In reaction to the announced 2005 price changes for some products Komercni banka told us that the move is expected to have a positive effect on the net fees income. The bank estimates that as a result of the re-pricing and changes in the number and volumes of transactions net fees income (on unconsolidated base) could rise by 4% y-o-y in 2005. It seems that the estimated rise in commission income for next year is at the lower end of the interval indicated earlier by the bank. Recently the management told us that going forward it sees the net fee income growing between 3 to 7% p.a.. Due to strong competition, KB’s management sees limited scope for fees increases.
Separately, yesterday the bank announced it has cut interest rates on all of its mortgages by 19 basis point on average. Lately also other KB competitors cut their rates on this product as long-term inter-bank rates have been going down. Mortgages to individuals make up about 18.7% of KB total loan portfolio and have been growing at a 40% rate. We estimate that the spread on these loans stands at about 190 basis points. The decline in rates puts pressure on the already tight spread, but it might assure KB regains some market share in this segment, which lately declined to 26% from 30% at the beginning of the year.
Tomáš Gatěk, Patria Finance