Erste Bank reported today a net result of EUR 1,647.0 million for the first nine months of the year, an increase of 13.5% compared to the same period of 2021, on the back of the strong operating result.

Net interest income increased to EUR 4,385.2 million (+19.5%; EUR 3,669.5 million) driven in particular by rate hikes outside the euro zone – mainly in the Czech Republic, Hungary and Romania – as well as significant loan growth across all markets.

Net fee and commission income rose to EUR 1,829.9 million (+8.3%; EUR 1,690.4 million). Increases were posted across nearly all fee and commission income categories and all core markets, with significant growth seen in particular in payment services and asset management.

Net trading result declined to EUR -848.5 million (EUR 67.5 million), the line item gains/losses from financial instruments measured at fair value through profit or loss rose to EUR 743.3 million (EUR 133.5 million). The development of these two line items was mostly attributable to valuation effects.

Operating income increased to EUR 6,270.7 million (+9.3%; EUR 5,735.0 million). General administrative expenses were up at EUR 3,381.3 million (+7.7%; EUR 3,141.0 million).

Overall, the operating result increased markedly to EUR 2,889.4 million (+11.4%; EUR 2,594.0 million) while the cost/income ratio improved to 53.9% (54.8%).

The common equity tier 1 ratio (CET1, final) stood at 13.8% (14.5%), the total capital ratio at 17,9% (19.1%).

Outlook
Erste Group targets a return on tangible equity (ROTE) of approximately 14% in 2022 and 13-15% in 2023. This forecast is primarily driven by a stronger economic performance in 2022 than expected in spring, strong labour markets across CEE and faster than expected interest rate normalisation in the euro zone.

While economic growth is forecast to slow down significantly in 2023 in the face of persistently high energy prices and generally higher inflation, continued constructive labour markets and normalised euro zone interest rates should support maintenance of solid profitability also in 2023.

In P&L terms increases in operating result and low risk costs are expected to remain the key drivers for earning the cost of capital. Key assumptions for the outlook include: economic slowdown but no negative year-on-year real GDP growth, no further material political or regulatory interventions beyond the impact of the potential Czech banking tax of up to EUR 100 million from 2023 to 2025, no further worsening of the geopolitical situation, and a stabilisation of European energy situation.