Erste Bank posts significant rise in 9-month earnings – net profit up by 28%
30 Oct 2006
“Consistent strong demand on the credit side and steady, high growth rates in net interest and net commission in-come reveal the profit potential inherent in our customer base which now numbers more than 15 million.
Also, especially in the third quarter, we benefited from interest rate increases made by the local central banks”, continued Treichl. “Although the third quarter is normally a weaker period for our banking busi-ness, this year’s third-quarter operating result was the best quarterly performance in the Group’s history, at EUR 473.0 million. At EUR 200.6 million, third quarter net profit after minority interests was slightly below the excellent results posted in the first two quarters of this year.”
Operating result for the first nine months of 2006 grew by 16.2% to EUR 1,398.8 million. Operating in-come was up 9.9% to EUR 3,511.1 million, while operating expenses increased by 6.1% to EUR 2,112.3 million. The cost/income ratio improved to 60.2% in the first three quarters of 2006 from 61.8% for the full year 2005.
The successful EUR 2.9 billion capital increase in the first quarter, as expected, caused return on equity to decrease from 19% in the full 2005 financial year to 13.0%. Total assets of Erste Bank increased by 6.5% in the first nine months of 2006 to EUR 162.6 billion.
The acquisition of a 61.9% ownership interest in Romania’s largest bank, Banca Comerciala Romana (BCR), closed on 12 October 2006. The new subsidiary will be consolidated in the accounts of the Erste Bank Group from this closing date. As a result of restructuring costs, no significant earnings contribution is expected from BCR for 2006.
At Erste Bank’s Capital Markets Day on 9 October 2006, the financial targets for 2006 and subsequent years were reaffirmed. For the period to from 2005 to 2009, management predicts average annual growth of more than 20% in net profit after minority interests. A cost/income ratio of less than 55% is targeted for 2009. As a result of the almost 70% rise in shareholders' equity in the course of the capital increase at the beginning of 2006, return on equity will ease as expected for this financial year. However, it is then expected to advance again, to a targeted level of between 18% and 20% in 2009.
For 2006, net profit after minority interests is also expected to grow by at least 20%. Following the inclu-sion of BCR, the profit growth target for 2007 has been raised from at least 20% to a new minimum of 25%.
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