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Erste, emerging Europe's No.3 lender, expects next year's operating earnings to rise by 10 percent, more than market expectations, even though lending growth will slow down and risk provisions rise, it told investors at its Capital Markets Day.
"That we are in retail banking, in this region, makes us feel more comfortable than other banks who are in other businesses and in other regions," Chief Executive Andreas Treichl told the meeting, in remarks broadcast over the Internet.
However, Treichl said visibility was too low to make a 2010 forecast, which weighed on Erste shares in late trading.
"I decided we will not make a forecast for 2010, because I don't care, because I don't know, and nobody in my bank can set up something for me that I would believe in," he said.
He said some people believed 2010 would be better than 2009 and some believed it would be worse. "I don't know who is right," he said.
Erste shares, which had outperformed the DJ Stoxx European banking index most of the day, fell as much as 11 percent on the remarks and were down 10 percent at 14.75 euros by 1606 GMT, worse than the sector.
While Erste's forecast is in stark contrast to the losses and job cuts announced by banks in developed countries, Erste and its peers in the region are facing mounting evidence that the wider economic slowdown is spreading to emerging Europe.
The worst decline of Czech output in eight years in October and Czech carmaker Skoda's production cut reminded investors on Friday that even the strongest central European economies are not immune from the global downturn.
Erste, which made 62 percent of its operating earnings in the first three quarters of this year in emerging Europe, owns the biggest Czech and Slovakian banks as well as the biggest in Romania, an economy that looks even more fragile.
"Romania is going to have big problems and when even Skoda in the Czech Republic is shutting down, the pressure is just everywhere," said one analyst who declined to be identified.
STATE CAPITAL
Erste has asked the Austrian government for a 2.7 billion euro injection to prop up its capital ratio, but approval of the deal has dragged on for more than a month until finally being given this week, and Erste said it was in no hurry anymore.
Treichl said he would now wait into next year and see what his options were, adding that the tendency on European capital markets may become more accommodative of bank capital raisings.
Its tier 1 capital ratio will stand at 7.6 percent by the end of this year without the state capital, Erste said.
Erste reiterated its pledge to raise operating earnings by 15 percent this year. Analysts, who slashed their estimates after Erste issued a profit warning in October, expect only 3 percent growth this year and 9 percent next.
Erste's outlook translates into 2009 operating earnings of around 3.2 billion euros ($4.3 billion), while analysts expect 2.9 billion euros on average, according to Reuters Estimates.
But the underlying growth in customer loans, Erste's main revenue source, will drop more notably to 5-7 percent, from 12 percent this year and 17 percent in 2007, Erste said.
And at the same time, risk provisions will rise to 0.9 to 1.2 percent of customer loans -- up 60 percent from this year and almost three times as high as 2007 -- implying a significant deterioration of Erste's loan book.
According to Reuters calculations, this outlook implies risk provisions of between 1.2-1.6 billion euros next year.
($1=.7537 Euro)
(Additional reporting by Sylvia Westall; Editing by Hans Peters and Rupert Winchester) Keywords: ERSTEBANK/ (boris.groendahl@reuters.com; +43 1 53112-258; Reuters Messaging: boris.groendahl.reuters.com@reuters.net)
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