Ceska sporitelna should release today, before the market opens, information on the volume of non-performing assets that is to be transferred this year to the state-owned Konsolidacni banka (KoB) as part of the ring-fencing agreement. CS has a put option and KoB a call option on the non-performing assets with an annual 2001 limit of CZK 7 bil. each, i.e. the maximum possible amount to be transferred this year is CZK 14 bil. We expect the volume of transferred assets (mainly loss loans) to reach some CZK 8 bil. in 2001. The transfer will improve the quality of CS’s loan portfolio, and may have a modest positive impact on the P&L (in this sense, the more assets are transferred, the better). At the same time, the nature of the ring-fencing agreement is known and analysts will have some transfer incorporated in their projections. Moreover, CS has stated many times its target of 6% ROE in 2001, which is very likely to be achieved, so the figure to be released today is unlikely to lead to profit forecast revisions. More details on the transfer and its exact impact on the P&L should be released on August 8 (6M results presentation).
We reiterate our buy recommendation for Ceska sporitelna, particularly in light of yesterday’s correction, our target price is CZK 283 per share.
(Ondřej Daťka)