Morningstar | Erste Group 1Q 2019: Interest Rate Hikes and Lending Growth Drive 1Q Results
Erste Group reported first-quarter results of EUR 377 million compared with EUR 336 million in the same period last year, driven by improved interest rates as well as lending growth in most of its core markets. The beneficial operating environment, supported by real wage growth and low unemployment, is expected to continue in 2019, keeping credit costs at a benign level while improved interest rates and loan growth support income generation going forward. We maintain our fair value estimate of EUR 40 per share and no-moat rating.Reference rate hikes in the Czech Republic and Romania as well as solid loan growth in Austria paired with stable performances in other core regions lifted net interest income 7% to EUR 1,161 million, the largest driver of positive results this quarter. This was partially offset by 5% higher operating expenses, which were affected by higher deposit insurance payments for full-year 2019 based on healthy deposit growth in the first quarter as well as 3% higher staff costs. However, the effect of EBS' operating leverage meant that operating results improved 11% to EUR 656 million vis-Ã -vis first quarter a year prior.
Erste Group is a financial services provider based in Austria. As of Dec 31 2015, Co.'s total assets amounted to Euro199,743 million and the number of customers was approximately 16.5 million. Co.'s key business is the retail business, covering the entire spectrum from lending, deposit and investment products to current accounts and credit cards. In addition to providing financial services to private individuals, Co.'s core activities also include advisory services and support for corporate clients in financing, investment and access to international capital markets, public sector funding and interbank market operations.
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