Komercni Banka beats Q3 profit estimates but lowers revenue outlook (updated)

Komercni Banka as

03/11/2023 11:13

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      Q3 net profit CZK 4.27 bln vs CZK 4.08 in poll
    

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      Provisioning release boosts Q3 profit
    

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      Sees deeper-than-expected 2023 revenue drop
    

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      Net interest income decline can reverse in 2024
    

  
 (Adds CFO comment, shares, 2024 outlook, 2025 targets)
       PRAGUE, Nov 3 (Reuters) - Czech lender Komercni Banka
 BKOM.PR  reported a lower-than-expected drop in third-quarter
net profit on Friday after releasing some loan loss provisions,
but cut its revenue outlook as falling interest income hits 2023
earnings.
    With high inflation and interest rates at more than
two-decade highs in the past year, banks had seen rising profits
in 2022 but now are grappling with higher financing costs as
clients shift to better-yielding deposits to safeguard savings.
    Net interest income fell 11% year-on-year to 6.51 billion
crowns in the third quarter. Net banking income was down 9.5%.
    Komercni Banka, the country's third-biggest bank that is
majority owned by French group Societe Generale  SOGN.PA ,
posted an 8.5% drop in attributable net profit to 4.27 billion
crowns ($185.66 million) in the quarter.
    It forecast 2023 revenue to decline at a mid-single-digit
rate - more than previously expected - due to interest income
falling by a tenth and a central bank decision to end
remuneration of mandatory minimum reserves.
    Komercni Banka shares fell 1.85% on Friday after the lowered
2023 outlook. 
    Chief Financial Officer Jiri Sperl told a media call
more-profitable current account deposits rose in the third
quarter, and the bank expected 2024 net interest income to grow
by a mid-single digit rate.
    "2022 was a record year, in 2023 the correction was expected
and came. In 2024, we are getting back to a trajectory that will
lead us to 2025 (profitability) targets," Sperl said.
    Komercni Banka is targeting a cost-to-income ratio of around
40% in 2025, down from above 45% in 2019 right before it
launched a five-year strategic plan and from 47% currently.
    It said its profit growth potential in 2023-2025 was limited
by a windfall tax on banks and a rise in the corporate tax rate
to 21% from 19% next year.
    A net release of provisions boosted its third quarter. It
forecast cost of risk factoring provisioning at zero basis
points in 2023, down from a previous outlook of 0-10 bps.
    It also lowered its lending outlook to low- to
mid-single-digit growth.
    On Thursday, the Czech National Bank deferred the start of
interest rate cuts on Thursday, leaving the option of launching
an easing cycle open in December.
     
($1 = 22.9990 Czech crowns)

 (Reporting by Jason Hovet; Editing by Rashmi Aich and David
Evans)
 ((jason.hovet@thomsonreuters.com;))