Erste Group Bank: posts net profit of EUR 262.2 million in 1-3 2017

On track for a 10%+ ROTE

Vienna (pta011/05.05.2017/07:30 UTC+2) (For table "Financial Data" please see pdf)

Highlights

P&L: January-March 2017 compared with January-March 2016; balance sheet: 31 March 2017 compared with 31 December 2016

Net interest income declined to EUR 1,051.3 million (-3.7%; EUR 1,092.2 million) despite lending growth mostly due to lower interest income from the government bond portfolio and a lower unwinding effect. Net fee and commission income increased to EUR 457.7 million (+3.3%; EUR 443.1 million). Income from the securities business and from asset management was up, while income from lending business declined. The net trading result decreased to EUR 48.6 million (-5.1%; EUR 51.2 million). Operating income was almost stable at EUR 1,617.5 million (-0.7%; EUR 1,629.3 million). General administrative expenses rose to EUR 1,018.3 million (+0.9%; EUR 1,008.8 million), which was mainly attributable to higher personnel expenses of EUR 571.7 million (+1.1%; EUR 565.4 million). This item already includes the upfront booking of almost all projected full-year deposit insurance payments for 2017 in the amount of EUR 64.7 million (EUR 71.7 million). The operating result consequently decreased to EUR 599.2 million (-3.4%; EUR 620.5 million). The cost/income ratio stood at 63.0% (61.9%).

Net impairment loss on financial assets remained close to historical lows at EUR 65.8 million or 19 basis points of average gross customer loans (EUR 56.4 million or 17 basis points). The NPL ratio remained at 4.9% (4.9%). The NPL coverage ratio declined slightly to 67.6% (69.1%).

Other operating result amounted to EUR -127.1 million (EUR -139.5 million). This includes expenses for the annual contributions to resolution funds in the amount of EUR 77.5 million (EUR 64.7 million). Banking and financial transaction taxes amounted to EUR 35.8 million (EUR 62.8 million). The decline was primarily due to the significantly lower Austrian banking tax in the amount of EUR 5.6 million (EUR 29.5 million) after a substantial one-off payment of banking tax in the fourth quarter of 2016. Banking levies in Hungary declined to EUR 23.6 million (EUR 26.9 million) and in Slovakia amounted to EUR 6.6 million (EUR 6.2 million).

The minority charge rose to EUR 76.8 million (+60.6%; EUR 47.8 million) due to a rise in the earnings contributions of the savings banks. The net result attributable to owners of the parent declined to EUR 262.2 million (-4.6%; EUR 274.7 million).

Total equity not including AT1 instruments rose to EUR 16.4 billion (EUR 16.1 billion). After regulatory deductions and filtering according to the CRR, common equity tier 1 capital (CET1, Basel 3 phased-in) slipped to EUR 13.4 billion (EUR 13.6 billion). Total own funds (Basel 3 phased-in) increased to EUR 19.0 billion (EUR 18.8 billion). Interim profit is not included in the above figures but first-quarter risk costs are deducted. Total risk (risk-weighted assets including credit, market and operational risk, Basel 3 phased-in) rose to EUR 103.6 billion (EUR 101.8 billion). The common equity tier 1 ratio (CET1, Basel 3 phased-in) stood at 13.0% (13.4%), the total capital ratio (Basel 3 phased-in) at 18.4% (18.5%).

Total assets increased to EUR 222.8 billion (+7.0%; EUR 208.2 billion). On the asset side, cash and cash balances were up at EUR 24.7 billion (EUR 18.4 billion), likewise, loans and receivables to credit institutions at EUR 10.4 billion (EUR 3.5 billion). Loans and receivables to customers rose to EUR 133.0 billion (+1.8%; EUR 130.7 billion). On the liability side, deposits from banks increased to EUR 22.9 billion (EUR 14.6 billion) and customer deposits grew again - most notably in the Czech Republic and in Austria - to EUR 144.7 billion (+4.9%; EUR 138.0 billion). The loan-to-deposit ratio stood at 91.9% (94.7%)

Outlook

Operating environment anticipated to be conducive to credit expansion. Real GDP growth is expected to be between 1.5% and 4.5% in Erste Group's CEE core markets, including Austria, in 2017. Real GDP growth should primarily be driven by solid domestic demand, whereby real wage growth and declining unemployment should support economic activity in CEE. Fiscal discipline is expected to be maintained across CEE.

Business outlook. Erste Group aims to achieve a return on tangible equity (ROTE) of more than 10% (based on average tangible equity in 2017). The underlying assumptions are: at best flat revenues (assuming 5%+ net loan growth); cost inflation of 1-2% due to regulatory projects and digitalisation; increase in risk costs, albeit remaining at historically low levels; positive swing in other operating result due to lower Austrian banking tax.

Risks to guidance. Impact of expansionary monetary policies by central banks including negative interest rates; political risks such as various elections in key EU economies; geopolitical risks and global economic risks; consumer protection initiatives.

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Emitter:	Erste Group Bank Am Belvedere 1 1100 Wien Austria
Contact Person:	Thomas Sommerauer/ Simone Pilz
Phone:	+43 (0)5 0100 - 17326
E-Mail:	thomas.sommerauer@erstegroup.com
Website:	www.erstegroup.com
ISIN(s):	AT0000652011 (Share)
Stock Exchange(s):	Vienna Stock Exchange (Official Trade)
Other Stock Exchanges:	Bucharest Stock Exchange, Prague Stock Exchange