According to Czech daily HN, there has been more speculation that Komercni banka plans to buy a 50% stake in building society Modra Pyramida from German bank BHW. Modra Pyramida is the third largest building society in the Czech Republic and KB owns already has a 40% stake. KB has declined to comment on this issue. According to daily HN, there are also talks over acquiring remaining 10% stake from the last shareholder Ceska pojistovna.
Our view: In terms of size, Modra Pyramida, is about one tenth the size of Komercni Banka in terms of assets and so not insignificant. At the end of 2005, it had total assets of CZK 57.7bn, loans of CZK 19.2bn, deposits of CZK 52.4bn, shareholders equity of CZK 1.6bn and an after-tax profit of CZK 270.6m. The ROE of the bank was close to 20%.
Whether the acquisition of an increased stake in Modra Pyramida is good news for shareholders will depend on the price but there is no reason to expect the bank to overpay. We would view the purchase positively, as there is a good strategic fit, capital isn't an issue, and the bank already has a 40% stake.