Erste Shares Tumble After Profit Warning

07.04.2014 By Bogdan Neagu

Erste Group Bank (EBS.RO) traded down more than 13% in Bucharest Friday morning, after the Austrian banking group issued a profit warning yesterday.

Late Thursday, Erste announced that it expects risk costs to rise from the planned EUR1.7 billion to about EUR2.4 billion in 2014 due to higher provisions in Romania and Hungary.

“Increased risk provisions in Romania reflect recently increased efforts by the Romanian National Bank, ahead of the ECB’s asset quality review, to reduce NPLs in the banking system in an accelerated manner, and the implementation of lower recovery assumptions by BCR, based on offer prices received for large volume NPL packages,” Erste said in a statement

As a result of increased provisions in Romania, Erste Group will carry out an impairment test on the entire amount of Romanian intangibles (goodwill, brand, value of customer relationships) of about EUR800 million, which may result in the full write-off of such intangibles.

“Such action may also lead to the write-off of deferred tax assets of about EUR200 million,” Erste said.

Erste said it expects to post a net loss of 1.4-1.6 billion euros for the full 2014, following the increase in risk costs.