Komercni Says Third-Quarter Net Fell on Interest Income

Komercni Banka AS, the Czech unit of Societe Generale SA, said third-quarter profit fell 2 percent as an environment of low rates hurt net interest income.

Net income for the three months ended Sept. 30 was 3.25 billion koruna ($170 million), from 3.32 billion koruna a year earlier, the Prague-based lender said in a presentation on its website today. Net interest income fell 3.1 percent to 5.29 billion koruna.

“While the Czech economy has entered a recovery phase, this has not yet translated into accelerated growth in loan volume,” Chief Executive Officer Albert Le Dirac’h said in a regulatory statement. “There have been signs that corporations are preparing new investments and that consumers’ appetite to borrow is rising.”

The lender achieved “excellent” results in products like mortgages and export financing, he said. Le Dirac’h took the helm at the lender in August from predecessor Henri Bonnet, who had led Komercni since June 2009.

Czech central bank approved unlimited koruna sales to ease monetary policy today after inflation slowed to its lowest in 3 1/2 years. It also kept the benchmark interest rate at what it calls a “technical zero” of 0.05 percent for an eighth meeting.

Komercni rose as much 1.3 percent in Prague after the central bank’s intervention announcement to a record before ending the day unchanged.

Czech banks, which reported record profits in 2012, have been suffering from pressures on interest income, their largest source of revenue, because of record low interest rates. Komercni’s competitor, Erste Group Bank AG unit Ceska Sporitelna, said last week its nine-month net income declined 2.6 percent to 11.5 billion koruna.

Capital Adequacy

Komercni’s net income from fees and commissions rose 7.1 percent to 1.79 billion koruna in the third quarter from a year earlier, while gains from financial operations added 5.9 percent to 661 million, it said.

In terms of the new capital adequacy ratio requirements by the central bank, Komercni is “fully” equipped with the capital and has the capacity to payout 70 percent from its 2013 profit in dividends, Chief Financial Officer Libor Lofler said in a meeting with journalists and analysts in Prague today.

The board proposes the dividend together with the full-year results, which are scheduled for Feb. 12, according to its website.

Foreign Demand

Future performance of the banking market will continue to depend on the developments in major trading partner countries, as business investments depend on foreign demand, Komercni said in the presentation today.

“The results are in line with estimates,” Marek Hatlapatka, an analyst at Cyrrus AS, said by phone. “Slightly worse banking income was compensated by the lower cost of risks.” Hatlapatka has a “buy” recommendation under review.

Komercni reiterated full-year guidance of revenue declining “just below” 6 percent from a year earlier, Lofler said today. The executive confirmed the outlook for the full-year net interest margin decline of between 3 to 5 basis points, even though the lender has seen “stabilization” of the measure.

The total gross volume of loans provided by Komercni Banka expanded by 2.9 percent to 475.7 billion koruna as of Sept. 30 from a year earlier, helped by mortgages and export credits, Komercni said. Client deposits rose 4.8 percent to 592 billion koruna from a year earlier, it said.

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