Komercni Banka profit drops on bad loan provisions (updated)

Komercni Banka as

03/05/2024 11:35

(Adds outlook in paragraph 1, executive comment in paragraphs
4-6, 13)
    By Jan Lopatka
       PRAGUE, May 3 (Reuters) - Komercni Banka  BKOM.PR  on
Friday reported a 21.3% drop in first-quarter net profit mainly
due to high bad loan provisions, but the Czech lender signalled
that bad debt charges would fall in the rest of the year and
confirmed its full-year outlook.
    Komercni, majority owned by Societe Generale  SOGN.PA , said
bad debt provisions reached 485 million Czech crowns ($20.84
million) in the first quarter, equal to 22 basis points, a
reversal from a provision release of 432 million crowns year
ago. Analysts had expected 177 million crowns. 
    "Net creation of credit risk allowances related
predominantly to the portfolios of loans to consumers and small
businesses segments as well as to a very limited number of
medium-sized corporate client situations," the bank said.
    Strategy Director Jiri Sperl told reporters the loan book
deterioration was limited to narrow segment and the bank kept
its full-year cost of risk guidance of 15-20 basis points.
    Chief Risk Officer Didier Colin said Komercni might start to
run down its inflation reserve, built up to cope with risks
stemming from high inflation, if it needed to respond to
currently unexpected potential provisioning needs. This would be
a backstop to meet the full-year cost of risk guidance.
    The bank kept its guidance for low to mid-single digit
growth in revenue this year, Sperl said.
    Net attributable profit dropped to 2.8 billion Czech crowns,
below expectations of 3.17 billion crowns in a Reuters poll.
    Operating profit rose by 1.7% to 4.0 billion crowns, helped
by a 4.1% drop in operating expenses.
    Net interest income dipped by 1.1% to 6.28 billion, in line
with expectations.
    Komercni's group lending rose by 4.6%, while client deposits
expanded by 7.2%.
    The bank reiterated it planned a dividend of 100% of 2024
net profit, same ratio as in the 2023 payout.
    "Net interest income declined slightly, as costs of funds
were elevated and there were increased interest costs related to
the volume of new liabilities mandated by regulation," Komercni
Banka said.    
    Sperl also said chances that the government would impose a
tax on banks were lower than a month ago.
    The tax has been a focus of political discussions after
banks paid less than expected in a windfall tax imposed on
several sectors for three years starting in 2023 in response to
a jump in energy prices and inflation after Russia's Ukraine
invasion.
    Komercni stock dropped by 9.3% by 1028 GMT on Friday in a
move related to the share going ex-dividend. Net of that effect,
it would be trading slightly higher on the day.
    



($1 = 23.2750 Czech crowns)

 (Reporting by Jan Lopatka; Editing by Mrigank Dhaniwala and
Jane Merriman)
 ((jan.lopatka@thomsonreuters.com; +420 234 721 614; Reuters
Messaging: jan.lopatka.thomsonreuters.com@reuters.net))