In a newspaper interview today, KB chairman Radovan Vavra gave information that we see as generally positive for the stock. He indicated that the bank’s operating results improved in May and June. This may point to good six-month figures, which are scheduled for release July 31. Vavra was quite vague as to his expectations of full-year profits, and said that a large loss as well as a large profit is possible. We find this understandable since the bottom line will be determined primarily by provisions, whatever the operating profit. As for the provisions, Vavra suggested that they could range between CZK 7 bil. and CZK 9.5 bil. (the latter is reportedly recommended by McKinsey). In our projections, we forecast CZK 7.8 bil. in provisions in 2000 (and a bottom-line loss of CZK 100 mil.; raising the provisions estimate to CZK 9.5 bil. would imply an expected bottom-line loss in excess of CZK 1.5 bil.). At the same time, Vavra said that an independent audit, which is currently under way at KB, has not revealed any new disasters of the B.C.L.-type. Vavra also said that KB greatly benefited from the recent IPB crisis, specifically through new corporate clients and new accounts. Generally, the news is positive (the operating performance in recent months; no skeletons in the closet; the inflow of new customers related to IPB). The degree of KB’s provision making is still uncertain, the range suggested by Vavra is still very wide.
(Ondřej Daťka)