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Erste profit rises to record on eastward expansion - extended

Erste Bank AG, Austria's biggest bank, said profit in the Q4 rose 35%, helped by its expansion in Romania and higher income from trading.

Net income climbed 35% to a record €277 million ($366 million) from a year earlier, Vienna-based Erste said today. Full-year profit also rose to a record, boosted by the sale of Erste's stake in the Austrian builder Alpine Mayreder Bau GmbH. Erste, which serves more than 15 million customers from the Czech Republic to the Ukraine, is expanding as people in former communist countries borrow to buy cars, and homes for the first time. Erste in October completed the purchase of Banca Comerciala Romana SA, Romania's largest lender, for €3.75 billion. The BCR contribution from Romania „is the first sign of the additional potential created within our group as a result of this acquisition,” said Andreas Treichl, Erste's CEO. Bucharest-based BCR added €27.4 million to quarterly profit. Ceska Sporitelna AS, Erste's biggest foreign business by profit contribution, said net income grew 14% last year on higher demand for home loans. Erste's Prague-based unit is the second-largest bank in the Czech Republic. Erste's 2006 full-year net income rose 30% to €932.2 million, helped by the sale of its stake in the Salzburg builder. The bank plans to pay a dividend of 65 cents a share for 2006, 18% higher than a year earlier.

The Austrian lender's rivals in the region include Bank Austria Creditantstalt AG and Raiffeisen Zentralbank Oesterreich AG. Erste expects its expansion in Romania, the Ukraine and Croatia to help drive earnings this year, the bank said. The €277 million quarterly results beat the €232 million median estimate of nine analysts surveyed by Bloomberg. Trading income in the quarter rose 28% to €90 million. Loan-loss provisions increased 17% to €107.9 million. Erste shares fell 2.5% to €55.30 at 10:45 a.m. in Vienna as European stocks extended a two-day slump in global equities that started in China. Erste's shares have risen 8% in the past year. For 2007, Erste aims to boost profit by 25%. In 2008 and for 2009, net income is expected to grow at least 20%. (Bloomberg)