Erste Group’s first half profit increases on hiked rates, loan growth — Update

by Ed Frankley

Erste Group Bank AG on Monday said its first half profit rose, taking advantage of interest rate hikes in Eastern Europe due to solid credit growth.

The Austrian lender said its net profit rose to 1.14 billion euros ($1.17 billion) in the six months to the end of June, up from EUR918 million in the same period last year.

Helped by interest rate hikes in the Czech Republic, Hungary and Romania, the bank focused on Central and Eastern Europe said net interest income rose to EUR2.84 billion from EUR2.45 billion in 1H 2021.

Loan volume growth rose 6.3% to EUR191.5 million, helped especially by its corporate segment and mortgage loans, it said.

“The geopolitical situation and high inflation are clouding the outlook in Europe. Nevertheless, economies in the eastern part of the EU have shown resilience so far,” said recently appointed chief executive Willy Cernko.

Mr Cernko took over from Bernd Spalt after he said he would not renew his contract over disagreements over the long-term direction of the Vienna-based bank.

Net profit growth was also due to a strong operating result, which increased 10% to EUR1.86 billion, and issuance of provisions, Erste said.

The company released EUR132 million from legal risks related to provisions surrounding Covid-19, Romanian consumer-protection law and other geopolitical issues.

Its common equity Tier 1 capital ratio, a measure of financial strength, was 14.2%.

Erste said it now expects net loan growth in the high single-digit percentage range for the full year. In its first-quarter earnings release in April, it said it expected growth in the mid-single digits.

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It maintained its full-year guidance for double-digit returns on tangible equities, though its outlook was based on the assumption that its core markets could import substantial amounts of gas from Russia this year.

The company said it plans to pay a dividend of 1.90 euros per share in 2022.

Write to Ed Frankl at [email protected]

(END) Dow Jones Newswires

Aug 01, 2022 03:10 ET (07:10 GMT)

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