Erste Group First Impression 1Q 2010

From a segmental/regional perspective Group Markets was the main surprise due to a strong trading income and F&C from securities business. Erste Bank Austria also topped estimates on good NII and F&C income. CEE overall was slightly below our forecasts (but in line with consensus). While the Hungarian (higher risk provisions) and the Romanian (weak F&C) segments came in below our estimates Slovakia topped our forecasts. See next page for segmental data.

Asset quality: As expected risk costs declined for the first time quarter on quarter (164 bps of average customer loans vs. 189 bps in 4Q). NPL formation continued its decelerating trend. As a result the NPL ratio in relation to customer loans reached 6.9% (in line with our estimates), following 6.6% at year-end 2009. The NPL coverage improved to 59.0% from 57.2% at year-end 2009.

Capital: Due to strengthening of CEE currencies and higher securities valuation shareholders equity increases by EUR 0.6 bn while risk-weighted assets remained flat – in line with the loan bookdevelopment. Tier 1 ratio therefore (total risk) amounts to 9.4% (+0.2% qoq) and Core tier 1 ratio also improved from 8.3% to 8.5%.

Outlook: As expected there is still no official guidance. Based on 1Q earnings and expecting risk costs to drop throughout the year we reckon that consensus net profit 2010 (EUR 942 mn, Bloomberg) will go up. We also have to adjust our forecast and will raise our price target. There will be a conference call at 9.00 (CET also available on the web).

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