Erste Group net profit stood at EUR 764.2 million in the first nine months of 2015, compared to a negative result of EUR -1,424.6 million registered in the same period of last year.
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The result was supported by significantly better results posted by the retail and SME business segments and the drastic decline of exceptional effects compared to last year.
Profitability improved in all countries except Croatia, where the net result deteriorated considerably due to provisions booked for the conversion of the entire Swiss franc loan portfolio to euro required by legislation.
Total assets increased by 2.5% compared to the end of last year, to EUR 201.2 billion at 30 September 2015, driven mainly by the lending revival.
Net lending to customers advanced by 3.1% compared to the end of 2014, to EUR 124.5 billion, supported by an increase of 7.5% of loans to large corporates, 3.7% to SMEs and 2.9% to households and micros.
Risk costs declined substantially in the first nine months of 2015, by -67.6% compared to the same period in 2014, to EUR 518.4 million, reflecting the assets quality improvement and the decrease in provisions registered in Romania and Hungary.
Moreover, customer deposits increased by 2.3% in the first nine months, to EUR 125.4 billion, demonstrating ErsteÂ’s strong deposit-gathering capabilities and supporting the groupÂ’s financial independence. Loan-to-deposit ratio remained steady at 99.3%.
The quality of assets continued to register a steady improvement on all key business segments (retail, SMEs and large corporates) and in all countries, with the overall rate of bad loans (relative to total loans to customers) decreasing notably to 7.4% at the end of September 2015, compared to 8.5% at the end of last year.
Moreover, the NPL coverage ratio increased from 68.9% to 69.2%, the highest level registered in the past seven years.
Total equity (IFRS) also strengthened significantly from EUR 13.4 billion at 31 December 2014 to EUR 14.4 billion at the end of September 2015, with the total capital ratio (Basel 3 phased-in) up from 15.7% to 16.8%. The clean common equity tier 1 ratio (Basel 3 fully loaded) improved from 10.6% to 11.6%, driven by strong improvement in profitability in the first nine months of 2015, while risk-weighted assets decreased only marginally to EUR 100.4 billion.
The efficiency of the groupÂ’s operations is demonstrated by a cost/income ratio of 56% (9M 2014: 54.5%). Administrative expenses rose both due to higher personnel number and higher regulatory costs that include the contributions in 2015 to the EU deposit insurance fund. On the other side, persistently low interest rates continue to impact the operating result.
General administrative expenses increased in the first nine months by 2.5% compared to the same period in 2014, to EUR 2,852.4 million, while operating income declined marginally, by -0.5%, to EUR 5,090.9 million. Thus, operating result amounted to EUR 2,238.5 million (9M 2014: EUR 2,333.8 million), in line with expectations.
Operating environment anticipated to be conducive to credit expansion. Real GDP growth in 2015 is expected to be between 2% and 4% 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 approximately 10% in 2015 (YE 14 TE: EUR 8.4 billion). Operating result is expected to decline in the mid-single digits, while loan growth in the low single digits is anticipated.
The risk costs guidance of EUR 750-950m reflects the accounting treatment of Croatian CHF conversion costs of EUR 144.9m in other operating result. Banking levies are expected at about EUR 320 million, including parallel contributions to national as well as European bank resolution and deposit insurance funds. Related discussions with the Austrian government are still ongoing.
Return on tangible equity (ROTE) expected at 10-11% in 2016. Consumer protection initiatives as well as geopolitical risks could have negative economic impacts. ■