(Repeats story published late on Tuesday)
* Bad loans to peak this year, fall in 2011
* Economic growth to average around 2 pct in coming years
By Jana Mlcochova
PRAGUE, March 9 (Reuters) - Corporate lending by Czech banks
is bottoming out but a recovery will only begin in the second
half of this year and will be gradual, the country's banking
association chief said on Tuesday.
Czech banks weathered the global financial crisis relatively
well thanks to a high deposit base, low levels of foreign
exchange lending, and little investment in toxic assets.
Lending, however, has dried up as the global crisis spilled
over into the real economy as West European demand for Czech
industrial goods plunged and new orders slumped.
"We do not expect a bigger slowdown than we are seeing now.
If the economy develops as we expect, then the drop should
culminate in this first half and then it should grow," Jiri
Kunert, head of the Czech Banking Association, told Reuters in
an interview.
The decline in lending was because corporate demand for
funding fell in the absence of projects and production to
finance, rather than banks' unwillingness to provide loans, he
said.
"There was a drop in lending in a reaction to the drop in
economic activity, these are interconnected things," Kunert
said.
All big Czech banks are foreign-owned. The biggest lender
by total assets CSOB is owned by KBC <KBC.BR>, Austria's Erste
Bank <ERST.VI> controls Ceska Sporitelna and France's Societe
Generale <SOGN.PA> owns a majority in Komercni Banka
<>.
BANKRUPTCIES SURGE
The volume of outstanding corporate loans shrank by 7.7
percent in January from a year earlier.
But Kunert said corporate lending remained the most
profitable business for banks because it tied up additional
financial services, such as treasury transactions.
Existing corporate credit lines were tapped by only 70-80
percent of the agreed volume, which showed that weak lending was
due to demand rather than supply, he said.
The Czech economy contracted 4.3 percent last year and the
central bank forecasts a 1.4 percent expansion in 2010 thanks to
growth in exports.
Kunert said the economy would average growth of around 2
percent annually in coming years, well below pre-crisis levels
of 6-7 percent seen between 2005 and 2007.
Bad corporate debt should peak in the first half of this
year and bad retail debt should peak around the middle of 2010,
Kunert said.
"We assume that it (overall bad debt) would peak this year
and should decline as of 2011. I think it will rise to some
11-12 percent (by end-2010)," Kunert said.
Bad debt covers loans of at least 30 days past payment date.
Corporate bankruptcies surged 36 percent last year,
according to debt collection and research firm Creditreform,
with most firms listing a lack of bank financing among the
reasons for going under.
(Editing by Susan Fenton)
