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Erste Group Q1 risk cost at 'historic' low

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Erste Group Q1 risk cost at 'historic' low

Erste GroupBank AG reported first-quarter net profit attributable to owners ofthe parent of €274.7 million, up from €225.8 million in the year-ago period.

EPS for the quarter amounted to 64 cents, compared to 53cents a year earlier.

CEO Andreas Treichl said: "This strong start to theyear was primarily attributable to extraordinarily low risk costs, while theupfront booking of almost all deposit insurance and resolution fundcontributions for the full year weighed on operating expenses and other result,respectively." The group expects banking levies to have a negative pretaximpact of about €360 million in 2016.

Operating expenses in the first quarter were €1.01 billion,compared to €948.1 million in the first quarter of 2015. The operating resultfor the quarter came in at €620.5 million, down from €741.0 million a yearearlier.

Treichl noted that "in the first quarter of 2016 riskcosts, at 17 basis points of average gross customer loans, declined to historiclows, hence significantly contributing to the improved bottom line." Lowerrisk costs reflected not only substantial provision releases in Romania andHungary, but also the continued solid development of asset quality in Austria,the CEO said.

Net interest income for the period amounted to €1.09billion, compared to the year-ago €1.10 billion. Net fee and commission incomefell to €443.1 million from €461.0 million, mainly driven by lower income fromthe securities business in Austria and payment services in the Czech Republic.

The net impairment loss on non-fair value financial assetsdeclined on a yearly basis to €56.4 million from €183.1 million, which thegroup said was mainly due to a substantial decrease in nonperforming loans andhigher income from the recovery of loans already written off.

The nonperforming loans ratio stood at 6.7% at the end ofMarch, compared to 7.1% at the end of 2015 and 8.1% at the end of March 2015.

ROE for the quarter stood at 9.8%, up from 9.0% a yearearlier. The bank said it continues to aim for a return on tangible equity ofapproximately 10% to 11% in 2016.

The group's Basel III phased-in common equity Tier 1 ratiostood at 12.1% at the end of March, compared to 12.3% at 2015-end and 10.5% atMarch 31, 2015.