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Komercni Says Quarterly Net Falls as One-Time Gains not Repeated

Komercni Banka AS, the Czech unit of Societe Generale SA, said second-quarter profit fell 23 percent as one-time gains from the sale of its stake in Bohemian-Moravian Guarantee and Development Bank weren’t repeated and low interest rates hurt income.

Net income for the three months ended June 30 dropped to 3.16 billion koruna ($161.7 million) from 4.12 billion koruna a year earlier, the Prague-based lender said in a statement today. Net interest income fell 3.3 percent to 5.33 billion koruna. Net income from fees and commissions rose 2.2 percent to 1.8 billion, while gains from financial operations slumped 41 percent to 729 million, Komercni said.

“In the context of subdued aggregate demand in the economy and heightened uncertainty, Komercni’s performance in the first half was solid,” Chief Executive Officer Henri Bonnet said in a separate statement. The lender is “well prepared to continue its development and to face future challenges.”

Bonnet is leaving the lender as CEO and will hand over his post to Albert Le Dirac’h as of tomorrow.

Czech banks, which reported record profits in 2012, have been suffering from pressures on interest income because of low base rates. Komercni’s competitor, Erste’s unit Ceska Sporitelna, said this week that its first-half net interest income, the lender’s largest source of revenue, dropped 10 percent.

Bottom Line

“Bottom line was affected by one-off gains from last year, which weren’t repeated, and as the business environment worsened, but operating results look better than the market expected,” Cyrrus AS analyst Marek Hatlapatka said by phone today. “Komercni is more focused on corporate loans and mortgages, which are growing, so its net interest income wasn’t as badly impacted as it was with its peers.” Hatlapatka has “buy” recommendation under review.

The pace of lending growth in the Czech banking market accelerated “marginally” in the second quarter, while demand for lending, mainly for corporate and housing loans was boosted by record-low interest rates, Komercni said in the statement.

The Czech central bank will leave its main interest rate unchanged for a sixth meeting at what it calls “technical zero” of 0.05 percent, almost half a point below the European Central Bank’s benchmark, according to all 13 economists in a Bloomberg survey. The rate decision will be announced at 1 p.m. in Prague today.

The total gross volume of loans provided by Komercni Banka rose 4.1 percent to 475 billion koruna in the first half, the lender said. The total volume of deposits climbed 1.8 percent to 591 billion koruna, it said.

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