital position of the bank is “very strong” and a decision about a dividend will be made in the fourth quarter, Chief Financial Officer Pavel Cejka said along with Bonnet.

Komercni holds about 7.8 billion koruna of Italian sovereign bonds on its trading books and isn’t planning a sale of the debt “for the time being” as the market would not accept a good price and the officials expect Italy to be able to pay its debt, Bonnet said. It has 0.5 billion koruna in Italian securities to be held to maturity, according to Komercni data presented at the press conference.

Gross lending rose to 434.7 billion koruna in the third quarter from 421.9 billion koruna in the previous quarter. Non- performing loans fell 3.7 percent from the second quarter to 16.2 billion koruna.

The results missed estimates on higher-than-expected writedowns, J&T analysts wrote in a note to clients. On an operating level, the results exceeded estimates and the faster pace of lending is a positive surprise, the analysts wrote.

Residual Value

The residual value for Greek bonds on the company’s books is “limited and manageable” at 2.89 billion koruna, Komercni said. Net banking income rose 2.1 percent to 8.26 billion koruna in the quarter from a year earlier. Net-interest income rose to 5.58 billion koruna from 5.27 billion koruna a year ago.

The Czech economy continued a modest recovery through the first three quarters that was particularly visible in export financing and improved demand for loans from individuals and businesses, Komercni said. Confidence in the economy began deteriorating toward the end of summer on worsening news from the euro zone, the bank said.

To contact the reporter on this story: Lenka Ponikelska in Prague at lponikelska1@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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