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Investing.com -- Erste Group Bank AG (VIE:ERST) shares rose more than 3% on Friday after the Austrian lender reported quarterly earnings that surpassed expectations, driven by higher interest income and stronger retail loan growth across Central and Eastern Europe.
The bank posted a pre-tax profit of €1.395 billion for the third quarter, about 7% above consensus estimates.
Total revenues were 2% higher than expected, with net interest income rising 3% above forecasts and fee income up 2%.
Trading and other income fell 7%, but UBS said net interest margins improved in Slovakia, Hungary and Croatia and stabilized in Austria.
Operating expenses were 1% higher than expected, leading to a 3% beat in pre-provision operating profit.
Credit costs were reported at 24 basis points, roughly 5% above consensus. Net profit came in at €901 million, exceeding estimates by 8%.
The bank’s cost-to-income ratio stood at 47%, while its common equity tier 1 (CET1) ratio rose to 18.2%, up 75 basis points from the previous quarter and above UBS expectations.
Retail lending remained a key driver, with net customer loans growing 1.8% quarter over quarter and 6.8% year over year.
Retail loans increased 2.8% in the quarter, and corporate loans grew 1.3%. Housing loans advanced 2.5% quarter over quarter and 7% year over year. Deposits were flat compared with the previous quarter and up 3.4% from a year earlier.
UBS said Erste’s performance reflected “solid core results and strong capital,” noting that the “rough in NIM likely reached at Group level.”
The brokerage added that retail and corporate lending showed “decent sequential growth” and that the group posted a “strong capital print.”
By geography, Austria contributed €282 million in net profit during the quarter, while Central and Eastern Europe generated €609 million.
Within the region, Romania reported a 42% quarter-over-quarter rise in profit to €162 million, and Hungary’s profit increased 6% to €91 million. The Czech Republic recorded a 9% decline in profit to €226 million.
Following the results, Erste upgraded its 2025 guidance. The bank now expects net interest income to grow more than 2% year over year, compared with its earlier forecast of more than 0%.
Loan growth of over 5% has been broadly achieved already, UBS said. Fee income is projected to rise by more than 5%, while operating costs are expected to grow around 5%, resulting in a cost-to-income ratio below 48%, an improvement from the prior goal of under 50%.
The outlook for the return on tangible equity remains above 15%, and the CET1 ratio target was raised by 25 basis points to above 18.5% before the consolidation of Santander Polska at year-end.
UBS maintained its “buy” rating on Erste shares with a 12-month price target of €93, compared with the closing price of €85.05 on Oct. 30.
The brokerage added that the bank’s capital build and lending momentum “appear better than thought” and said the upgrade cycle “should continue.”