Erste Group dubled its net profit to EUR 225.8 million in Q1 2015 (Q1 2014: EUR 103.3 million)

Erste Group makes strong start to 2015 (Press  release):

“We had a strong start to 2015 and are showing a solid net profit, due to a combination of positive developments: the economic rebound is bringing about a pick-up in lending, while bad loans costs are declining as expected. On the whole, the CEE region confirms its strong potential by making a significant contribution of 61.4% to the Group’s operating result”, explained Andreas Treichl, CEO of Erste Group at the presentation of the financial results for Q1 2015.

“In Austria, Slovakia and the Czech Republic, our results were driven by volume growth both in retail and corporate business. The Romanian subsidiary is profitable again and we see encouraging signs in retail lending, while in Hungary the completion of the FX loans conversion should clear the way for a comeback in new business. We are confident that economic growth in CEE will continue at a steady rate, increasingly driven by domestic demand, which is good news for a further uplift in lending”, said Andreas Treichl.

IN BRIEF

Erste Group closed the first quarter of 2015 with positive results, reflected in improved profitability, with net profit for the period increasing to EUR 225.8 million (Q1 2014: EUR 103.3 million).

Total assets increased to EUR 202.6 billion, compared to EUR 196.3 billion at the end of 2014. This balance sheet growth reflects a 2.2% pick-up in lending compared to the end of 2014, to EUR 123.4 billion (net volume), supported by the 1.6% growth of credits to households, 2.6% to SME and 9.4% to large corporates. Moreover, the deposit stock increased by 1.8% in Q1 2015 to EUR 124.8 billion, demonstrating Erste’s strong deposit-gathering capabilities.

The quality of assets also registers a steady improvement, with the rate of bad loans (relative to total gross loans) decreasing to 8.1%, compared to 8.5% at the end of last year.

The group further improved the efficiency of its operations, showing a tighter cost/income ratio of 56.1% (Q4 2014: 57.0%).The result was based on a steady performance on the income side, with EUR 1,689.1 million in operating income (Q1 2014: -0.1%; EUR 1,690.6 million), combined with a slimming down of administrative expenses, which decreased to EUR 948.1 million (Q1 2014: -1.6%; EUR 963.3 million). The operating result amounted to EUR 741.0 million (Q1 2014: +1.9%; EUR 727.3 million).

OUTLOOK

Operating environment anticipated to be conducive to credit expansion. Real GDP growth is expected to be between 2% and 3% in all major CEE markets, except Croatia, driven by solid domestic demand. For Austria, a real GDP growth below 1% is forecast.

Return on tangible equity (ROTE) expected at 8-10% in 2015 (YE 14 TE: EUR 8.4 billion). Operating result is expected to decline in the mid-single digits on the back of lower but sustainable operating results in Hungary (due to FX conversion related effects of lower average volume) and Romania (lower unwinding impact) as well as the persistent low interest rate environment.

For 2015, loan growth in the low single digits and a decline in risk costs to about EUR 1.0-1.2 billion are anticipated. Banking levies are expected to amount to about EUR 360 million in 2015, including parallel contributions to national as well as European bank resolution and deposit insurance funds. Related discussions with the Austrian government are still ongoing.

Risks to guidance. Consumer protection initiatives as well as geopolitical risks could have negative economic impacts.