CEE lender Erste lifts profit by a third to €1.265bn in 2016

By bne IntelliNews February 28, 2017

Erste Group reported on February 28 record net profit of €1.265bn in 2016, a rise of 31% on the previous year. The Austrian banking group proposed doubling its dividend to €1 a share for the year.

Net interest income edged down 1.6% to €4.375bn and net fees and commissions also slipped 4.2% to €1.783bn, but profit was pulled up by a 30% rise in net trading income and a 73% plunge in net impairments.

In a statement, Chief Executive Andreas Treichl said that the bank had made nearly €5bn in net new loans in 2016 and raised deposits by more than €10bn.

“While this savings inflow is a strong indication of the trust placed in our group, it also shows once more that the low interest rate environment by itself isn’t encouraging investments,” he said.

Non-performing loans fell to 4.9% of the total, down from 7.1% a year ago. However, during the year the bank had to make a €62.3mn provision for consumer protection claims in Romania, and another for €129.5mn for conversion of Swiss franc loans in Croatia. It also had to make a €613mn goodwill writedown in Slovakia because of increased capital requirements.

Treichl said Erste, the third biggest non-Russian bank in Central and Eastern Europe by assets, has doubled its capital base since the global financial crisis, lifting its (phased-in) CET1 ratio to 13.4% of assets, compared to 13.2% in the third quarter, and 12.3% a year ago.

Erste forecasts another return on tangible assets of more than 10% this year (after 12.3% in 2016). “We are one of the few banks in Europe that earn more than their cost of capital,” Treichl reiterated on Bloomberg TV.

The banking group said net interest income would be at best stable in the current low interest rate environment, with margins under pressure from falling sovereign bond yields. The net interest margin slipped 8 basis points to 2.51% in 2016.

Erste said loan growth and falling risk costs would again be the main drivers of profit this year. It predicted mid-single-digit loan growth in 2017.

Treichl stressed that Erste is not looking at acquisitions. “I’m not interested in M&A at all,” he said, adding that purchases would be a “drag on efficiency”.

He said the bank would continue to focus investment on rolling out its online banking platform across the Czech Republic, Slovakia and Romania this year. “I have no desire to invest in brick and mortar any more,” the CEO reiterated.

Related Articles

Iran "hits impasse" in bid to set up Bank of England clearing accounts

Iran is failing to make headway with a request to the Bank of England (BoE) to set up special clearing accounts for its banks, Reuters reported on March 20. Sources said the BoE ... more

IMF delays new $1bn tranche to Ukraine due to Donbas blockade

Ukraine's main donor, the International Monetary Fund (IMF), has cancelled a board meeting scheduled for March 20 that was expected to see the release of a $1bn tranche to Ukraine, while demanding ... more

IIB’s new placement to support debt-ridden Development Bank of Mongolia

The International Investment Bank (IIB) is participating in a new placement of Mongolian international sovereign bonds denominated in US dollars alongside other international ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss