Austrian bank Erste Group sought Thursday to dampen fears that it faces heavy losses in Eastern Europe as it reported a 26 percent fall in first-quarter net profit as provisions for bad loans increased.
The Vienna-based bank said its net profit in the quarter was 232.1 million euros ($310.4) compared with 315.6 million euros in the same period a year ago.
It said its risk costs — provisions made to account for the likelihood of more loan defaults — swelled 127 percent to 370.2 million euros in the first quarter in the increasingly difficult economic environment.
The result was better than expected and came despite mounting speculation that Austria's banks could see big casualties from the financial crisis gripping Eastern Europe.
Along with other European banks, Austria's financial institutions — including Erste — offered euro or Swiss-franc loans at low rates as countries like Poland and Hungary grew rapidly.
It was a good deal for banks and borrowers, until local currencies plunged and sent borrowers' repayments sky-high — raising fears of defaults and losses.
Erste said Thursday that, except for Ukraine, it was profitable during the first quarter in all Central and Eastern European markets where it has a presence.
These include the Czech Republic, Romania, Slovakia, Hungary, Croatia and Serbia.