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Erste Profit Falls 17% on Loan Provisions in Eastern Europe, Shares Slump
Erste Group Bank AG, Austria’s biggest publicly traded lender, said second-quarter profit fell 17 percent on rising bad-loan provisions in eastern Europe.
Erste declined the most in eight weeks in Vienna trading after reporting net income of 216.7 million euros ($283 million), down from 260 million euros a year earlier. That missed the average 221.2 million-euro estimate of nine analysts surveyed by Bloomberg.
Erste was hurt by a slowdown in eastern Europe, where the bank generates most of its operating profit. The Vienna-based lender, which received 1.2 billion euros from Austria’s government during the global financial crisis, increased provisions for bad loans by 6 percent to 553 million euros.
Provisions “increased quarter-on-quarter, despite the previous claims of the management that the bank had reached the peak in provisioning in the first quarter of this year,” Peter Vidlicka, an analyst and Wood & Co. in Prague, wrote in a note.
Erste fell 5.1 percent to 30.80 euros in Vienna, the biggest drop since June 4. That made the stock the worst performer on the 54-member Bloomberg Europe Banks and Financial Services Index, which declined 0.8 percent.
The bank expects lending in central and eastern Europe to remain muted this year, Chief Executive Officer Andreas Treichl told reporters in Vienna. He doesn’t expect loan-loss provisions to improve until 2011.
Net interest income, the difference between money paid on deposits and earnings on loans, increased 6 percent to 1.36 billion euros, Erste said.
First-half earnings fell at five of Erste’s seven eastern European units. Profit at the bank’s Romanian business, the country’s biggest foreign-owned lender, dropped by more than half to 36.3 million euros.
The bank posted a 30 million-euro charge for a banking tax in Hungary and will take another 7 million-euro charge in the second half, Treichl said.
To contact the reporter on this story: Zoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net
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