KBC Czech unit CSOB net profit grows 26.3% y/y in Q1.

By bne IntelliNews May 13, 2010
The consolidated net profit of the largest domestic bank CSOB, a unit of Belgian financial group KBC, grew by 26.3% y/y to CZK 3.9bn (EUR 150mn) in Q1, the bank's financial report showed. Adjusted for one-off, extraordinary influences - namely the positive revaluation of CDO portfolio (CZK 266mn, net) in Q1 2010 and IFRS treatment of ALM hedges (CZK -399mm, net) in Q1 2009, the net profit would have increased by 9.4% y/y to CZK 3.6bn. The net profits of CSOB major rivals, Ceska Sporitelna and Komercni Banka, also grew - that of the former by 4.1% y/y to CZK 3.1bn, of the latter - by 12.8% y/y to CZK 3.2bn. The value of CSOB loan portfolio decreased by 3.3% y/y to CZK 402.3bn at end-March as the housing loans expansion was offset by lower volume leasing and corporate loans. Nevertheless, the net interest income continued growing by 15% y/y to CZK 6.1bn in Q1. Despite the more moderate lending activity of the bank, the share of non-performing loans (more than 90 days overdue) increased to 3.67% at end-March from 2.57% a year ago and is likely to continue growing due to the still to increase unemployment. Nevertheless, the coverage of non-performing loans with allowances for loans and leases increased to 77.7% at end-March from 71.1% a year ago. The impairment on loans and receivables decreased by 1.3% y/y to CZK 811mn in Q1. CSOB attracted CZK 696.7bn worth of deposits and assets under management at end-March, up by 2.5% y/y. The bank still disposes of ample liquidity as the liquidity ratio (loans to deposits) remained high at 70.4% at end-March. CSOB total assets amounted to CZK 831.3bn at end-March, down by 5.2% y/y. The bank remains well capitalised with the consolidated capital adequacy ratio (under Basel II regulations) increasing to 15.22% at end-March from 10.69% a year ago. CSOB exposure to bonds of selected Southern European countries (Portugal, Italy, Greece and Spain) and Ireland amounted to CZK 14.5bn as of 11 May 2010, of which sovereign bonds accounted for 94.7% share. The government bonds of Greece had the largest value of CZK 7.9bn (the central bank estimated that the total exposure of local banks to Greek bonds amounted to CZK 20.5bn), followed by those of Italy (CZK 5.2bn) - all sovereign bonds are eligible for being pledged against the ECB. Even Greece potential default is not likely to have significant negative influence over the bank given its high capital adequacy. Belgian financial group KBC recently announced plans to sell 30-40% of its 100% stake in CSOB on the Prague Stock Exchange.

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