Erste Group Shares Jump on Guidance Raise After Rate Hikes Boost 3Q

By Ed Frankl

Shares in Erste Group Bank AG rose Friday as it raised part of its full-year guidance after interest income surged in the third quarter on the back of rate rises.

At 0835 GMT shares were up 5.3% to EUR26.67.

The Austrian bank, which focuses on central and eastern Europe, pushed up its expectations for net interest income to 20% growth in 2022, from a low-double digit rise under previous guidance.

It came after net interest income--the difference between how much a bank earns on clients' loans and how much it pays them for their deposits--rose 27% in the third quarter to 1.55 billion euros ($1.51 billion), driven by interest rate hikes outside the eurozone.

It also expects higher than 10% net loan growth this year, from high-single digit percentage growth under previous guidance.

A potential share buyback will also be considered in spring 2023, Erste added.

The updated forecast was driven by a stronger economic performance over 2022 than previously expected in the spring, strong labor markets across central and eastern Europe and faster-than-expected interest-rate normalization in the eurozone, the Vienna-based company said.

The lender also updated its guidance on return on tangible equity--a measure of profitability--to 14%, from double-digit expectations previously. It also targets ROTE of 13%-15% in 2023.

Meanwhile, net profit in the quarter was EUR510 million, ticking down from the EUR533.4 million in the same period last year. That beat consensus by around 3%, driven by revenue, net interest income, and better cost management, partially tempered by higher-than-expected provisions, Citi analyst Simon Nellis said in a research note.

The provisions, primarily on overlay provisions to industries affected by rising energy prices, was mostly due to a cautious approach to creating general provisions prior to the coming slowdown, Mr. Nellis said.

Write to Ed Frankl at [e-mail]

(END) Dow Jones Newswires

November 04, 2022 05:14 ET (09:14 GMT)

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