The global financial crisis, which has been crushing banks all over the world, has directly hit a Czech bank for the first time. The Belgian KBC, ČSOB’s parent company, announced Wednesday it is expecting nearly EUR 1 billion losses in the third quarter of this year. The reason for the losses is the overvaluation of securities that the company, including ČSOB, bought.

The investment problems will quickly lower ČSOB’s expected profit by CZK 6.2 billion. Spokesman Ivo Měšťánek said if it weren’t for the investement problems, the bank’s revenues would have totalled CZK 8.9 billion in the first three quarters. Now it will be only CZK 2.7 billion.

He said the overvaluation of securities will not have any impact on the bank’s clients or on its investment actvities. The central bank and other commercial banks also stepped in Wednesday to assuage the public’s concern. ČNB spokesman Pavel Zúbek said the central bank was informed in advance of KBC’s overvaluation of stocks. “ČSOB is a stable bank, which fulfills all its legal obligations,” said Zúbek. Komerční banka and Raiffeisenbank also issued statements saying they are stable.

Měšťánek said ČSOB’s clients have not panicked. “People did make inquiries, yes, but they were doing that before. We clearly explained the situation to them,” he said.

KBC issued a statement about the overvaluation of their securities in advance, before posting its quarterly results. The reason was that the rating agency Moody’s lowered its rating for five stocks in the bank’s portfolio. The securities in question are structured bonds called CDO. The overvalued portfolio will have an impact on ČSOB, which also invested in CDO. “The ČSOB group has in its protfolio structured bonds valued at approximately EUR 430 million (about CZK 10 billion). We would like to stress that the total nominal value of our CDO portfolio is lower than ČSOB’s yearly net profit,” the bank said in a statement.