Komercni banka's new business strategy, presented on Friday, assumes that KB will remain a universal bank with a strong domestic position in commercial banking. KB plans to reach an ROE of 25% and a cost/income ratio in the low 50's in 2004, which we consider rather ambitious.
Besides an average 5% increase in operating revenues, KB expects operating costs to decline by 5% annually through 2002-2004. KB plans a 25% personnel cut by 2004 (to approx. 7,000 personnel). KB has not disclosed any financial targets for 2002 or 2003. KB CEO A. Juan said that KB would probably not pay a dividend out of its 2001 profit. He expects KB not to create additional provisions to its CDOs investment if the US economy improves as forecast.
Also, the CEO said that the majority owner, Societe Generale, does not plan to increase its current stake in KB. This might have a negative impact on KB share price, since the recent gains there may have been partially driven by speculation of a buyout.
(Jan Hajek)