Czech banking sector profit falls 3.1% in Jan-Sep 2013

By bne IntelliNews December 2, 2013

The aggregate net profit of the Czech banking sector fell by 3.1% y/y to CZK 50.6bn (EUR 1.8bn) in the first nine months of 2013, according to central bank data. The decrease came as the country’s three largest domestic banks - Ceska Sporitelna​, CSOB and Komercni Banka that account for more than half of the sector’s profit, saw their 9-mo earnings fall. The banks blamed the record low interest rates for the fall in earnings.

The banks’ net interest income shrank by 3.9% on the year to CZK 78.5bn in January to September 2013 and the net income from fees and commissions dropped by 1.5% y/y to CZK 27.1bn. Impairments jumped 32.6% y/y to CZK 12.6bn.

The sector’s capital adequacy improved to 17.33% as of end-September 2013 from 16.35% a year ago.

There were 45 banks operating on the Czech market at end- September 2013. Of them, 37 are foreign-owned.

IntelliNews comment: Czech banks have seen their profits fall as the central bank cut its benchmark rate to almost zero in November 2012 in an attempt to boost consumer spending and help the economy that is emerging from a record-long recession that lasted six quarters. The low interest rates coupled with intense competition between banks for borrowers and depositors squeezed interest rate margins. The sector’s profitability may further weaken next year as the main centre-left party Social Democrats (CSSD), that won the October early elections, has pledged to raise taxes for utilities and banks once it comes to power to bolster state revenue. But it is yet to be seen whether CSSD will be able to deliver on its pledge, as it is now holding talks with pro-business movement ANO to form a coalition government and ANO is against tax hikes.

Banking sector performance      
CZK bn Jan-Sep 2013 Jan-Sep 2012 y/y change
Net profit 50,6 52,2 -3,1
Net interest income 78,5 81,7 -3,9
Net fees & commissions 27,1 27,5 -1,5
Administration costs 48,1 49,2 -2,2
Provisions 0,9 0,3 200,0
Impairment 12,6 9,5 32,6
Capital adequacy ratio in % 17,33 16,35 1,0
Source: Czech central bank      

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