Erste's Profit After Tax Increased Significantly

In the first quarter of the year, Erste Bank posted a profit after tax of HUF 6.3 billion, compared to a loss of HUF 1 billion a year earlier. The extra profit tax, the interest rate freeze and the extra payment due to the Sberbank bankruptcy amounted to HUF 38 billion, which together resulted in a profit in the first quarter, the CEO of Erste Bank, Radován Jelasity said at a press conference in Budapest on Tuesday.

He added that operating income grew significantly by 52.6% to HUF 70.4 billion, driven by an increase in interest income and fee and commission income.

This year will be an interesting year, the CEO said, questioning whether the interest rate freeze introduced in December 2021, a significant extra cost for the sector, will remain in terms of banks' revenues. He also questioned whether the interest rate cut will start and when the extra profit tax will be abolished.

Based on the non-performing loan ratio (NPL ratio), the bank's portfolio is stable and as long as employment remains at current levels, there is no need to worry, he said. The NPL ratio has fallen to 2.8% from 3.9% a year earlier.

Customer loans and bonds grew 17.2% to HUF 2,362 billion. However, the volume of new financing was 41% lower than in the same period last year; lending slowed due to the high interest rate environment, Radován Jelasity said.

According to the CEO, this year's result will be affected by a number of specific items, including the increase in the compulsory reserve ratio from April 1, which means a monthly revenue loss of HUF 500 million for every HUF 100 billion in reserves in the banking sector.

In the first quarter, net interest income rose 72.5%, partly because the bank booked part of its trading income here. Trading and conversion income therefore fell by HUF 17.8 billion. Fee and commission income rose by 10.4%, mainly due to higher transaction activity from the active client base and the performance of the investment business.