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UPDATE 1-Erste Group Bank's net profit falls as administrative costs rise
May 5, 2017 / 6:41 AM / 7 months ago

UPDATE 1-Erste Group Bank's net profit falls as administrative costs rise

(Adds detail, company comment)

VIENNA, May 5 (Reuters) - Erste Group Bank’s first-quarter net profit came in slightly below expectations as IT projects led to an increase in personnel and other expenses, the Austrian lender said on Friday.

The bank, which operates across central and eastern Europe, said low interest rates had pressured its net interest income, which fell 3.7 percent in the first three months of the year compared with the same period a year earlier.

Net profit after minorities fell 4.6 percent to 262.2 million euros ($288 million). Analysts had on average expected net profit of 270 million euros, according to a Reuters poll.

Regulatory reporting requirements and a push into digital services had raised the company’s IT costs and they were set to remain a challenge, it said. Personnel expenses also rose 1 percent to 571.7 million euros.

“Rising IT costs -- 91.6 million euros in just the first three months of the financial year 2017 -- are currently an obstacle to an improvement in the operating result and hence in the cost/income ratio,” Chief Executive Andreas Treichl said in a statement.

Erste said it expected solid growth in the region this year and kept its outlook of a return on tangible equity of more than 10 percent, having reached 9.8 percent in the first quarter.

Its fully loaded common equity tier 1 ratio -- a measure of balance sheet strength -- fell to 12.5 percent of risk-weighted assets at the end of March from 12.8 percent at the end of 2016. ($1 = 0.9104 euros) (Reporting by Francois Murphy and Alexandra Schwarz-Goerlich; Editing by Michael Shields)

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