Data from the Czech National Bank (CNB) show that in the first half of this year, banks’ net profit fell to 26.57 billion crowns. That is about 19 billion less than last year. According to Kovanda, the reason for such a huge decline is the coronavirus epidemic, which hit the banks hard. Simultaneously with the closure of stone branches, the speed with which banks are switching to online communication with clients is growing.
In response to the consequences of the pandemic and the necessary measures associated with it, the banks have hastily accelerated the closure of stone branches. “At the end of this year’s first half of the year, the number of banking positions in the Czech Republic dropped to 1761. Compared to the end of March this year, 116 banking positions have decreased,” said the economist.
This is the highest decline between quarters since 2008. Year-on-year, about 8.3 percent of bank branches decreased, the most in the last 11 years. According to experts, the rapid decline in profits is not only a problem for the Czechia, it is said to be a global problem.
Its primary reason is the uncertainty and fear of the effects of the second wave of the coronavirus pandemic. Companies are so hesitant to invest because they are not sure that the money will be returned to them. Demand for credit is also falling, and growing tensions between China and the United States are not helping.
“Central banks, including the CNB, want to make lending as easy as possible in such an environment, so they lower their key interest rates. However, they reduce the profitability of banks’ lending activities – normally measured by the net interest margin,” Kovanda described.
According to him, the profits of banks are also reduced by moratoriums (deferrals of maturity) on loan repayments, which the Czech government introduced as one of the measures to combat the economic effects of the pandemic. According to economists, the situation in the Czech Republic is still relatively favorable compared to, for example, Italy.
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