REUTERS SUMMIT-Komercni sees return to growth as economy revives
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By Jan Korselt and Jan Lopatka
PRAGUE, Sept 25 (Reuters) - Czech lender Komercni Banka expects to return to revenue growth next year as lending picks up alongside the wider economy, Chief Operating Officer Pavel Cejka said.
But Cejka said Komercni, the third biggest Czech lender, majority-owned by Societe Generale, had not yet seen any pickup in loan demand and reiterated that the bank saw revenue drop of 6 percent this year.
Speaking at the Reuters East European Investment Summit on Wednesday, he said a pickup should eventually arrive given positive second quarter GDP figures and as companies wait for more signs of growth before investing.
"We are expecting a return to growth, but very small growth of revenue. We expect that, as the economy starts up a little, the loan portfolio should grow slightly, by some 5-6 percent," Cejka told the summit.
"We will be very cautious on costs, we see none or minimum cost growth that should be below the rise in revenue."
He said the bank would not maintain its very low cost of risk, seen at 40 basis points this year, and predicted a growth to 50 in 2013. This reflects provisioning against losses from loans, investments and other risks.
Komercni faces a squeeze on margins due to increasing competition from small banks and new market entrants. Cejka said Komercni and other large banks had not lost many customers but smaller players were eating into the sector's profitability by competing with low fees.
SEES HIGHER CAPITAL REQUIREMENTS
Cejka said new capital rules being introduced to strengthen banks across Europe in the coming years would have an impact on Komercni's capital requirement, it could be "quite substantially" higher in the range of percentage points.
"It would force us to maintain capital adequacy roughly at the current level," he said.
Central Bank Vice-Governor Mojmir Hampl told Reuters this week that creating different conditions for individual banks was not the central bank's "hallmark", but Cejka said he still expected some additional buffer.
Komercni has, like most of the Czech banking sector, a strong capital ratio, at 16.2 percent at mid-year.
Higher capital requirements would not threaten the bank's dividend payout ratio of 60-70 percent of profits under current conditions. But this could change if the economy picks up speed in the future.
"At the current level of the growth of the economy, the loan portfolio, the growth of business we are generating more capital than we need," he said.
"But if the economy accelerates, if the loan portfolio started growing substantially faster, it could represent certain limitation."
For other news from Reuters Russian and Eastern Europe Investment Summit, click here)
(Follow Reuters Summits on Twitter @Reuters_Summits) (writing by Jan Lopatka; editing by David Evans and Jane Merriman)