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Strategies & Market Trends : Countries

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From: lukematt10/4/2008 8:39:08 AM
   of 264
 
ON THE MARKET: Komercni Banka



Komercni Banka is currently traded on these markets:

Prague; U.S. Pink Sheets (symbol: [t]KMBNY[/t])

[Note: There are only 14 companies on the Prague Stock Exchange. Four of these companies also trade on the U.S. Pink Sheets. They are four of the strongest companies in the Czech Republic.]

• Komercni Banka is one of the three companies still listed on the Prague Stock Exchange that also originally appeared on the market in 1993-94.

• I don’t know its “numbers” because, as I wrote in the blog “Prague Stock Exchange—Roots”, I don’t invest in any of the currently listed Czech companies. However, I can give you non-financial tidbits.

• My general impression of Komercni Banka…it’s a typical stodgy, conservative, old-style bank. That’s a compliment. (It’s better than an imprudent manager of money such as IndyMac, etc.)

• My family does not have an account at Komercni Banka because the service charges are too high. Better deals exist at other banks. At the same time, “Komercni” means “Commerce/Commercial”, so maybe they’re not interested in individual accounts.

• This summer (2008), I needed to get some Japanese yen. I looked on a special Czech website that lists best exchange rates by banks. Komercni Banka was number 6 or 7 for yen. However, when I tried the first 5 or 6 banks, nobody handled Japanese yen (I don’t know why they were even listed on the website). Finally, I went to Komercni Banka. Although the Brno branch did not have yen “on hand”, they took my order, and in one business day, I had it. Excellent service.

• My brother-in-law was an upper-middle-level manager at Komercni Banka’s headquarters in Prague for many years. He never had any bad words about Komercni Banka (but, of course, he’s a sell-your-soul-to-the-company kind of guy :-) ).

• Does Komercni Banka have any skeletons in the closet? Of course.

o During privatization (mid 1990s), Komercni Banka’s largest shareholder was Bank of New York. Then, in July 2001, Komercni banka was suddenly sold by the Czech government to Societe Generale Group. You know—the January 2008, 4.9 billion Euro trading loss scandal Societe Generale Group.

o From the Prague Post (May 10, 2000).

“Former Komercni banka (KB) director general Richard Salzmann said May 7 that charges brought in connection with KB's loss-making deals with Austrian firm B.C.L. Trading and the Frantisek Chvalovsky financial group may involve all members of KB's former management and other KB employees. He said that while he hasn't yet been questioned about the matter, he believes that he, too, might be accused. KB launched a risky deal with B.C.L. Trading in 1996, when KB was managed by Salzmann. The loss of about 8 billion Kc ($195 million) that KB suffered in the deal was the biggest loss in the Czech Republic's history. Salzmann is now a senator with the Civic Democratic Party (ODS).”

From Radio Prague (December 6, 2005)

Former Komercni Banka board of directors acquitted of fraud charges. A court has ruled that nine former members of the board of directors of the Komercni Banka bank are not guilty of fraud. They were accused of helping Austria's BCL Trading (owned by entrepreneur Barak Alon) defraud the bank of eight billion crowns (a little under 330 million US dollars). Komercni Banka is one of the Czech Republic's biggest banks.”

I have 17+ years of investment experience in the Czech Republic. Komercni Banka’s 8 billion Kc scandal and the subsequent acquittal of its accused directors clearly signal to me that Komercni Banka has links to organized crime. Of course, we could ask—do any financial institutions nowadays not have such links?

SUMMARY

Would I recommend that somebody buy shares in Komercni Banka? Well, it’s not **my** type of investment. I really don’t see any growth potential. However, if the financials are good and the share price is low, I wouldn’t tell somebody, “Never buy Komercni Banka shares”.
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