With inflation soaring, Czech interest rates have jumped in the past year, lifting the banking sector's profits even as risks build from the Ukraine conflict and a slowing economy, with price increases cutting into people's spending power.

Komercni Banka, the country's third-biggest lender and majority owned by Societe Generale, said on Wednesday the banking sector would begin absorbing negative effects, but lending should continue growing above the market in upper mid-single digits.

The company's second-quarter net profit rose 54% year-on-year to 4.81 billion crowns ($198.74 million), beating estimates according to a Reuters poll, and higher than Komercni Banka's previous-best quarterly net profit of 4.20 billion crowns.

Banking income rose 31% year-on-year to 9.69 billion crowns in the reported quarter, led by a 47% jump in net interest income.

Komercni Banka said it expects 2022 banking income to rise by more than 20%, compared with a year earlier when the pandemic hit operations.

The Czech economy maintained growth in the first half of the year, following a recovery from last year, but faces the risk of recession in the second half as soaring inflation and energy bills severely crimp household budgets, hitting demand and raising loan risks.

Komercni Banka's cost of risk, which factors in loan provisioning, was higher than a year earlier, although the bank said it should remain below normalised levels this year.

($1 = 24.2030 Czech crowns)

(Reporting by Jason Hovet; Editing by Shounak Dasgupta)