Komercni Says Profit Fell 2 Percent on Lower Fees Income

Komercni Banka AS, the Czech unit of Societe Generale SA (GLE), said its first-quarter profit fell 2 percent on lower income from fees and higher provisions.

Net income for the three-month period dropped to 3.08 billion koruna ($156 million) from 3.15 billion koruna a year earlier, the Prague-based lender said in a statement today. Net interest income, its largest source of revenue, rose 0.4 percent to 5.28 billion koruna.

The lender had an “excellent” sales performance in the quarter to individual and small business customers, Chief Executive Officer Albert Le Dirac’h said in the statement. On the other hand, the “solid” pace of recovery of the Czech economy has not yet translated into faster growth in business lending and corporate clients remained “cautious” about their investment plans, he said.

Czech banks have been suffering from pressure on interest income because of low base rates and as 18 months of economic contraction stifled lending last year. Total lending volumes started to recover by the end of 2013 as the recession ended in the second quarter last year. Still, the economy pick up is taking longer than expected to translate itself into a loan demand.

Loan Volume Growth

Komercni revised total loan volume growth to 3 percent to 5 percent in 2014 on year, lower than previously expected range of 6 percent to 7 percent, Chief Administrative Officer Pavel Cejka told reporters today. The lender estimates loan demand to increase in the second half of this year and carry on to 2015, Cejka said.

Net creation for bad-loan provisions grew 10 percent to 518 million koruna in the first quarter, driven by a “few” cases in the corporate segment, the lender said.

Komercni fell 53 koruna, or 1.2 percent, to 4,567 koruna as of 12:07 p.m. in Prague.

Net fees and commissions income fell 2 percent to 1.7 billion koruna in the period, Komercni said.

The volume of loans to clients provided by the bank rose 2.7 percent to 484.9 billion koruna in the first quarter from a year ago, helped by mortgages and a “recovery” in consumer lending, the bank said.

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

To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net Andrea Dudik, Elizabeth Konstantinova

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