STOCKWATCH - RCB Downgrades Serbia's Komercijalna Banka to “Sell", Cuts Target Price

“The business model was notably changed compared to our previous estimates showing a more downbeat drift,” RCB said in a statement, adding that the analysts have reduced their 12-month target price to 20,738 dinars ($313/222 euro) from 29,612 dinars.

Shares in blue-chip Komercijalna Banka were trading unchanged at 32,999 dinars by 1025 GMT on the Belgrade bourse on Wednesday after soaring 6.45% a day earlier.

”The key assumptions were kept unchanged except for the TV of ROE which was adjusted to 9.5% down from 12.5%,” the statement said. “The bank’s profitability will be under pressure in the period ahead due to: a) limited incentives for cost-cutting, b) a high deposit margin and c) volatile FX development.”

“Though Komercijalna was quite busy lending within the government sponsored package (H1’09 - 80.2 million euro), the shift to repo operations was noticeable,” RCB said.

“The bank will probably maintain the exposure in the state securities at more or less the same level as in H1, followed by government sponsored corporate lending," it added.

Komercijalna Banka posted a pre-tax profit of 870 million dinars in the first half of the year, down from 1.3 billion dinars a year earlier.

It ranked as Serbia’s second largest bank with total assets of 189 billion dinars at the end of June. The Belgrade-based unit of Italy’s Banca Intesa ranked as the largest lender by assets among the 34 banks active in Serbia at the end of the first half of this year.

(1 euro=93.548 dinars)