* 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)
By Michael Shields
VIENNA, April 29 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
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
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.
($1 = 0.7676 euros)
(Editing by Georgina Prodhan and David Holmes)