The worst financial crisis since the Second World War has badly hit the biggest banks on the Czech market.
Owing to the collapse of the investment bank Lehman Brothers, the fall of the Icelandic banking sector and failed investments in complicated financial instruments, Česká spořitelna, Československá obchodní banka (ČSOB) and Komerční banka had to write down an astronomical amount of money – about CZK 15.1 billion. Just to give a comparison: The sum would suffice to finance twelve months of operation of the Industry and Trade Ministry or nearly 600,000 average wages.
ČSOB wrote down CZK 10 billion of investments
The biggest loser was ČSOB, which wrote down investments in special CDO bonds (collateralised debt obligations) worth more than CZK 10 billion. Moreover, it had to reduce the value of its investments in bonds of Icelandic banks by CZK 136 million, and lost a further CZK 455 million on money it lent to Icelandic banks that later went bankrupt. The September collapse of Lehman Brothers deprived the bank of hundreds of millions of crowns.
It is not clear whether ČSOB is facing more losses and what would be their size. Ondřej Vychodil of ČSOB did not comment on the portion of problematic investments that the bank has written off already and did not specify the total sum of unsuccessful investments. “This is not public information,” he said.
Česká spořitelna’s loss tops CZK 2 billion
The collapse of Icelandic banks Landsbanki Island, Glitnir banki and Kaupthing Bunadarbanki cost Česká spořitelna (ČS) more than CZK 2 billion. The bankruptcy of Lehman Brothers deprived the Czech bank of hundreds of millions of crowns.
“In the instant of purchase and for the whole period of time that we held the bonds issued by Lehman Brothers and by the Icelandic banks, their rating was comparable to the rating of the Czech Republic,” said Pavla Langová of the bank’s press department.
ČS is allegedly facing no major losses now. “We have written down most bonds of Lehman Brothers and Icelandic banks,” said Langová. The bank also lost more than CZK 1 billion on complicated credit products.
Komerční banka wrote down only CZK 152 million
Compared with ČSOB and ČS, the Komerční banka group was better off when it comes to the impacts of the financial crisis. It wrote down only CZK 152 million, for which it purchased Landsbanki bonds; unlike ČSOB and ČS, Komerční banka wrote down the investment to the full. “The group bears no other risk of future changes to the value of these bonds,” spokeswoman Monika Klucová said.