A Profitable Q3 For Banks: Interest Income Drives Erste Bank Profit To 228 Million EUR

Erste Group Bank AG, the majority shareholder in Banca Comerciala Romana (the Romanian Commercial Bank - BCR), reported a net profit of 228 million EUR for the third quarter of the year, slightly up from the corresponding period of 2008, amid an increase in interest income, according to a press release from Friday. However, the net profit decreased from the 260 million EUR reported for Q2/09.

The aggregated profit reported for the first three quarters of the year reached 720.1 million EUR, down from 1.46 billion EUR in the first nine months of 2008, duly adjusted for the proceeds from the sale of the insurance business to Vienna Insurance Group in 2008.

The operating profit of the Austrian-based financial group in the first three quarters reached the record of 2.78 billion EUR, up by 26.6 per cent year-on-year, amid a 5.7 per cent decrease in operating expenses and a 7.8 increase in operating income.

The net interest income gained 7.5 per cent to 3.48 billion EUR, amid a slight increase in lending and stable net interest margins. "Net interest income and net trading result were the major drivers of the operating income in the first three quarters of 2009," the Erste Group press release indicates.

The non-performing loan ratio based on customer loans increased from 5.9 per cent in Q2/09 to 6.3 per cent in Q3/09. The coverage ratio (risk provisions to non-performing loans) increased from 55.2 per cent in Q2/09 to 56.7 per cent in Q3/09.

• 1.6 billion EUR capital increase

Erste Group is launching today a capital increase of up to 60 million new shares in order to further increase capital ratios and improve capital structure. The bank is anticipating the gross proceeds of the offering to reach as high as 1.65 billion EUR, based on an assumed offer price of 27.5 EUR/share, according to a press release from Friday.

Erste Group has so far issued 317.9 million shares in total, so a full subscription of the new offering would increase the overall number of shares by approximately one fifth. According to CEO Andreas Treichl, Erste Group intends to use the net proceeds of the offering to increase its core Tier-1 capital. Erste Group has no current plans to repay the participation capital, which was issued to the Republic of Austria and to private investors.

The capital increase will take the form of a public offering in Austria, the Czech Republic and Romania and an international private placement to institutional investors in certain other jurisdictions.

Erste Group also announced that one of its significant shareholders, Criteria CaixaCorp S.A. (5.1 per cent) had already announced intent to exercise all of its subscription rights for the new shares and to acquire and exercise all of the subscription rights of Erste Stiftung, the main shareholder in Erste Group with 31 per cent.