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Aug 05, 2016

Erste Hungary in profit after suffering losses last year

The results are thanks to the release of risk provisions, the lower bank levy and a gain through the sale of VISA Europe shares compensated for a drop in operating profit

Erste Bank Hungary Group has announced a net profit of 100.7 million euros in the first half of this year, an improvement over last yearʼs net loss of 34.6 mlllion euros.

The results are thanks to the release of risk provisions, the lower bank levy and a gain through the sale of VISA Europe shares compensated for a drop in operating profit, Erste bank revealed.

According to Budapest Business Journal, operating income of the group fell 8.3 percent in one year to 165 mlllion euros, according to the report, which was published by the MTI news agency.

The report also said overall income was significantly helped by a 71.7 mlllion euros in positive income from the release of risk provisions, related to the retail portfolio and the cleaning/sale of the groupʼs commercial property portfolio. In H1 2015 the Hungary segment booked a loss of 58.8 mlllion euros on the same line.

Other results were also lifted by a 12.8 mlllion euros gain related to the sale of shares in VISA Europe. Other results included the 1.8 mlllion euros contribution to the resolution fund.

Net interest income fell a steep 22.0 percent year-on-year to 88 million euros, mainly due to lower loan volumes and the impact of the consumer loan law, as well as narrowing net interest margins.

Net income from fees and commissions fell 2.1 percent to 68.6 mlllion euros, but net trading and fair value results became a positive 6.5 mlllion euros against losses of 3.5 mlllion euros in H1 2015.

Operating expenses rose by 7.2 percent to 93.3 mlllion euros, due to the booking of the full year contribution to the deposit insurance fund of 7.1 mlllion euros as well as higher personnel costs.

Operating results fell as a consequence by 22.7 percent to 71.7 mlllion euros and the cost/income ratio rose to 56.6 percent, up from 48.4 percent in H1 2015.

The loss on other results shrank 41.1 percent to 37.3 mlllion euros mainly due to the reduction of the Hungarian bank levy, to 19.6 mlllion from 46 million euros, the report said, noting that provisions for contingent credit risk liabilities still increased.

The state of Hungary and the European Bank for Reconstruction and Development (EBRD) each acquired 15 percent stakes in the Hungarian unit of Austrian banking group Erste on June 20, in line with an agreement signed in February 2015.