Czech banks experienced a highly favorable macroeconomic environment in 2023, benefiting from interest rates that supported lending activity while maintaining healthy profit margins, according to an analysis by Investika.
“Banks benefited last year from a macroeconomic situation that was almost tailor-made for them. The basic interest rate fell enough to stimulate credit activity, but remained high enough to allow room for healthy margins,” said Vít Hradil, an analyst at Investika.
The refinancing of mortgages from previous periods at higher rates continued, but without a corresponding increase in default rates. Consumer demand also spurred economic growth. Banks were often able to release provisions set aside for systemic risks from previous years that did not materialize, Hradil added.
While bank profitability remains high, the pace of year-on-year improvement has slowed compared to previous years, noted analyst Anna Píchová.
“If we compare bank profitability to the performance of the Czech economy or the size of bank assets or required capital, it has essentially achieved better results compared to the pre-COVID period only in the last two years,” she pointed out. This suggests a recent surge in financial performance for Czech banks.
The six largest banks in the country will be subject to a tax on unexpected windfall profits, approved by the previous government as a 60% surcharge on excess earnings. The excess profit is defined as the difference between the tax base and the average cost of the tax base for the last four years, increased by 20%.
“While the profits of the six largest banks increased last year, the amount they will pay in windfall tax will not be significant for either them or the state. The amount collected could be in the lower hundreds of millions of crowns,” said Tomáš Cverna, an analyst at XTB.
Česká spořitelna reported a net profit of CZK 27.8 billion for 2023, while ČSOB recorded CZK 20 billion. Komerční banka’s net profit reached CZK 18 billion, and Raiffeisenbank reported nearly CZK 10 billion. Moneta Money Bank posted a net profit of CZK 6.5 billion, and Česká a slovenská UniCredit Bank reported CZK 12 billion.
