Erste Group provides update on performance – closes profitable 2008 with 19% operating profit growth. Following a meeting of the Management Board today, Erste Group Bank AG announces key highlights of the 2008 preliminary results, ahead of the full presentation on 27th February 2009.
• Erste Group reports continued solid improvement in operating profit: up more than 19% vs 2007, underscoring the strength of its retail banking business model in Austria and Central and Eastern Europe
• Net profit for the year 2008 – including the positive impact of the sale of the insurance business and the negative revaluation of certain financial assets as a result of the continued difficult market conditions, particularly in December 2008 – exceeds EUR 1.3 billion; however:
• the management board has taken the decision to assign the proceeds from the sale of the insurance business to the full write-down of intangibles related to the Ukrainian and Serbian operations and to the partial write-down of intangibles in Romania, amounting to a total of approx EUR 570 million (pre-tax); and
1 in view of the deterioration in the macroeconomic environment over recent months, Erste Group has proactively decided to bolster risk provisions in all of its geographies, resulting in risk costs in relation to average customer loans of close to 90bps for the year 2008; as a result,2 clean net profit is expected to total EUR 860 million for the year 2008
Including all of the above measures and prior to the announced issuance of participation capital the Group’s Tier 1 ratio is expected to reach 7.2% at YE 2008.
Erste Group continues to be convinced that the longer term outlook for superior growth opportunities in its region remains unchanged. However, following a thorough review of activities across its operating region the Group’s management has taken the decision to adjust the business plans for 2009 to 2011 to reflect the expected impact of the worldwide economic slowdown on Austria and the CEE region in the near term.
Despite these extraordinary effects, Erste Group expects to report a clean full year net profit for 2008 of EUR 860m, underlining the solid, sustainable earnings capability of the retail-focused operating model.
“Against the backdrop of an exceptionally difficult fourth quarter, these initial results underline the solid foundation on which the Erste Group is based,” says Andreas Treichl, CEO of Erste Group. “We are well-funded and profitable, and with the steps we have taken to further tighten our risk management and reduce costs, together with our dedication and commitment to providing an unrivalled service to our over 16 million customers, we believe that Erste Group is well positioned to withstand whatever new challenges 2009 may bring.”
D.C.