Morningstar | Erste Reports a Good First-Half 2018 Despite a Dip in Trading Results
Erste Group Bank reported good first-half 2018 results as net interest income and net fee and commission income more than offset another quarter of weak trading results. Net profit for the first six months of 2018 came in at EUR 774 million, up 24% compared with the year-ago period, despite the cost/income ratio deteriorating slightly to 61.5% from 60.8%. With a return on tangible equity of 13.3% in the first half of 2018, Erste is well on track to meet its guidance and our expectations of 10%-plus returns for the full year. We maintain our fair value estimate of EUR 40 per share and our no-moat rating for Erste.Higher interest rates and loan volumes in its largest region by operating profits, the Czech Republic, were the main driving factor behind the 3.3% growth in net interest income to EUR 2,214 million for the first half-year. This, in combination with 5.3% higher net fee and commission income, more than counterbalanced the typically more volatile net trading line, which declined by EUR 91 million, or 88.5%. Negative contributions from securities and derivatives trading, slightly offset by gains in financial instruments measured at fair value, were the main culprit. As we see the weakness in trading as temporary and expect the pendulum to swing the other way eventually, we are left with confidence regarding the structural improvements Erste has delivered in first-half 2018. Its asset quality improved, as indicated by a lower nonperforming loan ratio of 3.6% versus 4.0% previously and an NPL coverage ratio of 72%, compared with 68.8% in the year-ago period, while posting solid loan growth (credit institutions up 87.9%, customers up 3.7%) at the same time. Erste’s common equity Tier 1 ratio stands at 12.6%, down from 13.4% last year.
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.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.