Erste Q1 profit bucks estimate on lower cost

New York / AFP

Erste Group Bank AG, Austria’s biggest bank, beat analyst expectations for first-quarter profit as a sharp drop in bad debt provisions outweighed declining lending and fee revenue.
Net income came in at 274.7 million euros ($316 million) in the three months through March compared with 226 million euros a year earlier, the Vienna-based bank said in a statement on Wednesday. The result beat the average analyst estimate of 219 million euros as risk costs came in lower than all estimates.
“We are particularly encouraged by the fact that asset quality improved again to levels last seen at the end of 2009,” Chief Executive Officer Andreas Treichl said in the statement. “Customer loans continued to grow; however, they could only partially offset the decline in net interest income, which was impacted by the negative rates.”
Treichl, one of the longest-serving CEOs at a major European lender, is seeking a return to loan growth in eastern Europe to offset the impact of record-low interest rates on credit revenue. His bank also needs to keep asset quality intact after years of loan losses racked up by its Hungarian and Romanian units.
Erste is the seventh-best performing euro area bank this year with a decline of 14 percent. The Euro Stoxx Banks index has dropped 20 percent in the period. At Tuesday’s closing price of 24.85 euros, Erste is valued at 10.7 billion euros, or 0.89 times book value, compared to an average of 0.8 for Europe’s 25 biggest banks.