The MF Dnes newspaper reports today that Cabinet could decide as early as next week (on Monday) about possible KB guarantees, which may help the stock today. While the option of zero-guarantees reportedly still remains open, a Ministry of Finance proposal seems to portray the bank as truly in need of additional guarantees and the privatization adviser is reportedly also advocating guarantees. Specifically, the Finance Ministry seems to propose that CZK 25 bil. in guarantees be provided by the government, and that these guarantees be used over a three-year period to cover the cost of dealing with KB’s remaining bad debt. A similar range has been referred to before.
At the same time, however, it is not certain that a conclusive decision will be made by the Cabinet next week. The Ministry of Finance proposal could be addressed by Cabinet next week since, according to new budgetary rules (as of January 2001), Parliament must approve any government guarantees. However, some deputies believe that the government should wait until next year before deciding on guarantees. Also, the Finance Ministry spokesman himself said that the size of the guarantees might be determined only in direct negotiations with the bidders (i.e., early next year). Our 12M target price is CZK 955 per share, and we do not change it for now.
(Ondřej Daťka)