January 25, 2019 / 3:18 PM / 6 months ago

UPDATE 2-Shares in Austria's Erste Group climb after 2018 profit jump

* Preliminary 2018 net profit at 1.8 bln euros

* Release of risk provisions, low tax rate help

* Dividend to increase to 1.40 from 1.20 euros/share (Adds details, background, updates shares)

VIENNA, Jan 25 (Reuters) - Shares in Erste Group jumped more than 7 percent on Friday as the Austrian lender said the release of risk provisions and a low tax rate helped it increase full-year net profit by a third.

The bank, which operates in six central and eastern European countries besides its Austrian home market, said preliminary figures showed 2018 net profit had increased to 1.8 billion euros ($2.1 billion) from 1.31 billion euros the year before.

Analysts had expected the figure to come in at 1.47 billion, Refinitiv Eikon data show.

The group released preliminary figures on Friday. Further figures will be released on Feb. 28.

Erste, one of the largest financial services providers in the eastern part of the European Union in terms of clients and total assets, said earnings were boosted by the release of risk provisions worth about 59 million euros and a 2018 tax rate of below 15 percent.

The group, whose Chief Executive Andreas Treichl steps down next year, also benefited from higher interest rates in the Czech Republic and in Romania.

The new chief executive will be Bernhard Spalt, the chief risk officer of Erste’s Austrian unit.

The lender, which focuses on retail business, said the preliminary numbers showed the 2018 operating result was 2.73 billion euros, also beating analysts’ estimates. It reported 2.51 billion euros in 2017.

The bank raised its full-year outlook for a return on tangible equity (ROTE) to more than 12 percent in November, based on expectations of 5 percent growth in its net loan business and flat expenses.

Erste Group said it aimed to increase its dividend to 1.40 euros per share for 2018 from 1.20 euros the previous year.

Its shares closed 7.4 percent higher at 31.22 euros, still below their level before Romania announced new bank taxes in December.

The new Romanian measures, which apply for 2019, required banks to pay a quarterly tax on financial assets as part of the government’s plan to raise income to address a budget deficit.

Erste Group earns 8.4 percent of its revenues from Romania’s biggest bank Banca Comerciala Romana.

Raiffeisen Centrobank analysts estimate that earnings from the Romanian unit of Erste Group could drop to 18 million euros in 2020 from an estimated 202 million euros in 2018 due to the tax.

$1 = 0.8794 euros Reporting by Kirsti Knolle Editing by Mark Potter and Edmund Blair

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