We expect KB to report earnings up 15.2% y/y but down 6.8% q/q. The decline versus last quarter is mainly expected as a result of lower one-off gains and higher costs. We expect KB’s net interest income to grow. After robust growth in 2Q05, the Czech banking sector showed further momentum in 3Q05 both in consumer loans (+4.6% q/q) and corporate loans (+3.8% q/q) but less so in corporate deposits (+0.6% q/q) and retail deposits (+0.4% q/q). Net banking income is expected to fall 0.4% q/q. Net fee income is expected to grow 0.6% q/q, benefiting from higher volumes but with continued pressure on prices and a shift towards low-cost distribution channels. Total costs are expected to rise 2.7% q/q, given KB's plans to open 20 new branches in 2005. We believe the overall picture presented for 3Q05 will be seen as positive, with strong volume growth in key segments (i.e. retail lending), and reiterate our buy rating on the stock. A conference call is to be held on today, October 31 at 4:00pm CET (3:00pm UK). Dial-in number: +44 207 162 0125.
IFRS unconsolidated (CZK m) 9M2005E 9M2004 % change Consensus
Net interest income 10,161 9,061 12.1 10,120
Net fees and commissions 6,507 6,379 2.0 6,430
Net banking income 17,433 16,801 3.8 17,370
Total operating expenses -8,705 -8,645 0.7 -
Cost of risk -739 -897 -17.7 -
Net profit/loss 6,280 5,623 11.7 6,260