Net profit at Austrian lender Erste Group more than doubled in the second quarter, helped by a one-off gain from selling shares in VISA Europe and improved business conditions in markets in eastern Europe.
The bank said on Friday it was making preparations to pay an annual dividend of up to 1.10 euros ($1.23) a share, more than twice the 2015 level, and its shares rose 3.4 percent after its results to 23.705 euros.
It will not announce the exact payout to shareholders until its next set of results at the earliest, it said.
Erste was among the dozen worst-performing banks in a recent stress test of 51 major European lenders, in terms of core capital left under an adverse scenario.
However, the Austrian bank’s capital as measured by the common equity tier 1 (CET 1) standard is well above regulatory requirements and analysts at Credit Suisse said the lender had room to offer a generous dividend.
“We think the bank’s strong capital allows higher dividends,” they said in a note.
Erste said the size of its dividend would depend on whether banking supervisors raise the minimum level of capital reserves it is required to hold. However, it said conversations with the European Central Bank suggested that level would remain roughly the same.
“What we are currently hearing from the ECB and our supervisor is that there will be no significant additional capital requirements,” Chief Executive Andreas Treichl told a news conference.
“What I do think is that they will make even more adjustments in the calculation of risk-weighted assets,” he added, arguing that the stress test was particularly harsh for the two Austrian banks subjected to it.
Erste said on Friday that its fully loaded CET 1 ratio, a measure of financial strength, had risen to 12.7 percent at the end of June from 12.0 percent at the end of last year, the point on which the stress test was based.
Net profit rose to 567 million euros in the three months through June, from 261.4 million a year ago and slightly above the bank’s forecast last month of roughly 560 million euros.
The sale of its shares in VISA Europe contributed 120 million euros to net profit, it said. It also recovered funds from loans already written off in Romania and Hungary, which helped turn its net impairment loss entry positive, to 30.6 million euros.
Erste’s non-performing loans ratio also improved to 5.8 percent, the lowest level since June 2009, after it sold 846 million euros in bad loans, mainly in Romania, and economic growth picked up in many of its markets.
Shares of several major banks including Erste suffered after the European stress test results were published a week ago. ($1 = 0.8964 euros) (Reporting by Francois Murphy; Editing by Alexander Smith and Susan Fenton).
