The sector last showed worse numbers at the start of the year in 2000, when it was in a two billion loss. This is a warning signal for this year’s bank gains, even though January is a business-specific month, experts agree.
“Nobody expected this year’s lockdown in the autumn, and its impact will delay the recovery and deplete other corporate reserves, so banks are facing another wave of provisions. .
The January profits of banks were also hampered by the recognition of banks’ roughly half a billion higher contribution to the Crisis Resolution Fund, but banks have paid a similar amount in previous years. According to the regulator’s statistics, the fall in the banking sector’s profits intensified at the end of last year, mainly due to another wave of reserves.
“In general, banks’ results are marked by lower transaction activity of clients during the partial closure of the economy, significantly lower year-on-year market interest rates and higher provisions for credit risk,” said Komerční banka spokesman Michal Teubner.
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Banks have an obligation to create additional reserves in the event of deteriorating economic prospects. During January, for example, the Ministry of Finance worsened the expected growth of the Czech economy from 3.9 to 3.1 percent in September.
“It was only at the very end of the year that the problems of their clients began to hit banks, and this continues to a greater extent at the beginning of this year,” recalls Raiffeisenbank analyst Lenka Kalivodová. According to her, due to the development of the pandemic situation, banks expect an increase in problems in repaying loans, which is why they are further increasing their reserves.
“In addition, rates on new mortgage and consumer loans are low in January and on corporate loans at the second lowest level since January 2004,” Kalivodová added, noting that even relatively solid demand for loans in these circumstances does not bring adequate profits to banks.
The main onslaught of the first waves of the pandemic was felt by banks last year. For the whole year, they earned 46 billion crowns, ie 48 percent less than in 2009, and thus the business went the worst since the crisis year of 2008.
“An increase in CNB rates in response to the still relatively high inflation could also have a positive effect on banks’ profitability,” predicts Petr Kříž, an economist at the consulting company PwC. The largest profit in history was achieved by Czech banks in 2019, at almost 90 billion crowns.
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