Czech Watch - 1 November 2001

Komercni banka announced an unaudited unconsolidated profit of CZK 2.53bn in the first three quarters of this year by IAS, compared to a revised loss of CZK 2.33bn in Jan-Sept 2000. The lower-than-expected profit of Komercni banka for Jan-Sept was mainly due to provisioning for collateralised debt obligations and losses of insurer Komercni pojistovna.

Ceskoslovenska obchodni banka showed a profit of CZK 4.25bn by CAS in the first nine months of the year, almost twice as much as in the same period of the previous year. Nevertheless, last year's figure does not include performance of Investicni a Postovni banka.

Money supply M2 increased by 12.2%, year-on-year, in September. The volume of deposits in banks rose by 13.4%. The volume of credits granted by banks fell by 19.3% becauce of the transformation of Konsolidacni banka to Czech consolidating agency.

Third quarter GDP in U.S. shrinked by estimated 0.4%. A modest rise in consumer spending again offset plunging inventories and business spending. The resilience of consumer spending again prevented a plunge in overall activity. Third quarter consumption rose 1.2%. However, a deceleration is apparent. In the second quarter consumer spending increased by 2.5%, and in 2000, it reached an increase by 4.8%. Business spending continued downward at a double-digit pace Business investment expenditures dropped by 11.9% annualized suggesting that US economy still cannot see a possibility of a quick revival. As the domestic demand fell, net exports could show an improvement. Net exports improved by nearly USD 12 billion compared to the previous quarter. Government spending decelerated in the third quarter to a 1.8% annualized pace.

The koruna today moved in an interval of 33.58-33.63 CZK/EUR. The market is waiting for Thursday's meeting of the central bank board when the October Report on inflation should be released. Against the dollar the Czech currency fell to 37.30 CZK/USD affected by changes in the euro/dollar market.

Worries concerning a meeting of Finance Ministry and state bonds auction participants sent prices on the Czech fixed-income market down. Our fixed-income market index BIX fell by 0.32%, the index of state bonds market decreased by 0.27%.

David Marek