Tuesday, July 31, 2007

Erste Bank Q2 Net Up 25%, at Low End of Forecasts

VIENNA (Reuters) - Erste Bank der oesterreichischen Sparkassen (ERST.VI: Quote, Profile , Research) posted a 25-percent rise in second-quarter net profit on Tuesday, at the lower end of analysts' forecasts as costs of integrating its new Romanian unit weighed.

Net profit after minorities came in at 263.9 million euros ($360.8 million) for the quarter to June, compared with an average estimate of 277 million euros in a Reuters poll of 15 analysts, with earnings growth also held back by its key Czech franchise.

Overall revenues grew faster than the analysts expected. Net interest income rose 26 percent, more than forecast on average, while provisions for bad loans expanded less than expected. Fee and commission income grew 25 percent, in line with estimates.

However, operating expenses rose 30 percent, for which Erste mainly blamed the integration cost of Romania's Banca Comerciala Romana (BCR), Romania's biggest bank which it acquired for 3.75 billion euros last year.

Net profit at its Czech unit Ceska Sporitelna, its biggest in the former communist bloc, expanded only 5 percent in the quarter, far off its full-year target of 15-20 percent net profit growth.

Erste Chief Executive Andreas Treichl said in a statement he expected cost growth to slow down in the second half of the year and reiterated he expected full-year net profit to rise by at least 25 percent.

Erste, central Europe's second biggest lender, disappointed investors in April with first-quarter results that showed a weak revenue mix and high cost growth, and its shares have dropped by 13 percent since.

They are now trading at 12 times next year's forecast earnings -- less than peers in emerging European markets as investors remain skeptical about BCR and growth prospects in more developed central European countries.

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