Erste Group, the parent company of Austrian custodian Erste Bank, saw the net fee and commission income generated from custodial fees drop by 10% in Q1 2011, when compared to the same time last year, from 11 million to stand at 9.9 million. Brokerage net fees and commission income also dropped by 2.7% during the same period.
However, under the securities transactions division, investment fund transactions grew by 18.8%, rising to 52.4 million in Q1 2011, from 44.1 million in the same period last year.
Overall, net fee and commission income grew by 2.1% from 471.5 million to 481.2 million in the first quarter of 2011.
The group says that this development was driven mainly by growth in payment transfers handled by the Czech subsidiary (increase in card transactions) and the asset management companys securities business and that the improvement in the lending business was attributable largely to higher contributions from the Slovak subsidiary and Erste Bank Oesterreich.
“All of Erste Group’s markets in Central and Eastern Europe in 2011 are expected to see either a return to growth or a continuation of that recovery,” says Andreas Treichl, CEO of Erste Group Bank. “Thanks to their strong export performance, the Czech Republic and Slovakia will continue to lead the way. Hungary and Romania are set to follow this trend, albeit with some delay, with the latter benefitting from the scheduled roll out of infrastructure projects. In addition, the first signs of a revival in private consumption have become evident across almost all the countries of Central and Eastern Europe.”
Overall, net interest income amounted to 1,295.7 million in Q1 2011, falling -2.1% versus Q1 2010. This was in part due to a slight decrease in the net interest margin to 2.88%, versus 3.03% in Q1 2010, which was attributable to a marginally changed balance sheet structure, as well as continued low market interest rates.
On the back of ongoing tight cost control and despite rising inflation, operating expenses remained stable in the first quarter 2011 at 963.0 million. This resulted in a cost/income ratio of 50.2%, compared to 49.2% in Q1 2010.
Risk costs declined by 13.4% from 531.2 million in Q1 2010 to 460.1 million in Q1 2011. The group says that this development was primarily due to the gradual economic recovery – albeit at different pace in various countries – in Central and Eastern Europe.
“Erste Group has made a good start to the new financial year, posting an increase in net profit as a result of declining risk costs and despite the significant negative impact from the banking taxes in Austria and Hungary”, says Treichl. “Overall, macroeconomic fundamentals in Central and Eastern Europe, as well as sentiment towards the region, continued to improve. This was reflected in significantly increased industrial output together with currency appreciation as well as a tightening in CDS spreads. While Romania and Hungary continued to work through economic issues and are not expected to show meaningful improvements before the second half of 2011, the performance in the Czech Republic, Slovakia and Austria (the markets which account for roughly two thirds of total business volumes) makes us confident about our ability to significantly raise profitability again this year.”