Provisions may eat into '06 Czech KBC profit

...disputes over past claims with the state, a Czech newspaper reported on Tuesday. The daily Mlada fronta Dnes quoted unindentified sources as saying central bank regulators demanded that KBC unit CSOB create extra provisions to hedge against having to pay as much as 5.6 billion crowns to cover the claims arising from its 2000 takeover of failed IPB bank.

The central bank said it had no comment on the news report when contacted by Reuters.

Ceskoslovenska Obchodni Banka (CSOB), the biggest Czech lender and 97.5-percent owned by the Belgian banking and insurance group, said it knew of no request for extra provisioning and that auditors agreed with the way it accounted for the claims.

"We do not register such a requirement (by the regulator)", CSOB's Chief Executive Officer Pavel Kavanek said in a written statement sent to Reuters.

CSOB reported an unaudited net profit of 9.5 billion crowns ($440.6 million) for last year on Monday, an equivalent of more than half of net income of the entire KBC group in the fourth quarter of 2006 which reached 634 million euros ($835 million).

CSOB said the claims in dispute were covered by state guarantees issued to secure IPB's takeover by CSOB in 2000.

"The regulator is fully informed about legal opinions the bank has, which confirm the very strong and sound position of CSOB in requiring the state to honour the guarantees," the bank statement said.

"Therefore, to create provisions as the local press suggests, would be illogical and in contradiction to international accounting standards. CSOB's auditor continuously affirms the position CSOB has maintained," it added.

IPB, the country's third largest bank at the time, was taken over by the state after suffering a liquidity crunch and swiftly sold to CSOB for 1 crown in a deal covered by state guarantees.

Shares in KBC, which have risen around 10 percent in the past year, fell 1.95 percent to trade at 95.17 euros by 1020 GMT, compared with a 1.6 percent drop in the DJ Stoxx European banks index .

[PRAGUE/Reuters/Finance.cz]