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VIENNA, Feb 28 (Reuters) - Erste Group's net profit fell more than expected in the fourth quarter as a one-off charge linked to a reform of Austria's bank tax weighed on its results, but the Austrian lender confirmed it planned to double its dividend.
Erste, which operates across central and eastern Europe, said it was expecting solid economic growth in the region this year but net interest income would be flat "at best" as the positive effect from shedding bad loans diminished.
Investment in digital technology would also lift expenses, it said.
Fourth-quarter net profit fell to 85.6 million euros ($90.7 million) from 204 million in the same period a year earlier, Erste said on Tuesday. That was below an average estimate of 94 million euros in a Reuters poll of analysts.
"Banking tax in Austria increased to 221.1 million euros due to the recognition as an expense of the one-off payment made pursuant to the Austrian Bank Tax Act in the amount of 200.9 million euros," Erste said, referring to a payment banks are making in exchange for a drop in the tax.
Erste proposed doubling its dividend to 1 euro per share on the back of a 31 percent increase in full-year net profit. It said it expected return on tangible equity of more than 10 percent in 2017, compared with 2016's 12.3 percent.
"Erste Group expects that, at best, it will be able to keep net interest income stable in 2017. If the interest rate environment remains unchanged, a slight decline might also be possible, though," it said. Net interest income is the difference between interest earned and paid out. ($1 = 0.9438 euros) (Reporting by Francois Murphy; Editing by Christian Schmollinger and Michael Shields)