UPDATE: Komercni Banka Sees Opportunity In Economic Slowdown

Czech lender Komercni Banka AS (BAAKOMB.PR) foresees the possibility of raising fees and boosting margins, after several quarters of margin pressure amid growing competition, the bank's Financial Chief Pavel Cejka said Thursday.

Cejka said the last time the economy went into recession the bank was able to price up its products.

"When the market is growing very dynamically, there's lots of price pressures. But with a market slowdown, there's higher risk but also space for pricing up," he said.

Chief Executive Henri Bonnet added that Czech legislative changes as of Jan. 1, 2013 will force state institutions to move some banking business away from commercial banks to the country's central bank, and commercial banks may raise fees to recover lost revenues as a result.

"It could lead to upward pricing changes by banks which are affected by these measures," Bonnet said.

Regarding the recent pressure on margins, Cejka said new mortgage sales are at lower margins than on outstanding loans, but as the bank's portfolio is sizeable the impact isn't visible.

"In most loan categories there is margin pressure from quite intense competition...but if we look at margins, the pressure is there but the overall decline is very small," Cejka said.

The Czech economic outlook is better now than it looked only three months ago and the economic slowdown isn't hurting the quality of its loan portfolio, a senior executive added.

Aurelien Viry, the bank's head of risk management, said the bank's cost-of-risk guidance hasn't changed since the end of last year. "We're comfortable with the guidance and don't see any change of trend in coming quarters. If anything the economic outlook is better than what we thought one quarter ago," Viry said.

The bank's shares were down 0.6% on the day at CZK3,399 ($128.9) at 0854 GMT.

Earlier in the day the bank said its first-quarter net profit rose 3.3% on the year to CZK3.49 billion in the three months through end-March, up from CZK3.38 billion earlier. The results beat expectations as net interest income rose though the bank increased its provisions for potential losses.

-By Sean Carney, Dow Jones Newswires; +420 222 315 290, sean.carney@dowjones.com

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