According to Bloomberg, Komercni Banka may have to pay CZK 679m (USD 29m) plus interest after it lost an arbitration dispute with a Czech state agency. The row concerned the issue of risky assets, which the government took over before selling KB to Societe Generale, in 2001. An arbitration panel ruled that the bank must pay the disputed sum to Konsolidacni, yesterday. Konsolidacni Agentura was set up by Czech government to take over risky assets from Czech companies. The government provided guarantees and bought bad loans worth about CZK 120bn from KB and Ceska Sporitelna before selling them to foreign investors. According to the bank, the disputed sum has already been fully provisioned in 4Q05 and should not have any impact on the banks results. While we expect mildly negative trading impact on the stock price today, although we reiterate our Buy rating with a fair value of CZK 4,267.