May 4, 2018 / 6:38 AM / a year ago

UPDATE 1-Komercni Banka Q1 profit falls less than expected, plans strategy shift

(Adds details on lending, strategy plan)

PRAGUE, May 4 (Reuters) - Komercni Banka posted a 26.5 percent year-on-year drop in first-quarter attributable net profit on Friday, less than expected but sharply down after the Czech lender booked gains from a real estate sale in the same period a year ago.

Profit at the bank, majority owned by Societe Generale of France, dropped to 2.999 billion crowns ($140.96 million), beating the average estimate of 2.87 billion crowns in a Reuters poll thanks to the release of provisions for bad loans.

Net interest income rose in the quarter, although due to increased competition, growth lagged the rise in deposits and lending, which increased 4.3 percent and 2.8 percent respectively.

Overall banking revenue fell by a more-than-expected 3.6 percent to 7.57 billion crowns, dragged lower by weaker financial operations income.

The bank has said it expects lending growth in the mid single digits in 2018 along with “flattish” banking revenue.

With a growing economy and unemployment the lowest in two decades, banks have seen strong lending growth in recent years that is starting to cool a bit. The central bank started raising interest rates last August, delivering three rate hikes so far.

To counter persisting pressure on profit margins and growing competition, Komercni Banka said it planned to update its strategy in the coming years to simplify, digitalise and accelerate customer processes in its retail and corporate segments.

It said implementation of its KB Change 2020 plan - under which it will adjust its retail network including closing 10-15 percent of branches - would bring a net positive financial contribution starting from 2019. It will also boost investments, mainly in digital channels, this year and next.

It added it was still assessing the scope of activities and investments under the plan.

$1 = 21.2750 Czech crowns Reporting by Jason Hovet; Editing by Adrian Croft

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