* Lower provisioning driving earnings rest of year
* Revenues down on drop in financial operations income
* Low single digit revenue growth seen
(Adds background, quotes, share price)
By Jan Korselt
PRAGUE, May 5 (Reuters) - Czech lender Komercni Banka
<> lifted first quarter net profit by more than a tenth
through hefty cuts in bad debt provisions which it said would
remain the key earnings driver for the rest of the year.
The third largest Czech bank by total assets, which is 60
percent owned by France's Societe Generale <SOGN.PA>, said a
fragile market recovery would restrict revenue growth to low
single digits.
Analyst Milan Lavicka at Atlantik FT said the cut in
expectations for what the bank called cost of risk was
"definitely positive" because it meant the economy was
developing better than the bank had expected.
Bank profitability took a battering last year as the
export-reliant Czech corporate sector lost orders from the
recession-stricken euro zone and non-performing loans rose.
Market activity fell, squeezing income from lending and
financial transactions.
Shares in Komercni slipped 1.78 percent to 3,781 crowns at
1245 GMT, in line with the overall market amid the Greek
turmoil.
Net profit rose 12.8 percent to 3.21 billion crowns from
2.84 billion last year, above the estimate of 2.87 billion
crowns in a Reuters poll, while the fall in the cost of risk -
mostly bad debt provisions - was nearly 600 million.
Deputy chief executive Didier Colin told a news conference
that corporate cost of risk was forecast to be at 50-70 basis
points this year, compared to 70-90 points seen earlier, and
retail sector risk costs would drop to 95-115 basis points,
slightly below an earlier forecast of 100-120 basis points.
"The improvement in the bank performance this year will come
from cost (cutting) and from improvement in provisioning," Chief
financial officer Pavel Cejka told a news conference.
"In contrast, in net banking income (revenues), there will
be a very low, single-digit growth," he said.
Revenue dipped 3.5 percent to 8.02 billion, below analysts
estimates for 8.13 billion, mainly due to a 32.3 percent drop in
income from financial operations. Net interest income was 5.29
billion crowns, below the 5.46 billion expected in the poll.
The finance ministry forecasts a 1.5 percent GDP growth this
year after a 4.1 percent contraction last year, on the back of a
pick up in foreign trade. But rising unemployment - blamed for a
spike in non-performing household loans - is not expected to
peak until early 2011.
Komercni Banka shares traded at a two-month low and around
12.8 times 2010 forecast earnings, versus the European sector
banking average of 13.6, according to Reuters data.
(Reporting by Jan Korselt, writing by Jana Mlcochova; Editing
by David Cowell)
