Bloomberg News

Komercni Banka Quarterly Net Falls on Greek Bond Holdings

November 09, 2011

(Updates with additional comments starting in sixth paragraph, updates shares.)

Nov. 8 (Bloomberg) -- Komercni Banka AS, the Czech unit of Societe Generale SA, said third-quarter profit more than halved as the company took a charge for Greek government bonds.

Net income dropped to 1.56 billion koruna ($85 million) from 3.48 billion koruna a year earlier as it wrote down 2.64 billion koruna of Greek debt, the Prague-based lender reported.

The results missed estimates on higher-than-expected writedowns, J&T Banka AS analysts wrote in a note to clients. On an operating level, the results exceeded estimates and the faster pace of lending is positive, the analysts wrote.

Gross lending rose to 434.7 billion koruna in the third quarter from 421.9 billion koruna in the previous quarter. Non- performing loans fell 3.7 percent from the second quarter to 16.2 billion koruna.

Komercni shares traded up 0.9 percent, or 30 koruna, to 3,330 koruna, as of 12:05 p.m. in Prague, erasing earlier gains of as much as 3.3 percent.

Komercni hasn’t discussed its dividend policy at the board level, Chief Executive Officer Henri Bonnet said at a news conference today in Prague. The capital position of the bank is “very strong” and a decision about a dividend will be made in the fourth quarter, Chief Financial Officer Pavel Cejka said, speaking along with Bonnet.

The Czech economy continued a modest recovery through the first three quarters that was particularly visible in export financing and improved demand for loans from individuals and businesses, Komercni officials said. Confidence in the economy began deteriorating toward the end of summer on worsening news from the euro area.

Parent Declines

Societe Generale, France’s second-largest bank, reported third-quarter profit fell 31 percent to 622 million euros ($856 million), hurt by lower trading revenue and a writedown on Greek sovereign debt. The bank also said it won’t pay a dividend for 2011.

“The European banking industry finds itself in a difficult situation where macroeconomic challenges are combined with regulatory uncertainties,” Bonnet said, adding the Czech banking system is “healthy” and Komercni has proven its capacity and commitment to supply credit to the economy.

Komercni holds about 7.8 billion koruna of Italian sovereign bonds on its trading books. The lender isn’t planning a sale of the debt “for the time being” as the market wouldn’t accept a good price and bank officials expect Italy to be able to pay its debt, Bonnet said.

Italian Securities

The lender has 0.5 billion koruna in Italian securities to be held to maturity, according to a presentation made at the press conference.

The residual value for Greek bonds on the company’s books is “limited and manageable” at 2.89 billion koruna, Komercni said. Net banking income rose 2.1 percent to 8.26 billion koruna in the quarter from a year earlier. Net-interest income rose to 5.58 billion koruna from 5.27 billion koruna a year ago.

Komercni’s share buyback program is an “opportunistic approach” of the lender of how to deal with the bank’s capital level, Cejka said today. Komercni, which already bought back shares worth 400 million koruna, is considering canceling the stock rather than offering the shares back to the market.

--Editors: Douglas Lytle, Peter Branton

To contact the reporter on this story: Lenka Ponikelska in Prague at lponikelska1@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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