“Following our pre-announcement for the third quarter on October 10, concerns were raised in relation to our CDS exposure. We have reacted to this and reduced our portfolio from EUR5.2 billion at the end of September to EUR0.3 billion on October 27, with no additional negative profit and loss effect,” said Andreas Treichl, CEO of Erste Group Bank AG.
The change in the fair value of the group’s CDS triggered a 8.8% decline in the operating result to EUR2.6 billion in the first nine months, from EUR2.8 billion in the year-earlier period.
Risk costs increased 17% on the year to EUR1.86 billion, mostly due to additional risk provisions at the Hungarian subsidiary, Erste said in its financial report.
In Romania, Erste’s bank Banca Comerciala Romana (BCR), reported net interest income of EUR517.6 million in the first nine months, down 16.8% on the year (or currency-adjusted -16.3%).
“The current earnings development in Romania and a revised outlook on economic developments and business opportunities in the banking sector led to extraordinary write-downs totaling EUR692.8 million, which reduced goodwill to EUR1.1 billion,” the Austrian bank said.
Net fee and commission income declined 10.1% (currency-adjusted: -9.7 to EUR97.5 million, because of lower contributions from the lending business.
Erste said operating expenses in Romania increased marginally by 0.5% on the year (currency-adjusted: +1%) to EUR282.7 million at the end of September.
However, risk provisions on the local market declined to EUR373.7 million in the first nine months, from EUR386 million in the year-ago period.
The cost/income ratio rose from 37.5% in the previous year to 43.2% in September.
Erste Bank owns 69.4% in BCR. The Austrian group said it has reached an agreement in principle to buy another 24.12% stake in BCR from four of the five minority holders SIFs in exchange of EUR435 million in cash and stock.
The agreement is pending final approval from SIF shareholders.