Page 44 - CE Outlook Regions 2023

Those households with disposable cash made greater use of savings
accounts to safeguard cash from inflation. Encor Wealth Management
partner Lubor Zalman cited a figure of CZK220bn (€9.1bn) in savings
accounts on the Czech market but expects attractive interest rates for
savings to gradually drop in 2023.

The six largest banks in Czechia will also be affected by the windfall tax
approved by the cabinet late in 2022 and aimed at collecting excessive
profits in 2023-25. While 2023 profits are all but certain to be subject to
taxation, and the cabinet is making calculations on the expected
revenues from the levy to mitigate the impact of the energy crisis,
Finance Minister Zbynek Stanjura reiterated that the taxation will be
reviewed before being applied to the 2024 or 2025 profits.

Erste, which together with KBC has the largest presence in CEE, is set
to take over the local Sberbank CZ’s bank loan portfolio for CZK41bn
(€1.7bn). Sberbank was forced to file for insolvency after Czech
authorities revoked its banking licence amid rumours that the branch
wouldn’t have enough cash to withstand the impact of sanctions.

2022 also saw a rise in loans offered in euro currency as a result of the
lower interest rates in euro. The new loans are now almost evenly split
between the euro and koruna.

3.1.3 Industry

Major Czech brands including Skoda Auto or Skoda Transportation
made their exit from the Russian market after the Kremlin’s invasion of
Ukraine and imposition of sanctions. A focus on decoupling from
Kremlin-linked business can still play a role in business mergers and
acquisitions in 2023.

Late in 2022 CEZ completed the takeover of Skoda JS, one of the
country’s main nuclear energy companies, previously owned by
Russian engineering group OMZ, which is controlled by Gazprombank.

Military materiel production will receive a further boost from the
government's plans to revive Soviet-era production lines staffed by
Ukrainian engineers and technicians. The project is coordinated with
the Ukrainian government and is expected to be financed by countries
supporting Ukraine financially and militarily, headed by the US, UK, and
several EU member states.

The largest company on the market Skoda Auto is switching to euro
currency from January 2023 as most of its sales are in the euro
currency and this trend is further boosted with the rise of electric car
sales.

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