The HN daily newspaper writes today that Komercni banka might suffer losses from its equity investments in Ceska zbrojovka (CZ, manufacturing) and Vodni stavby Praha (VSP, construction) companies. KB has a majority stake in both companies (KB is their major creditor and subsequently accumulated their equity in order to increase its control), and has to sell them in order to comply with the banking law. What the paper does not say is that KB already values the equity stake in VSP at zero, hence there is no risk of an additional write-off or provisioning.
KB has not disclosed how it currently values its CZ equity investment, but, according to the newspaper, a sale of the stake is imminent. Although this does not necessarily mean that a sale would not result in a loss, any loss should not be large (we estimate that in the worst hypothetical case of a write-off to zero, which is unlikely if a sale is imminent, KB’s loss would not exceed CZK 6-7 per KB share, and this is assuming that KB now values its stake at its purchase price, which is also probably not the case). If the report has any negative effect on the stock, it should not be great.
(Ondrej Datka)