* H1 net profit 640 mln euros vs 422 mln year ago
* Provisioning charges in Austria, CEE fall 21 pct
* CFO - provisioning "bit better" than expected run rate
* Core Tier 1 ratio steady at 10.02 pct
* Impairment at Russian unit reflects securities strategy
(Recasts with comments from news conference)
By Michael Shields
VIENNA, Aug 4 UniCredit unit
Bank Austria sees room to lower bad debt charges if the economy
holds up, emerging Europe's leading lender said after a sharp
fall in provisioning helped net profit rise more than half.
"The cost of risk is starting to get into a
positive area but we may still have potential for further
improvement provided the economic environment stays relatively
benign, especially in CEE," finance chief Francesco Giordano
told a news conference.
Banking in central and eastern Europe (CEE) generates
two-thirds of Bank Austria's net operating profit and should
remain a growth driver as the region's rebounding economy
outpaces expansion in sluggish western Europe, it says.
Profit before tax in its CEE banking operations rose 34
percent in the first half.
Provisioning costs fell 21 percent in the first half,
including a 28 percent drop in Austria's robust economy and 19
percent in CEE, Bank Austria said on Thursday.
Harmonisation of accounting standards in some CEE
countries helped a bit on this front, Giordano said, adding:
"The quarterly rate is indeed a little bit better than we can
expect as a run rate, but this of course doesn't cancel the
general consideration that there is a very strong improving
Solid commercial lending in the half also helped offset a
one-off hit to net profit of 100 million euros ($142.5 million)
from writing down Greek government bonds as its contribution to
a rescue package for the highly indebted euro zone country.
It also took a 53 million euro impairment charge, mainly for
goodwill at its Russian unit CJSC UniCredit Securities, formerly
known as ATON.
Giordano said this reflected a more cautious view of the
earnings potential from its securities business in Russia.
"While we are extremely committed to Russia as you know, we
would also consider that we would like to do securities business
mostly in support of corporate and maybe less as standalone
activity," he said.
Citing a nearly unchanged core Tier One ratio of just over
10 percent of risk-weighted assets, Giordano said the bank was
well placed to meet Basel III capital adequacy rules.
Chief Executive Willibald Cernko said the bank was
not seeing a rise in default rates on its Swiss franc loans to
borrowers -- many of whom borrowed at low rates to finance their
homes -- despite the franc's strength.
In Austria 250,000 households have Swiss franc loans, of
which 60,000 are at Bank Austria, he said.
"The customers are paying. They are fulfilling their
obligations. On the other hand we want to provide offers to get
out of this difficult situation," he said, adding 300 to 400
staff in Austria were dealing solely with this issue.
UniCredit, Italy's biggest bank, easily beat second-quarter
profit forecasts on Wednesday, as trading results helped offset
the impact of the euro zone's debt crisis.
Big Austrian banks are the largest lenders in central and
eastern Europe. They include Bank Austria, Erste Group Bank
and Raiffeisen Bank International .
Erste Group lowered its full-year outlook last week as bad
loans remained high in Hungary and Romania and as lending growth
(Editing by Greg Mahlich and Jane Merriman)