Provisions in Romania and Hungary led Erste Bank to record EUR 1 bln loss

Erste Group Bank fell to a second-quarter net loss of EUR 1.03 billion euros as it wrote down its business in Romania and set aside 130 million euros for a Hungarian law forcing banks to compensate customers for mispriced loans, writes Reuters.

“Results reflect the measures we announced on July 3. Our portfolio quality evolved positvely, indicating a continous tendency for improvement. As far as the impairment test is concerned,. the evolution of our stock-in-trade is especially encouraging: despite losses, it increase by 11.7 percent, according to Basel 3 regulations. Our decision to accelerate the balance quality will lead to freeing up resources which allows us not only to achieve better results in 2015, but to contribute to restarting a credit line for Central and Eastern Europe. We’re already observing a balanced economic growth in the region and from our position as regional leader we want to have the necessary strength to finance this growth”, according to Andreas Treichl, CEO for Erste Group Bank.

The bank said its net interest income, weighed down by low-interest rates and foreign-exchange effects, declined to EUR 2.24 billion from EUR 2.34 billion in the same period last year. The bank’s net impairment on non-fair value financial assets increased to EUR 796.1 million in the first six months of the year, and increase from EUR 784.3 million during the first six months of 2013.

This month, Austria’s largest bank by assets issued a warning saying it estimates a net loss of between EUR 1.4 billion and EUR 1.6 billion in 2014 after increased risk provisions in Romania and Hungary, in part in preparation for the European Central Bank’s review of bank balance sheets through the process known as asset quality review as well as in response to new banking legislation in Hungary.

“The positive trends that emerged in the second quarter of 2014 may only be visible at second glance, but they do exist and provide reason for some optimism,” Chief Executive Officer Andreas Treichl said in the quarterly report. “We expect that in 2015 we will again be able to generate a solid net profit.”