Erste Bank der Oesterreichischen Sparkassen has confirmed its earnings targets for 2006 and announced that the Romanian Constitutional Court has cleared the way for the closing of the bank's acquisition of Banca Comerciala Romana.
Erste Bank’s earnings targets for 2006 include an increase in annual net profit of at least 20% compared to 2005.
The later-than-anticipated closing of the acquisition of Banca Comerciala Romana (BCR) means that the new Romanian operation is not expected to make a material contribution to the group results this year. However, by rejecting the complaints against the law relating to the privatization of BCR, the Romanian Constitutional Court has now cleared the way for Erste Bank to close its acquisition of BCR.
The bank said that, due to ongoing positive economic developments in central and eastern Europe and base rate changes in recent weeks, the group’s annual net profit for the financial year 2007 (including BCR) is expected to increase by at least 25% compared to 2006.
Erste Bank also confirmed its medium-term growth targets. For the three years to 2009, an annual average increase of more than 20% is expected in the group’s profit after taxes and minority interests.
The results for the second half of 2006 will be affected by various non-recurring items, the bank said. For example, profits will be increased as a result of sales of financial assets and investments, but risk provision for loans and advances and other operating results will be adversely affected by a settlement dispute.
The Austrian retail and mortgage business will narrowly miss its targeted return on equity of 11%. This is primarily due to a lower contribution from the insurance business based on the development of the yield curve and the consequent impact on asset valuations, leading to a lower result than last year’s exceptionally good performance.