“Triggered by BCR’s half-year result, Erste Group conducted an impairment test on the goodwill as of June 2012, which resulted in an impairment of EUR210 million,” the Austrian bank said in its financial report.
BCR group reported a loss of 546.4 million lei (EUR120 million) in the first six months of 2012 versus profit a year earlier, hurt by higher provisions and a weak loan demand.
However, BCR is expected to return to profit as of 2013, Erste said.
Erste owns 93.27% of BCR’s shares. This is Erste’s second impairment charge on the Romanian unit. In October 2011, the bank wrote down EUR700 million in goodwill in Romania.
The Austrian lender reported a net profit after minorities of EUR453.6 million in the January-June period, down 12.9% from EUR520.8 million in the first half of last year.
“Despite the challenging operating environment in Europe, Erste Group generated a net profit of EUR453.6 million in the first half of 2012. This result was impacted by positive as well as negative one-off items, yet reflects the underlying strength of our franchise”, said Andreas Treichl, Chief Executive Officer of Erste Group Bank AG.
The group posted operating profit of EUR1.75 billion in the first half, down from EUR1.97 billion in the same period of 2011.
Overall, operating income declined 6.7% on the year to EUR3.63 billion, largely due to a 57.9% drop in the net trading result. Net interest income fell 1.9% to EUR2.65 billion, while net fee and commission income slid 4.5% to EUR865.5 million.
Total assets rose by 2.5% to EUR215.2 billion since year-end 2011.
Risk costs rose 6.6% to EUR981.8 million in the first six months of 2012, mainly due to additional provisions in Romania.
In Romania, Erste reported net interest income in the retail and SME business of EUR284.3 million in the first half, down 19.9% on the year (or currency-adjusted -15.9%).
“This development was mainly due to weak consumer credit demand and narrowing margins on retail and corporate business,” the Austrian bank said.
At the same time, net fee and commission income was down 8% (currency-adjusted -3.4%) to EUR60.6 million, from EUR65.9 million in the first half of 2011.
Additional provisioning requirements in the corporate and real estate business resulted in an increase of risk costs by EUR140.8 million, or 62.8% (currency-adjusted: +71.0%) to EUR364.9 million in January through June, from EUR224.1 million in the same period a year earlier.