Prague - Profit of Komerční banka (Commercial bank), a Czech private financial institution, in the first three quarters of 2011 dropped by 29.3 percent, to CZK 7bil, compared to the same period one year ago.
The main reason of this decrease is the decrease of value of Greek government bonds, the bank explained in its quarterly press release.
The bank's net profits, adjusted for these losses, increased in the same period 5.6 percent, to CZK 10.5bil.
The volume of personal loans granted by the bank increased 12 percent from the previous year - nearly 4 percent of this increase is attributed to the acquisition of 50.1 percent share in SG Equipment Finance.
Loans to private companies grew 6.9 percent - the figure increases to 15 percent if the above-mentioned acquisition is included.
The bank said in its statement that its capital adequacy is 16 percent, which is above the current regulatory framework of 8 percent and the Basel 3 regulatory minimum of 10.5 percent (to come into force in 2019).
"The European banking sector finds itself in a complicated situation, when macroeconomic problems meet with regulatory insecurities," said the bank's director general Henri Bonnet about the current financial troubles in Europe. "In this broader environment, the Czech banking sector is healthy," Bonnet added.
The drop in price of Greek government bonds has caused troubles to Komerční banka's mother institution, French Société Générale.
In August this year, the bank announced that its net profit for the first six months of 2011 had dropped by 15.5 percent.
Unemployment expected to increase
Economic data released today by the Czech employment office show that the unemployment rate dropped in October 2011 by 0.1 percentage point, to 7.9 percent. Analysts comment that this is far from being an uncommon development for this month - since 1997, the unemployment rate has always decreased in October.
However, the Czech Statistical Office expects the number of unemployed to increase in the following months. "The economy will not be able to create enough jobs," said analyst Tomáš Volf. According to a survey of 250 managers conducted by Deloitte, roughly half of the companies expect they will be forced to lay off staff. The public sector will continue to shed jobs as well.
This means that by the end of 2011, the jobless rate could surpass 8.5 percent.
"Unfortunately, at this point it is likely that the unemployment rate will surpass 9 percent at the beginning of next year. Next year's development will depend strongly on the current solution of the European debt crisis," said Michal Brožka, an analyst for Raiffeisenbank.
Private consumption drops
Fresh data on domestic consumption are equally gloomy. In September, the Czechs spent less than in the previous month. After the end of the holiday season, retail sales in the Czech Republic dropped by 0.6 percent. Compared to the same month in 2010, the sales decreased by 0.5 percent.
This surprised analysts, who generally estimated that the growth from August would continue.