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INTERVIEW-Komercni Banka sees Czech corporate borrowing slowdown
September 20, 2017 / 4:44 PM / 3 months ago

INTERVIEW-Komercni Banka sees Czech corporate borrowing slowdown

* Komercni Banka may revise lending outlook down

* Says weaker corporate lending main driver

* Sees mortgage lending down in 2018 as rates rise

* Confirms 2017 dividend guidance (Adds detail, quotes)

By Jason Hovet

PRAGUE, Sept 20 (Reuters) - Komercni Banka, the Czech division of Societe Generale, said its loan growth may not be as strong as expected this year as corporate borrowing has started to slow.

Chief Financial Officer Jiri Sperl told Reuters that the Czech Republic’s third-largest bank expected “broadly flattish” banking revenue for the full-year, despite a boost from the central bank’s interest rate tightening cycle that began last month.

Higher rates would help and were already visible in August, Sperl said. Every 1 percentage point rise in the interest rate yield curve will add 1.2 billion to 1.3 billion crowns ($59.80 million) to net interest income over 12 months, he said

But with a slowdown in corporate lending growth, Komercni Banka is likely to cut its loan growth outlook for this year, previously seen in the mid- to high-single digits.

“Without any doubt there is a slowdown,” Sperl said on Wednesday. “I cannot exclude that we will have to revise down a bit (the lending growth outlook).”

He said the slowdown was partly due to structural market shifts and increased lending in euros rather than crowns. He said Komercni Banka was more cautious about the trend towards making loans in euros.

“We don’t participate too much in euro-denominated loans. This is another reason there is not such huge (lending) growth like we had indicated,” he said.

CAPITAL REQUIREMENTS

With a hot housing market, the central bank has imposed higher capital buffers on banks. From mid-2018, Komercni Banka’s capital adequacy will need to be at 15.9 percent, which it already meets.

Komercni Banka wants to reinforce its capital gradually through Tier 2 components. Sperl said regulations allow the bank to issue up to 2 percentage points of capital, or almost 400 million euros.

He said the bank was likely to look at subordinated debt for this purpose and may issue around 100 million euros this year.

The Czech central bank has also set tougher recommendations on mortgage lending that mean borrowers need a bigger down payment, often disqualifying potential buyers.

Sperl said mortgage growth this year would be relatively fast but would halve next year to around 4 percent.

He also said the bank was sticking to its plan to pay out 60 percent of recurring net profit for the year 2017 as dividends. The bank was not ready to reinstate an official dividend policy range for future years like it had in the past but would guide investors on a year-by-year basis, he said. ($1 = 21.7380 Czech crowns) (Reporting by Jason Hovet; Editing by Susan Fenton and Jane Merriman)

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