Erste Group Bank
The economies in most of its core markets would grow this year albeit at slower paces than in 2011, with only Hungary and Croatia set for a mild negative performance, the bank said on Wednesday.
Erste Group said it expects a slightly higher operating result in 2012 supported by loan growth in its core markets and lower provisions for problem loans.
Risk provisions jumped 12 percent in 2011 to 2.27 billion euros (2 billion pounds), primarily to cover losses from Hungary's scheme to let borrowers repay foreign-currency loans at below-market rates and to raise coverage ratios for dud loans in Hungary and Romania.
Risk costs should decrease in 2012 as extraordinary effects such as the 450 million euro one-off provisions in Hungary are not expected to recur.
The bank said customers in Hungary had repaid 730 million euros worth of Swiss franc loans by this week, causing a loss of around 200 million euros that was covered by risk provisions it built in the third quarter.
It saw a potential impact of around 80 million euros from additional relief for Hungarian borrowers under a proposal subject to parliamentary approval in Budapest.
Erste Bank shares rose 4.4 percent in early trading.
Chief Executive Andreas Treichl said in a statement the Vienna-based bank was on track to hit the European Banking Authority's (EBA) goal for key lenders to reach a core tier 1 ratio of 9 percent of risk-weighted assets by mid-2012.
At year-end 2011, the EBA core tier 1 ratio already stood at 8.9 percent, thus reducing the capital shortfall from 743 million euros to 166 million euros, he said.
Fourth-quarter net profit after minority interest edged up year on year to 254.1 million euros, easily beating the average estimate of 181 million in a Reuters poll of analysts.
That brought its annual loss to 718.9 million. The bank said in October it would lose up to 800 million in 2011 and omit a dividend after taking hits on foreign-currency loans in Hungary, euro zone sovereign debt and its credit default swap portfolio.
Erste's total sovereign debt net exposure to the struggling economies of Greece, Ireland, Portugal, Spain and Italy stood at a combined 553 million euros at the end of 2011, down from 2.12 billion a year earlier. Greece accounted for 4 million of the total and Italy 473 million.
Erste trades at 8.2 times 12-month forward earnings per share, a premium to Austrian rival Raiffeisen Bank International (RBI)
Pretax profit at RBI rose nearly 7 percent last year while net profit after minorities fell 11 percent to 968 million euros
as deferred taxes hit the bottom line, emerging Europe's third-biggest lender said last week.
(Reporting by Michael Shields; Editing by Angelika Gruber and Erica Billingham)