* Q1 net profit 255 mln eur beats Reuters poll 226 mln
* Unexpectedly strong trading result
* Bad debt charges decline q/q as expected, on Romania
* Wait for H2 2010 for significant drop in bad debt charges
* Return of E. Europe credit volume growth will be slow
(Repeats to reach more customers)
By Boris Groendahl
VIENNA, April 30 (Reuters) - Erste Group Bank <ERST.VI> beat
forecasts thanks to bumper quarterly trading profits but said
loan growth driven by the recovery in emerging Europe will be
slow and a significant drop in bad debt will have to wait for
the second half.
The No.3 lender in emerging Europe said on Friday net profit
rose 10 percent to 255 million euros ($340 million) rather than
declining from a year ago as analysts had forecast, mainly
thanks to the stronger trading result. []
Bad debt charges were 13 percent lower than last quarter,
showing the expected first decline in a year and backing up
hopes that the surge of sour loans that has haunted banks in the
former Communist part of Europe is coming to an end.
The decline was surprisingly big in Romania, the country
surviving on lifelines from the International Monetary Fund,
where provisions for loan losses declined by 39 percent on the
quarter and the rise in bad debts slowed down significantly.
Provisions still ate up more than half of Erste's net
interest income in the country, a key swing factor for Erste
which bought Romania's biggest bank for six times book value in
2006, near the peak of the eastern European economic boom.
"Romania did very well, provisions came down while we had
expected them at almost the fourth quarter level and the profit
is almost half of what we see for the full year," said Peter
Vidlicka, analyst and brokerage Wood & Co.
"I would imagine this leads to upgrades for the stock," he
said. "Everybody is watching Romania."
Echoing this week's comments by Sweden's top banks, whose
eastern exposure is mainly in the Baltics, Erste said trends in
the former Communist European economies were stabilising but
still far from growth rates the previous boom. []
"As the economic recovery (in central and eastern Europe)
will initially be driven by exports rather than domestic demand,
the return of volume growth ... is expected to be slow," the
Vienna-based bank said.
"Nevertheless, the improvement in operating conditions
should have positive, if gradual, effects on asset quality," it
added. "Accordingly, Erste Group continues to expect risk costs
to remain elevated for the better part of 2010."
The group, whose franchise also includes the second biggest
Czech bank, delivered almost exactly the rise in interest and
fee income -- much more important revenue sources than trading
for the retail bank -- that analysts had predicted.
Erste shares have risen 29 percent this year and are trading
at 12 times 12-month forward earnings, according to StarMine, a
slight discout to peers such as Czech Komercni Banka <>
or Austria's Raiffeisen International <RIBH.VI>.
($1=.7508 Euro)
(Reporting by Boris Groendahl; Editing by Jon Loades-Carter and
Andrew Callus)
