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Erste books €22 mln loss in Hungary

Austria's Erste Group had a €21.8 million loss in Hungary in 2010 as the country's extraordinary bank levy ate up profits, Erste Group said in its annual report on Friday.

Erste had net income of €57.9 million in Hungary in 2009.

The bank levy, booked among other results, cost Erste €49.8 million in Hungary last year. But this year Erste expects the levy to take €35 million off the bottom line.

Net interest income of Erste's Hungarian retail and SME businesses improved, in part because of exchange rate changes, by 9.5% to €387.1 million. The rise was 7.4% if adjusted for the change in the exchange rate.

The forint lost 2.9% against the euro on the last day of 2010 compared to the last day of 2009, official exchange rate from the National Bank of Hungary show.

Net revenue from commissions climbed 13.6% to €97.8 million.

Operating costs fell 5.3% to €202.6 million as a result of staff cuts and lower spending on marketing and consulting. Erste's headcount in the country fell by 8.8% to 2,900 in the twelve months to December 10, 2010.

Erste's cost-to-income ratio in Hungary improved to 39.9% in 2010 from 45.6% in 2009.

Risk provisions rose a sharp 43.0% to €244.3 million, an increase that “reflected the economic contraction and exchange rate volatility”, the bank said.

Erste Group said Hungary should benefit from accelerating economic growth but added that risk costs in the country “are expected to remain elevated in 2011”.