Erste Czech unit to cut costs by $102 mln in 2013 -report

PRAGUE, March 13 Wed Mar 13, 2013 3:35am EDT

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PRAGUE, March 13 (Reuters) - Erste Group's Czech unit Ceska Sporitelna plans to cut 2 billion crowns' ($101.66 million) worth of personnel and other costs this year, the lender's chief executive was quoted as saying on Wednesday.

Last week Ceska Sporitelna said it would lay off 600 employees, or 6.5 percent of staff, in the coming months as part of plans to save a total of 1 billion crowns.

In an interview with daily paper Hospodarske Noviny, Pavel Kysilka said the overall cuts would reach 2 billion crowns, of which 500 million crowns would come from personnel costs, including the 600 layoffs.

The Czech Republic's second-biggest bank by total assets saw 2012 net profit rise by 21.8 percent to a record 16.6 billion crowns. Kysilka said in the interview the bank would cut costs even if its financial results improved further.

"The development of the overall economy does not give banks the opportunity to grow this year."

The Czech economy has been contracting since the middle of 2011, its longest recession on record, due to falling household consumption and weakening exports to its main trading partner, the euro zone.

Kysilka said he expected net interest income to drop by up to 5 percent this year. He also said he expected income from fees to continue to decline.

"If banks want to maintain profitability they must cut costs. It is a simple equation," he said.

He said the bank did not expect any large investments like those made last year in various advertising campaigns. The bank has also cut costs by hundreds of millions of crowns by making better price deals with key suppliers, he added.

The move to cut costs was Ceska Sporitelna's own decision, rather than a decision of its parent company, Erste Group, Kysilka said.

($1 = 19.6732 Czech crowns) (Reporting by Jana Mlcochova; Editing by Helen Massy-Beresford)

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