Austrian bank Erste Group lifts target after profit beats forecasts

·2-min read
FILE PHOTO: The logo of Erste Group Bank is seen outside of one of its branch offices in Vienna

(Reuters) -Austrian bank Erste Group lifted its full-year key profit target on Friday after first-quarter earnings exceeded market expectations, boosted by higher interest rates in Central and Eastern Europe.

The bank, which operates in seven countries across the region, reported a net profit of 593.6 million euros ($652.1 million) in the quarter, beating analysts' average estimate of 543 million euros provided by the company.

Its net interest income (NII), a key metric for banks, rose 27.1% to 1.77 billion euros, slightly above the 1.72 billion euros expected by analysts.

The bank lifted its full-year NII target to around 15% from its previous guidance of 10% and Erste's finance chief Stefan Dörfler said the group was "well underway" to achieving it.

The group cited interest rate hikes mainly in Austria, Hungary and Romania, and a larger customer loan volume across all markets as reasons for the strong results.

"Eurozone continues to drive the NII momentum ... but Hungary posted strong 44% QoQ growth, too," J.P. Morgan analysts said in a note.

Dörfler said the bank had also kept a lid on operating expenses and had benefited from a "benign" risk environment.

The group confirmed its 2023 outlook for mid-single-digit net loan growth and said it targeted the upper end of its guidance range for return on tangible equity of between 13% and 15%.

Global banking shares plunged last month after the collapse of Silicon Valley Bank and Signature Bank in the U.S. and the forced takeover of Credit Suisse by UBS in Switzerland, but markets have since largely calmed.

Erste shares have been gradually gaining ground since the start of this month, after dropping by around 14% in March following the collapse of SVB.

The shares were down 1.6% at 0855 GMT after rising 1.9% in early trading.

($1 = 0.9103 euros)

(Reporting by Anna Mackenzie and Philipp Krach in Gdansk; Editing by Milla Nissi and Elaine Hardcastle)