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Komercni Rallies as Record Profit Defies Recession: Prague Mover

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Feb. 13 (Bloomberg) -- Komercni Banka AS shares jumped as the Czech unit of Societe Generale SA posted a record profit that beat analyst estimates.

The stock climbed as much as 2.9 percent after the company said net income attributable to shareholders surged 47 percent last year to 13.95 billion koruna ($740 million), more than the 13.75 billion-koruna median estimate of 15 analysts polled by Bloomberg. The bank proposed a dividend of 230 koruna per share, or 63 percent of profit, up from a 160 koruna payout last year.

Lending growth helped Komercni Banka mitigate a drop in net interest income and fees as the Czech economy shrank last year, the Prague-based lender said. Profit was boosted by a 75 percent plunge in reserves and provisioning as a 5.36 billion-koruna write-off on Greek government bonds in 2011 was not repeated.

“The earnings are solid, confirming the bank’s stability and ability to cope with negative factors in a difficult environment,” Marek Hatlapatka, an analyst at Cyrrus brokerage, said by phone today from Brno, Czech Republic.

The stock added 1.5 percent to 3,908 koruna by close in Prague, outpacing a 0.8 percent gain for the PX index. SocGen tumbled 3.5 percent by 4:55 p.m. in Paris after the French company said its full-year profit slumped 68 percent to 774 million euros ($1 billion).

Komercni Banka’s fourth-quarter net attributable income increased 25 percent from a year earlier to 3 billion koruna. That compares with SocGen posting its first quarterly loss since the first three months of 2009.

’Riskless Investment’

Economic conditions “will probably remain difficult this year and market interest rates will stay very low,” Komercni Banka said in its earnings statement today. Net income will probably shrink 12 percent to 12.3 billion koruna, according to the median estimate of 15 analysts for the full year 2013.

“Everyone knows that this year will be more difficult and profit will be lower,” Cyrrus’s Hatlapatka said.

Komercni Banka seeks to sell part of its 7.5 billion-koruna portfolio of Italian government bonds at around nominal value this year and move the funds to assets including Czech sovereign debt, Chief Operating Officer Pavel Cejka said in an interview for Bloomberg News today. The switch to lower-yielding Czech notes would curb the risk and return on the investment, he said.

“When we bought the Italian bonds, they were considered a riskless investment -- that’s no longer true,” Cejka said.

To contact the reporter on this story: Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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