Erste Won’t Repay State This Month, Still Plans Early Refund

Erste Group Bank AG (EBS) still aims to pay back 1.2 billion euros ($1.6 billion) of state capital as soon as talks with supervisors about the refund are concluded and will update on the status at the end of next month.

Erste, eastern Europe’s second-biggest lender, had said July 29 it expected to get approval for the redemption in the third quarter, a target that is “unlikely” to be met now, spokesman Michael Mauritz said by telephone today. Talks with the central bank about the viability of the repayment continue, he added.

“We’re in talks with the central bank, they’ve asked questions and we have to answer them -- it’s a back-and-forth,” Mauritz said, adding the group planned to update on the status when it reports third-quarter results, due Oct. 28. The talks’ goal still is “that we can repay early,” he added.

Erste was the first bank in the Alpine republic to get non- voting state capital in 2009, along with 540 million euros from private investors. Chief Executive Officer Andreas Treichl said July 29 he had achieved consensus with the Finance Ministry on repaying the state portion of the capital and was waiting for approval from the financial regulator and the central bank, which he expected as soon as this quarter.

UBS AG cut its target price for Erste by 44 percent to 20 euros today after it reduced its estimate for next year’s earnings per share by a third, partly because it now expects the state aid to be repaid only by the end of next year, analyst Daniele Brupbacher wrote in a note to clients today. The estimate cut is mainly due to “lower growth and margins” as well as “higher risk costs,” he said.

Erste’s core Tier 1 ratio, a measure of financial strength, stood at 8 percent at the end of June excluding so-called participation capital, which includes the funds injected by the state in 2009.

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