Abstract
The Czech banking system is an innovation market driven by the power of new low-cost banks focused on young internet clients. We could say that it is profitable and one the most stable market in Eastern Europe.The purpose of this article is to analyse the effect of the interest rates on the loan product policy of selected banks in the Czech Republic, specifically in connection with the banking products offered to the SME segment.In particular, the final report focusses on measuring bank profitability based on interest rates on different products within a specific time period.Final touch of this article is complemented by a calculation of the additional ROE for the commercial bank using model based on itnerest margin and profitability of provided loans.We found out that the usage of different approaches of internal models with different combinations of key determinants can potentially increase the bank's profitability in the interval from 1,042 mil. to 24,300 mil. CZK.
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