Komercni banka: CEO repeats long-term dividend policy

Komercni banka CEO Alexis Juan, in an interview for Reuters, repeated that the bank aims to pay out in dividends 30-40% of its annual net profit in the long term and that last year’s dividend of CZK 200 / share was exceptional. Given last year’s net profit of CZK 9.3bn, or CZK 245 / share, this year’s dividend would amount to about CZK 70 – CZK 100, which would be below our and the market’s expectations. However, the actual dividend proposal might deviate from the long-term policy. Given the bank’s overcapitalization (Tier-1 ratio above 14%) we believe the bank could pay much higher dividends and we are still looking for a dividend of up to CZK 200 / share for this year.
Juan also added that for 2005 the bank expects a single-digit increase in revenues driven by a revival in corporate loans and also that costs should stagnate, with the cost-income ratio remaining between 50-53%. This is in line with expectations. He also commented that low interest rates and strong competition for clients will further squeeze margins and that there is increasing pressure on banks to keep down fees. Regarding the buy-back, Juan said the bank did not buy any shares under the program approved last year and that the bank would ask shareholders to extend the program. However, he added that the bank would not intervene on the market to support the bank’s stock price. We remind that the bank is holding its AGM on April 28. Overall the news is slightly negative and we believe it could put downward pressure on the stock price today.