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Komercni May Cut Profit, Payout on Greek Bonds, Cyrrus Says

October 13, 2011

(Adds capital, liquidity comment in sixth paragraph.)

Oct. 13 (Bloomberg) -- Komercni Banka AS, the Czech unit of Societe Generale SA, may curb dividends as additional losses on Greek government bonds threaten to slash profit to the lowest in five years, according to Cyrrus AS.

Komercni shares had their 12-month price estimate lowered to 4,150 koruna from 4,503 koruna at Cyrrus to reflect the worse earnings outlook, according to a report to clients today. The Brno, Czech Republic-based brokerage kept Komercni at “buy.”

The lender, which took a 1.66 billion-koruna ($92 million) impairment charge on Greek debt in the second quarter, still holds “slightly more” than 5 billion koruna of the securities, Chief Financial Officer Pavel Cejka told Lidove Noviny newspaper on Sept. 22. Investors may be required to shoulder a 50 percent cut in the value of Greek debt, Komercni Chief Executive Officer Henri Bonnet told Hospodarske Noviny two days ago.

“More writedowns are likely by yearend, depending on how talks on Greece’s managed default go,” Marek Hatlapatka said in the Cyrrus report. “Greek writedowns will probably result in a lower dividend from the 2011 profit. This year’s exceptionally high dividend of 270 koruna will probably not be repeated.”

Spotless Liquidity

Komercni may take another charge on Greek bonds in the last quarter of “nearly 2 billion koruna,” which would cut full- year net income to less than 11 billion koruna from 13.3 billion koruna last year, according to Cyrrus. That would be the lowest profit since 2006, when Komercni netted 9.2 billion koruna.

“The loss from Greek bonds will be unpleasant for Komercni earnings, but poses no risks for the bank’s capital stability or liquidity,” Hatlapatka said. “With a core tier 1 capital ratio of 14 percent, Komercni won’t need a capital increase. Its loan- to-deposit ratio below 75 percent makes liquidity spotless.”

The stock fell 0.4 percent to 3,465 koruna at its 4:24 p.m. close in Prague.

--Editors: Linda Shen, Peter Branton

To contact the reporter on this story: Krystof Chamonikolas in Prague at

To contact the editor responsible for this story: Gavin Serkin at

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