BZ WBK 2Q net profit below expected

Bank Zachodni WBK SA said Wednesday that its second-quarter net profit was marginally lower than a year earlier, as higher interest income was offset by higher provisions and costs.

BZ WBK reported net profit of 250.1 million zlotys ($81 million) in the three months ended June 30, down from PLN254.2 million a year earlier.

Analysts expected the bank to post PLN258 million net profit, according to Dow Jones poll of five analysts.

BZ WBK's net interest income rose 24% in the second quarter, to PLN438.3 million, and was slightly better than analysts expectations of PLN435 million.

The bank's fees and commission income, at PLN335.7 million, was also better than the year-earlier result and analysts forecast, but that was offset by higher operational costs, especially administrative ones, and higher provisioning against non-performing loans.

The bank's operating costs rose by 7% to PLN431.1 million, mainly on 6% rise in employee costs, to PLN391.7 million.

"Our employees got substantial raises in April," Chief Executive Mateusz Morawiecki said. "It was just fair after all sacrifices they had to incurred in the difficult year of 2009."

Despite higher costs, the bank's cost-to-income ratio fell to 48.7% at the end of June, from 51.6% a year earlier.

"We want to keep the ratio below 50% for the whole year," Morawiecki said.

Other financial ratios have also improved in the first six months of the year, with the solvency ratio rising to 13.67% at the end of June from 11.50% a year earlier and the loan-to-deposit ratio falling to 83.1% from 86.4%.

The bank's return on equity ratio rose to 17.7% from 13.1%.

In the second quarter, the bank set aside PLN146.4 million provisioning, by 19% more than in a corresponding period of last year and considerably higher than analysts' expectations of PLN128 million.

"It's nothing to worry about," said equity analyst Tomasz Bursa of Ipopema brokerage in Warsaw, explaining the extra PLN38 million provisions belong to so-called incurred-but-not-reported category, reflecting the bank's conservative approach to possible worst-case scenario than real problems with the loan portfolio.

Source:   Dow Jones Newswires