Erste Group Sees Higher Risk Costs In Hungary, Romania In FY14; Stock Plunges

(RTTNews) - Austria-based financial services firm Erste Group Bank AG's (EBKDY.PK) shares plunged over 15 percent in Vienna on Friday, after the company on Thursday said it expects risk costs to rise from the planned 1.7 billion euros to about 2.4 billion euros in 2014 as a result of increased provisions in Hungary and Romania.

Due to increased provisions in Romania, Erste Group will carry out an impairment test on the entire amount of Romanian intangibles of about 800 million euros, which may result in the full write-off of those intangibles. Such action may also lead to the write-off of deferred tax assets of about 200 million euros.

The company now expects a net loss for 2014 of 1.4 billion euros to 1.6 billion euros.

Erste sees group operating result slightly below the guidance in 2014 due to weaker operating results in Romania and Hungary.

In April, the company said it aims to keep operating profit stable at about 3.1 billion euros.

The lender expects strongly improved post-provision result and net profit in 2015, despite still disproportionate banking levies.

Andreas Treichl, CEO of Erste Group Bank, said, ''...by taking these measures, we have done everything in our power to avoid one-off effects from 2015 onwards. This will also be reflected in a more stable and increasing net profit of Erste Group."

The stock is down 15.6 percent at 19.67 euros.