Economic Results of Financial Intermediation

Unlike the difference between total revenues and total expenses, the financial performance of the monetary banking institutions is higher by the profits made from certain financial transactions (e.g. foreign currency, derivates and securities transactions). Since 2002, the financial performance of these institutions has been measured in terms of their results – i.e. as profits or losses from these financial transactions – and not in terms of revenues and expenses.

In the first quarter of 2006 the difference between the total revenues and total cost was CZK 10,6 billion and the net profit from financial operations was CZK 3,2 billions. The banking monetary institutions made pre-tax net income amounting to CZK 13,8 billion. The banks and building societies sustained the upward trend of pre-tax net income (by 14 %) thanks to incomes and revenues from consumer credits, mortgage credits and commissions receivable.

During the first quarter of 2006 all 35 banks and building societies employed 36 000 actual persons on average, by 1,5 % less than in the same period of 2005. In terms of f/t equivalent, the average number of employed persons fell by 1,6 %, 35 544 persons. The average monthly wage related to f/t persons has continued in growing trend (increase by 10,8 %) and stood at CZK 51 822.

Interests receivable reached CZK 28,4 billion and interests payable reached the amount of CZK 11,7 billion in the first quarter of 2006. Interests receivable increased by 4,5 % year-on-year. Interests payable rose by 0,4 % year-on-year. This growth of interests receivable is caused by big call for mortgages and consumer credits. The interest margin grew from CZK 15,5 to 16,7 billion.

In comparison with the end of 1^st quarter of 2005 there was a drop of number of concluded contracts for savings for building purposes and purchases of a house. The fell was 308 008 contracts (total 6 083 536) year-on-year and translates into a fell of 4,8 % compared to the corresponding period of the year 2005. The number of contracts in saving stage accounting for 90,3 % of total number of contracts stood at 5 491 599, which means the decrease by 332 318 contracts in comparison with the end of corresponding period of the previous year.

Non-banking monetary institutions (CZ-NACE, rev.1, code 65.2 and 67) realized during the reference period a profit of CZK 5,4 billion, which means reduction by 4,9 % in comparison with the same period of the last year. Year 2005 was from the point of view of watched institutions the period economically strong – they show persistent growth. But this expansion stopped in the fourth quarter, when the slump in financial revenues and then in profit occurred. Current quarter absorbs this slump, although it doesn’t reach the results from the beginning of the last year.

Investment companies and investment funds (CZ-NACE, rev.1, code 65.2) made in the reference period a profit of CZK 1,5 billion. In comparison with the last year was the 33,9 percentual growth in financial revenues followed by overproportional 86,1 percentual growth in financial costs. Anyhow, in comparison with the last quarter, the decrease in profit was reduced.

In February came about a change of Act. no. 256/2004 Coll., about business on capital market. The amendment opens new investment opportunities (e.g. via estate funds), but also brings changes in the way of refund payment to the Guarantee fund. The amendment enacts stockbrokers to return to fund the contributions in the amount of 2 % from received fees and commissions. Fixed level is according to stockbrokers inadequate and in some cases they will have to spend severalfold more than up to now. However, due to high competition, such increase in the costs could hardly influence the level of the fees, which clients will pay for provided services.

Financial leasing companies (CZ-NACE, rev.1, code 65.21) made in the reference period a profit of CZK 1,2 billion, by 31,1 % less than year before. In the industry continue the trends of decrease in concluded leasing contracts and rising interest in consumer credits. Since the beginning of the year the indebtedness of Czech households rise again. Statistics of Czech Leasing and Financial Association (CLFA) talk about the growth of share of car and machine leasing and fall in the share of heavier vehicle and computer equipment leasing. Generally the volume of business with movable assets in the first quarter has increased by 4 billion CZK in comparison with the last quarter. Despite it, from shown data it is evident, that leasing companies suffered fall in all of the indicators of financial economic activity. The cause of this situation is hard to find. It can be for example in constantly increasing number of insolvent clients (and high figure of seizures lately) or in permanently strengthening Czech crown, which is disadvantageous for exporters.

In January to March insurance companies (CZ-NACE 66.01 and 66.03) made pre-tax profits amounting to CZK 2,9 billion, which translates into a decrease of 42,6 % compared to the corresponding period of the previous year.

In the first quarter of 2006 gross premiums written stood at CZK 32,7 billion, accounting for 46,6 % of total revenues and rising by 1,6 % year-on-year. Insurance claims paid amounted to CZK 14,2 billion, making up 21,1 % of total expenses of the insurance companies. Costs of these insurance claims increased by 12,8 % year-on-year. Over the period of January to the end of March, total technical provisions for life insurance decreased by CZK 108 million to CZK 162,8 billion.

In the period from the beginning of 2006 till the end of March all of the 44 insurance companies employed a total of 14 284 employees (actual persons) on average, i.e., by 1,5 % less than in the corresponding period of 2005. In terms of full-time equivalent (fte) persons, the average registered number of employees was 14 124; the employment thus decreased by 1,8 % as well. The average monthly wage (related to the fte persons) was 34 206 CZK, increasing by 4,6 % in comparison to the same period of 2005.

During a quarter of 2006 there were concluded 1 412 325 non-life insurance contracts, by 18,7 % more than in the same period of the previous year. The number of life insurance contracts concluded during the observed period of 2006 is 191884, which translates into a decrease of 13,3%.

In the first quarter of 2006 pension funds (CZ-NACE 66.02) made their profits amounting to CZK 1,1 billion (an drop of 13,4 % year-on-year). Total expenses of 11 active pension funds during the period from January to the end of March reached CZK 1,2 billion, rising by 76,1 % year-on-year. Total revenues increased by 17,9 % year-on-year to CZK 2,3 billion. Financial expenses were 58,6 % of total expenses and financial revenues accounted for 98,7 % of total revenues.

First quarter of 2006 saw total technical provisions of pension funds growing by CZK 4,1 billion to CZK 116,9 billion. Contributions received from members and employers (excluding government contributions) stood at CZK 6,7 billion, increasing by 25,6 % year-on-year. Government contributions increased by 13,1 % in the observed period of 2006 and amounted to CZK 1,0 billion. Supplementary pension insurance benefits paid stood at CZK 2,9 billion, which is a year-on-year growth of 21,7 %.

There were 3 380 004 active supplementary pension insurance policy holders (members of pension schemes) in total on 31^st March 2006. The number increased by 352 095 persons (11,6 %) in comparison with the end of the same period of 2005. Of the total, 3 318 761 persons received government contributions. The number of pension recipients increased by 91 to 4 805 persons since the beginning of 2006.

All of the pension funds employed a total of 466 actual persons on average in a quarter of 2006, by 0,2 % less than in the same period of 2005. This employment in terms of full-time equivalent stood at 447 persons and fell by 0,7 % year-on-year. The average monthly wage related to fte persons was up by 17,0 % year-on-year and amounted to 44 839 CZK.