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Komercni Banka Leads Czech Stock Rout on Greece Referendum Risk

November 02, 2011

Nov. 1 (Bloomberg) -- Komercni Banka AS slumped the most in 1 1/2 months, leading a decline in Czech shares amid renewed concern a Greek default could hurt Europe’s banks.

The PX equity gauge slid 3.6 percent to 897.3, a four-week low, at its 4:28 p.m. close in Prague. Komercni, the Czech unit of Societe Generale SA with a 21 percent weighting in the index, fell 6 percent, the most since Sept. 19, to 3,259 koruna.

Global stocks sank as investors bought German bunds after Greece announced a referendum on Europe’s latest bailout plans, threatening to send the nation into default if voters reject the deal. Komercni, which reported a 1.66 billion-koruna ($91 million) loss on Greek debt it holds in the second quarter, is scheduled to publish third-quarter earnings on Nov. 8.

“Further writedowns in Komercni’s third-quarter earnings can’t be ruled out,” Marek Hatlapatka, an analyst at Cyrrus AS, said by phone today from Brno, Czech Republic. “Valuation-wise, it doesn’t matter if they do it now or in the last quarter. The loss should have been largely priced in by now. But if the Greek referendum fails, it will be a further blow to European banks, including Komercni, and that makes investors nervous.”

Komercni may take another charge on Greek bonds by the end of the year of “nearly 2 billion koruna,” which would cut full year profit to less than 11 billion koruna, a five-year low, from 13.3 billion koruna last year, Hatlapatka wrote in an Oct. 13 report to clients.


New World Resources Plc, the biggest coking-coal producer in the Czech Republic, and CEZ AS, the country’s largest power utility, tumbled as commodities dropped. Austria’s Erste Group Bank AG slid 4.8 percent to 375.9 koruna, its lowest close in Prague trading since April 2009.

Greece’s referendum poses a threat to financial stability in the euro region and increases the risk of a “disorderly” default, Fitch Ratings said today.

“While Prime Minister George Papandreou hopes this will strengthen his political mandate for further reforms, investors see this as a clearly negative move,” Hatlapatka said today. “It brings another significant dose of risk and uncertainty to the already extreme situation surrounding Greek debt.”

--Editors: Ana Monteiro, Alex Nicholson

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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