Net interest income rises to €7.53bn as Erste Group expands in CEE core markets

Overview

Erste Group delivered a solid financial performance in fiscal year 2024, reporting a net profit of €3.13bn, marking a 4.3% year-over-year increase. The results were driven by strong net interest income, robust fee and commission income, and an increase in operating income, offset by slightly higher provisioning and regulatory costs.

CEO Peter Bosik emphasized the need for proactive strategies, stating: “We need to release this mental handbrake and really step on the gas now. We believe that Eastern Europe is in a good position going forward for the coming fifty years.”

Q4 2024 vs. Q4 2023:

Net interest income increased to €1.94bn (+7.3% YoY), driven by higher loan volumes in CEE core markets.
Net fee and commission income was €780m (+11.1% YoY), supported by asset management and payment services.
Net trading result & fair value gains/losses declined to €79m (-38.75% YoY), reflecting valuation effects.
Operating income rose to €2.86bn (+5.9% YoY), fueled by growth in all key revenue lines.
Operating expenses also increased to €1.47bn (+9.3% YoY), mainly due to higher personnel and IT costs.
Net profit recorded a value of €609m (-11.5% YoY), due to higher provisioning and tax expenses.
Cost/Income ratio was 51.4%, slightly up from 49.8% in Q4 2023 due to increased investment in digital banking.
ROE declined to a value of 10.7% (compared to 13.7% in Q4 2023), but reflecting stable profitability in a challenging environment.

Full-Year 2024 highlights:

Net interest income was on an upward trend, reaching a value of €7.53bn (+4.2% YoY), driven by higher loan demand in Czech Republic, Romania, and Hungary.
Net fee and commission income rose to €2.94bn (+11.3% YoY), led by strong asset management growth.
Operating income reached to €11.18bn (+5.9% YoY), demonstrating business expansion across Erste’s seven core markets.
Operating expenses recorded a value of €5.28bn (+5.2% YoY), reflecting salary increases (+7.1% vs. 2023) and IT investments (+13.3% vs. 2023).
Net profit was €3.13bn (+4.3% YoY), supported by stable revenue growth and efficiency improvements.
Impairment result amounted (€397m), reflecting a higher provisioning ratio of 0.18%, primarily due to deteriorating asset quality in Austria.
Cost/Income ratio was 47.2%, slightly improved from 47.6% in 2023.
Loan/Deposit ratio was 90.2% (vs. 89.3% in 2023), maintaining a balanced funding position.
Common Equity Tier 1 (CET1) ratio was 15.1% (compared to 15.7% in 2023), ensuring strong capital adequacy.
Erste expanded its loan portfolio, with total customer loans reaching €218.1bn (+4.9% YoY).
Total assets increased to €353.7bn (+4.9% YoY), with customer deposits rose to €241.7bn (+3.8% YoY), driven by retail savings in the Czech Republic and Romania, offset weaker results in Austria and Slovakia.

For 2025, Erste Group aims for a 15% return on tangible equity (ROTE), supported by 5% loan growth, driven by expansion in both retail and corporate lending. The bank expects a stable operating result, with net interest income remaining flat and fee and commission income increasing by 5%. Operating expenses are projected to rise by 5%, while maintaining the cost/income ratio below 50%, ensuring continued efficiency. Risk costs are expected to increase slightly to 25 basis points of average customer loans, reflecting a stable credit risk environment. Additionally, Erste Group anticipates further strengthening its CET1 ratio, enabling flexibility in capital returns, including dividends and share buybacks, reinforcing shareholder value.

The day of the results report brought a slight decline for EBS shares on the Austrian stock exchange, their price falling by -6.75%, although the main results reported slightly exceeded analysts’ estimates. However, in the last year, Erste Group shares have maintained a constant upward trend, the stock price is currently higher by approximately +73% compared to the same period last year.