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December 5th, 2008
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Banks rake in large profits

Domestic finance booms in face of global turbulence

By Victor Velek
Staff Writer, The Prague Post
March 5th, 2008 issue

Despite uncertainty on global financial markets, the largest Czech banks all recorded large increases in profit this past year.
Česká spořitelna (ČS), the country’s largest bank in terms of clients, posted a record profit of 12.15 billion Kč ($729 million) in 2007, climbing 17 percent over the previous year, the bank announced Feb 29.
“The growth was stimulated mainly by revenues from interest and loan fees, both to individual and corporate customers,” said ČS spokeswoman Klára Gajdušková.
Last year, ČS saw its volume of mortgages to individuals increase almost 40 percent year on year, while consumer loans grew by 23 percent. The bank netted 9.82 billion Kč in fees and commissions, up 7 percent compared to 2006.
By surpassing the 12 billion Kč mark, ČS, a subsidiary of Austria’s Erste Bank, beat its two major domestic rivals and became the most profitable bank in the Czech Republic.
However, Komerční banka and ČSOB, the other two banks of the country’s “big three,” also performed well last year. ČSOB netted 10.84 billion Kč, up 14 percent, and Komerční banka saw its profits climb 22 percent to 11.23 billion Kč.
The robust shape of the banking sector reflects the booming economy, analysts say.
“The solid growth of large Czech banks stems from the economy’s growth and large demand for mortgages and consumer loans,” said Jiří Staník, researcher at Wood & Company, a Prague-based investment firm.
Moreover, the banks have better management than in previous years, he added.
Problems tied to the U.S. subprime mortgage market have only indirectly affected the domestic financial market, according to Ondřej Moravanský, an analyst at Cyrrus brokerage.
Europe’s banking giants have been making large write-offs because they operate on international markets, while Czech banks are not global players, he said. This makes them much more profitable nowadays compared with banks in Western Europe and the United States.
“To date, the U.S. subprime crisis has pushed down share prices of banks worldwide. But the actual financial performance of Czech banks has been virtually unaffected,” Staník said.
However, the banking sector won’t be immune to domestic factors like the predicted slowdown of the economy and the rise in loan rates this year, he said.
Banks should still continue to prosper this year despite the slowdown, with the big three possibly increasing their annual profits up to 15 percent, Staník said.
ČS hopes to continue the record-setting pace it posted this year.
“In 2008, we expect net profits to go up year on year 15 percent to 20 percent,” Gajdušková said.
Viktor Velek can be reached at velek@praguepost.com

Victor Velek can be reached at vvelek@praguepost.com


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