Banks sitting on record capital pile
“The increase in capitalisation is linked to the banks’ good husbandry combined with the banks still remaining in the dark as to what the capitalisation requirements will be once all changes to applicable regulations have been implemented,” said Milan Lávička of J&T Bank.
Banks have a current desire to hold on to more free cash than necessary. “We want to have enough capital for our further growth in loans but also for a certain extra capital reserve as well,” said Tomáš Kofroň of Raiffeisenbank.
On the European scale, such a well-padded cash cushion is rather unusual. According to financial news provider Bloomberg, the average capitalisation of banks across Europe is almost 20 percent lower that what is seen in the Czech Republic.
“The increasing capital adequacy ratio is partly a product of trends with negative connotations for the economy, one of them being the non-existent growth on the loans market,” said Marek Hatlapatka of Cyrrus. Low demand for loans is certainly not suggestive of an economic recovery. Businesses have so far taken out about the same amount of loans as they had by this time last year, with the loan market being kept afloat by mortgages. “Where the Czech banks’ healthy condition is concerned, they owe quite a bit of gratitude to Czech households’ willingness to become indebted for the sake of a place to live,” noted Petr Hlinomaz of BH Securities. Mortgage demand is mainly being driven by historically low interest rates.
The high proportion of capital available in Czech banks also results from their foreign parent groups draining less capital than they conceivably could from their Czech acquisitions.