According to the Radio Prague web portal, Czech banks are facing a clash with clients that could cost them hundreds of millions of CZK. More than 40,000 people have signed up to class actions to reclaim fees charged for loan and mortgage accounts. Following a 2011 verdict by the German Supreme Court, the clients claim that the practice is illegal. The court ruled that fees charged by banks for keeping clients’ loan accounts were illegal as the account statements provided no relevant information to the clients. According to the article, the banks claim all their charges are in line with the Czech law.
Our view:
Komercni Banka recently stated it had cancelled loan fees, although this will be offset by higher net interest income. The fees will instead be recognized over the useful life of the loan, in line with the effective interest-rate method. This implies that the cost will be passed on to clients. The management expects this change to have an impact of CZK 20m lower net fee income but offset by CZK 20m higher net interest income in 2013. The scale of possible reclaims is hard to evaluate, but we do not expect any major impact on Komercni Banka's bottom line. Meanwhile, the news could have some negative impact on sentiment towards Komercni Banka.