This week’s edition of the Czech weekly magazine Euro contains new information on Komercni banka’s exposure to CDOs (collateralized debt obligations). There has been speculation that the purchase of CZK 17 bil. of CDOs can damage KB’s bottom line because of the deteriorating quality of debt underlying them, and that it has attracted the attention of the central bank. KB officials counter this by suggesting that the additional yield on the CDOs far outweigh additional provisioning stemming from the CDOs (CZK 60 mil. this year, says KB). Moreover, the central bank did not find anything extraordinary about the transactions. This in itself could be seen as positive, but we do not expect KB’s stock to be much affected.
(Ondrej Datka)