May 13, 2014 / 6:42 AM / in 4 years

UPDATE 1-Bank Austria boosts Q1 profit as loan writedowns fall

* Q1 profit up 24.5 pct to 350 mln euros

* Cautiously optimistic on economic outlook for rest of 2014

* Loan writedowns fall, especially in CEE region (Adds details and background)

VIENNA, May 13 (Reuters) - UniCredit unit Bank Austria boosted first-quarter profit by a quarter to 350 million euros ($481 million) as loan writedowns fell, especially at its core business in central and eastern Europe (CEE).

Bank Austria, CEE’s leading lender, said it was cautiously optimistic on the economic outlook for the rest of 2014.

“Recovery should continue and credit demand should rise if the current geopolitical tensions can be resolved peacefully,” Chief Executive Willibald Cernko said in a statement on Tuesday.

Parent UniCredit returned to profit in the first quarter and said on Monday bad loans had fallen for the first time since 2008 as the Italian economy showed signs of recovery.

Bank Austria’s net operating profit slipped 8.3 percent as net interest income eased and the strong euro weighed, but gains on divesting property helped compensate. The year-ago quarter also included a 64 million euro charge for a Swiss court case.

Net write-downs of loans and provisions for guarantees and commitments fell nearly 23 percent to 190 million euros. They dropped 28.5 percent in CEE, partly due to write-backs of provisions in several countries including Bulgaria and Romania.

Bank Austria, which is in the process of selling its bank in Ukraine, said it remained committed to the region despite tensions surrounding the political crisis between Kiev and Moscow over Russian support for separatists.

“While we hope that political tensions in the region will come to a peaceful solution, we still consider ourselves a strategic long-term investor in Central and Eastern Europe,” said Gianni Franco Papa, head of its CEE division.

UniCredit’s talks to sell its operations in Ukraine have slowed because of the political turmoil there and it was difficult to predict the outcome, its chief executive said on Monday.

A complete writedown of goodwill on equity investments had pushed Bank Austria to a 2013 loss of 1.6 billion euros.

Its core tier 1 capital ratio dipped to 11.1 percent of risk-weighted assets from 11.3 percent at the end of 2013.

$1 = 0.7270 Euros Reporting by Michael Shields; Editing by Georgina Prodhan

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