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UPDATE 2-Erste Group upbeat on 2013, plans dividend
October 30, 2012 / 7:16 AM / 5 years ago

UPDATE 2-Erste Group upbeat on 2013, plans dividend

* Q3 net profit 143.7 mln eur vs Reuters poll avg 157 mln

* Sees 2012 oper result “only slightly behind” 2011 level

* CEO expects results to improve in 2013 vs 2012

* CEO sees no reason to omit dividend again

* Shares gain more than 6 percent (Recasts with comments from conference call)

By Michael Shields

VIENNA, Oct 30 (Reuters) - Erste Group Bank expects 2013 profit to rise as emerging European economies pick up, provisions for bad loans stay in check and revenues expand, the Austrian lender said on Tuesday.

Erste, which vies with Raiffeisen Bank International (RBI) to be central and eastern Europe’s No.2 lender after UniCredit, also plans to resume paying a dividend on 2012 results, Chief Executive Andreas Treichl said.

His upbeat tone after the bank swung back to a third-quarter profit helped Erste stock gain as much as 6.5 percent.

“Whereas we are by no means bullish about what is going to happen in 2013, we are quite firm that (events) will represent a further improvement (on) our results in 2012,” Treichl said on a conference call with analysts.

Erste, which had cut its outlook the previous two quarters, reiterated 2012 operating profit would dip from the 2011 level of 3.63 billion euros ($4.68 billion) as weak European economies and its scaling back of non-core assets weigh on revenues.

It made a third-quarter net profit of 143.7 million euros versus a year-ago loss of nearly 1.5 billion after big writedowns. Analysts polled by Reuters had on average expected 157 million euros.

It reiterated it expected risk costs of around 2.0 billion euros in 2012, with risk costs peaking in Romania this year. It still saw its Romanian unit returning to profitability in 2013.

Treichl highlighted the bank’s good performance in Austria, the Czech Republic and Slovakia as well as “a certain degree of stabilisation in Romania”, where margins rose for the first time in six quarters.

Romania has been a tough market for Erste and other banks, but provisions for bad debt there should fall “significantly” in 2013 while the volume of non-performing loans peaks next year, Erste officials said.

Erste’s losses in Romania widened to 206 million euros in the first nine months of 2012.


Treichl declined to discuss prospects for its Hungarian business - which had a nine-month loss of 64 million - to return to profit earlier than scheduled in 2014. He hoped to find a solution for loss-making Ukrainian operations within six months.

Erste skipped a dividend on 2011 results after losing more than 700 million euros, but Treichl called that a one-off move.

“We presently see no reason why we should not pay a dividend for 2012,” he said without being more specific. Analysts polled by Reuters before the quarterly results had on average expected a 2012 dividend of 43 cents per share.

But he said Erste had no intention of repaying soon the 1.2 billion euros in non-voting capital it got from Austria when the financial crisis erupted. Finance Minister Maria Fekter included some repayments in Austria’s 2013 budget.

“If the conditions under which we took (state capital) remain the same, which is actually what we anticipate, probably we will keep it for another two to three years and then start repaying it in 2015,” Treichl said.

Erste pays 8 percent interest on the capital with a coupon step-up from 2014.

Erste’s said its capital ratio as defined by the European Banking Authority stood at 9.9 percent of risk-weighted assets at the end of September excluding retained earnings.

Erste shares rose 5.6 percent by 1140 GMT to 18.94 euros, the leading gainers in the Stoxx European banking sector index , which was up 0.8 percent.

Erste stock had been trading at 8.4 times 12-month forward earnings, a premium to rival RBI on 7.7 times, according to Thomson Reuters StarMine, which weights estimates by analysts’ previous forecasting accuracy. ($1=0.7749 euro) (Reporting by Michael Shields; Editing by Mike Nesbit)

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