VIENNA (AP) - Austria's Erste Group bank reported a 19 percent drop in second-quarter net profit Thursday, amid rising risk provisions for bad loans in crisis-hit Central and Eastern Europe.
The Vienna-based bank said its net profit after minorities in the quarter was ¤260 million ($365 million) compared to ¤321 million ($451 million) during the same period a year ago.
It said its risk provisions for loans and advances rose to ¤892.1 million ($1.2 billion) during the first half of the year, up 132.3 percent from ¤384.1 ($540.1) during the first six months of 2008.
Along with other European banks, Austria’s financial institutions – including Erste – offered euro or Swiss-franc loans at low rates as countries throughout Eastern and Central Europe grew rapidly. It was a good deal for banks and borrowers, until local currencies nose-dived and sent borrowers’ repayments soaring – raising fears of defaults and losses.
CEO Andreas Treichl sought to allay fears about the impact of the area’s financial downturn.
“While we believe the economic conditions will remain difficult in coming months, we do not believe in the disaster scenarios for the region,” Treichl said in a statement. “Our knowledge of the private and corporate customer is improving at a good pace, allowing us to take effective measures to guide our bank as well as our customers through the crisis.”
Except for Ukraine, Erste said it was profitable during the second quarter in all Central and Eastern European markets where it has a presence. These include the Czech Republic, Romania, Slovakia, Hungary, Croatia and Serbia.
