UPDATE 2-Erste sees second-half uptick in eastern Europe
* Q1 net 176.2 mln eur vs Reuters poll avg 188 mln
* Still sees stable 2013 operating results
* Core Tier 1 ratio steady at 11.2 pct
* Shares little changed in firmer European sector (Recasts with comments on outlook, adds comments from conference call, market reaction)
VIENNA, April 29 (Reuters) - Green shoots of recovery in central and eastern Europe trouble spots will help Erste Group Bank chop risk provisions this year, the region's number-three lender said.
Erste, which battles Raiffeisen Bank International (RBI) for second place behind regional market leader UniCredit, has bet big on long-term growth in central and east Europe (CEE) and its outlook is heavily dependent on the area's economic prospects.
"Overall we go into this year with a slightly optimistic mood," finance chief Manfred Wimmer said on Monday after the Austrian bank reported first-quarter net profit nearly halved from a year-ago period flattered by one-off items.
Like Vienna-based rival RBI, Erste expects a slight upturn in CEE economies in the second half, although growth would stay moderate. Austrian banks count on the region as their profit engines given higher growth prospects than in western Europe.
"For the second quarter we do not yet expect that we will see a real revival of lending across the board," Wimmer told a conference call with analysts, but he thought positive developments in Slovakia would continue and hoped consumer lending in the Czech Republic could slowly revive.
The bank stuck to its forecast for stable operating results, saying it aimed to keep operating profit stable by using cost cuts to offset slightly lower operating income, given "moderate" loan demand and low interest rates. Wimmer defined "stable" as plus or minus 2 percent.
Erste also reiterated its forecast that it would make money in Romania this year, where the volume of non-performing loans was set to peak in the first half of 2013.
Despite lower costs, Erste's quarterly operating result fell nearly 9 percent to 835 million euros ($1.1 billion), as operating income shrank 5.1 percent due to lower net interest income and a lower net trading result that was not fully offset by higher fee and commission income.
Net profit after minorities fell 49.1 percent to 176.2 million euros, lagging the average estimate of 188 million in a Reuters poll of analysts.
First-quarter risk costs fell nearly 31 percent as provisioning levels fell or held steady in all markets except Croatia and Serbia, it said, sticking to its view that risk provisions would drop at a double-digit rate this year.
In the meantime, Erste is trying to squeeze down interest rates on deposits while raising them for loans.
Wimmer hailed a plan by Hungary's central bank to promote growth by fuelling lending to small and mid-sized companies.
"We see it (as) fundamentally positive because everything that helps growth is welcome," he said, but added: "The question remains whether demand from the corporate side will really be there."
Erste's quarterly loss in Hungary narrowed to 27.5 million euros - less than a third of the year-ago level - while it lost just 3.6 million in Romania as risk costs plunged in both countries.
Erste stock eased 0.1 percent to 24.10 euros by 1010 GMT, while the European sector index firmed 0.5 percent.
Erste trades at around 10.5 times 12-month forward earnings per share, a premium to RBI on around 9 times. RBI has said selling more shares was an option, while Wimmer said Erste has a "high priority" not to dilute shareholders with a stock issue.
Both trade at a discount to UniCredit on 16 times, according to Thomson Reuters StarMine, which weights estimates by analysts' previous forecasting accuracy.
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