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The YTD derating looks excessive. We upgrade to Outperform Last Friday Erste reported what we viewed as a solid set of results. Yet the stock fell by 4% bringing the total YTD underperformance vs the sector to c.25%. This is in spite of negligible direct exposure to Russia and an increase in our adj. EPS estimates for 2022-23e of respectively 11% and 7% so far this year (+9% today). Our 2022-23e net income estimates are now 15% and 12% above VA (pre-results) consensus, primarily on far higher NII. Trading at a 2022e P/TBV of c.0.8x for an average ROTE in 2022-24e of 12.5%, valuation is attractive (13.6% average ROTE if all excess capital is paid out). Our new EUR44 PT is now net of the EUR1.6 DPS to be paid on May 25 (c.6.5% yield). Risks are overstated Erste''s underperformance is in our view primarily due to concerns about contagion risks from the Russia-Ukraine war to the CEE region. A macro slowdown is certain but, according to the IMF, the 2022 GDP slowdown in CEE will not be dissimilar to that experienced in WE. Conversely CEE is expected see a stronger rebound relative to WE in 2023. Guidance of a cost of risk in 2022 20bps is in our view realistic (9bps in 2021; 13bps in Q122). Erste''s 2.3% gross NPE ratio is the lowest since 1997 and on our calculations the bank can absorb an increase in its gross NPE ratio of 0.7ppt at zero cost by reallocating c.EUR700m of ''excess'' Stage1+2 provisions accumulated in the past 2 years. NII guidance appears very conservative Management guides for an ''at least high-single digit growth'' in NII in 2022 (+19% y/y in Q122) and for ''mid-single-digit'' lending growth (+2.8% YTD in Q1). On our estimates NII will grow by +13.9% y/y and lending by 5.5%. The targets of ''mid-single digit'' y/y growth in fee income and of a cost/income below 55% are in our view realistic (we estimate +4.8% y/y and 54.1% respectively). Excess capital = medium term upside risks to EPS Despite progressive dividends, Erste''s FL CT1...
Erste Group Bank AG Erste Group Bank AG
Waiting for CaixaBank''s exit We downgraded the stock to Neutral 3 weeks ago on valuation grounds. Erste''s Q3 results were strong and will in our view lead to further EPS upgrades by consensus. Additionally, management appeared more open to the possibility of returning a portion of the excess capital via a share buy-back in 2022. Notwithstanding these points, we believe that the overhang risks associated with a possible market placement of a portion of CaixaBank''s 9.9% stake will limit the rerating of the stock in the near future. Among Austrian banks we reiterate a preference for Raiffeisen which is in our view cheaper and exposed to similar tailwinds with regards to a) rising rates, b) strong lending growth, c) accelerating transaction fees and d) a benign credit environment. Our new TP of EUR42 now excludes the EUR1 special dividend to be paid in the coming weeks. Increasing estimates. c.12% ROTE in 2022e and 2023e We increase our adj. EPS estimates for 2021-22e by 9% and 2023e by 6%. Stronger lending growth results in higher NII. The robust growth in fee income reported in 9M 21 looks to us sustainable and we now expect the bank to clearly exceed its 2024 target of EUR2.4bn already in 2023e. Cost of risk in 2021-22e should benefit from the reversal of covid provisions and we expect it to remain below the 30bps normalised level also in 2023e. The prospects of a share buy-back in 2022 have increased Although management remains on the lookout for possible bolt on acquisitions, it seemed to us more open to return some of the excess capital to shareholders via an extraordinary buy-back should MandA options not materialise quickly. In light of CaixaBank''s planned exit, a buy-back would also have the added benefit of potentially increasing the proportion of share capital owned by the remaining members of the shareholders pact (at present they jointly own 21.3%). We estimate a FL CT1 ratio of c.14.4% in 2021e resulting in c.EUR1.1bn of excess...
Visible outperformance fuelled by rate hikes Erste and RBI have outperformed the sector by 15% and 14% respectively in the past 3 months (+17% and +6% respectively YTD). Besides favourable macro conditions which have supported loan growth (+3.7% in H1 21 for both) and kept provisions low (cost of risk of 10bps and 24bps respectively in H1 21), the material rerating of Austrian banks in the past few months was in our view primarily driven by the tightening of monetary policy in several CEE countries. In this note we upgrade our earnings estimates further. Our 2022e net income estimates are now 8% and 18% above consensus for Erste and RBI respectively (5% and 17% above for 2023e). Erste Bank. Downgrade to Neutral on valuation grounds Erste has been one of our top picks in the sector since May. However, at c.1.2x 2021e TBV for a 2022-23e ROTE of 11.3-4% it has now reached fair value in a sector context. In our view the strong operating momentum and the likely further tightening of monetary policy in some of the countries where the bank operates are well understood by market participants and already adequately reflected in the valuation multiples. We note that our estimates already embed a cost of risk of 27bps in 2022-23e (below management guidance of a normalised cost of risk of 30bps) and further rate hikes in Q4 21 and 2022. With a FL CT1 ratio of 13.9-14% in the forecast period excess capital is also not particularly large. Raiffeisen. Valuation remains disconnected from fundamentals RBI trades on a 2021e P/TBV of c.0.7x for a 2022-23e ROTE of 9.7-10% (10.7%-10.9% excluding provisions on CHF mortgages). The stock has had a good run in the past few month, but in our view remains significantly undervalued (30% P/E discount vs the sector). In our view the positive operating momentum underpinned by rate rises and strong macro far outweigh the risks associated with the timing and magnitude of future losses on Polish CHF loans. Additionally,...
EBS RBI 0MJK 0NXR
Still a top pick in Europe Erste has strong solvency (FL CT1 ratio of c.13.9% over the forecast period) and good asset quality (gross NPE ratio of 2.5% with c.54% coverage in H1 21), which allow for a steady dividend flow. At the current price we expect an average dividend yield of 6.2% in 2021-23e (including a special DPS of EUR1 in Q4 21). While these are common characteristics of many European banks, Erste stands out from the pack with regards to prospective profitability (c.11% ROTE in 2021-23e) and revenue growth (4.3% CAGR in 2020-23e vs 2% for the sector). Increasing our estimates further - we stay ahead of consensus Following Q2 results we increase our 2021-22-23e adj. EPS estimates by respectively 11%, 2% and 4% due to a combination of higher fees, lower provisions, lower costs and a lower tax rate. In the past 2 months we have increased our 2022e and 2023e adj. EPS estimates by 31% and 24% respectively and are currently over 13% and 11% above consensus respectively. Still too cheap Erste has outperformed the sector by 11% in the past 3 months. Yet it still trades at a small P/E discount despite a best-in-class balance sheet, a structurally higher profitability due to its presence in CEE, very good earnings visibility and strong momentum. We trim our TP marginally from EUR40 to EUR39.5 on lower prospective solvency.
Increasing estimates further We increase our 2021-22-23e adj. EPS estimates by 14%, 8% and 4% respectively. The bulk of the upgrade is driven by lower provisions, but we also make further upward adjustments to both NII and fee income. As we see no sign of asset quality deterioration in the countries where Erste operates, we now expect cost of risk to normalise as soon as 2021e (36bps) with a further downwards trend in 2022e (33bps) and in 2023e (31bps). Management guides for a ''normalised'' cost of risk at the low end of a 30-50bps range. We expect the cost of risk guidance of 65bps for 2021 to be visibly improved when the bank reports Q2 results at the end of the month. As inflation trends are above central banks'' tolerance ranges, we expect further rate hikes in Hungary and the Czech Republic before year-end. Commission income should continue to grow on AUM inflows and higher transaction related fees as for all European banks. We have increased our 2022e adj. EPS by a cumulative 22% over the past 3 months. Our 2022/23e adj. EPS estimates are now 13% and 9% above consensus respectively. Recent underperformance unjustified Erste underperformed the bank''s index by 3% in the past month (4% outperformance over 3 months). In the past few months, bank stocks have primarily been used as proxies to enact or unwind ''reflation trade strategies''. In light of its liquidity (EUR24m average daily trading volume in the past 3M), Erste is seldomly traded that way, which results in lower share price volatility. Higher NII on the back of higher short-term rates is already a reality at Erste, whilst is in our view a long way away for Western European banks. A conviction Outperform Erste remains one of our top picks in Europe. On our revised estimates the stock trades at a small P/E discount vs the sector (3-5%). This is despite a structurally higher ROTE (11% in 2023e), a FL CT1 ratio of c.14.5% over the forecast period and strong asset quality metrics....
The rate hike cycle is about to kick-off Yesterday the deputy governor of the Central bank of Hungary indicated that preparation for a benchmark rate hike to deal with sustained inflation risks has started and that this could happen as soon as June. As inflation as shifted up a gear in April in all CEE countries (y/y growth rates: Hungary +5.1%, Romania +3.2%, Czech Republic +3.1%, Serbia +2.8%) and CEE currencies are to a degree interconnected, we believe it is only a matter of time before other central banks will follow suit The prospect of a rate hike in the Czech republic as soon as August has in our view materially increased. Increasing estimates further We already increased our EPS estimates considerably on May 3rd, following the publication of a Q1 results. We also upgraded the stock to Outperform and Erste is now one of our top picks in Europe, alongside ISP, CredAg, BBVA and Barclays. ERSTE BANK: Shifting gears. Upgrade to Outperform Today we increase our EPS estimates by a further 2-4% to capture a more widespread and steeper rate hiking cycle across all non-Eurozone/Eurozone linked markets. Our 2022-23e adj. EPS estimates are now 8% above consensus, primarily on higher NII. Profitable, well capitalised and predictable On our revised estimates Erste trades at a relatively small P/E discount vs the sector (4-5%). This is despite a structurally higher ROTE (10.8% in 2023e), a FL CT1 ratio in excess of 14% over the forecast period and strong asset quality metrics. Additional upside could come from small cash funded bolt-on acquisitions which the bank is openly exploring. These should be EPS accretive due to cost synergies and not threaten dividend distributions (assuming a 45% average pay-out ratio in 2021-23e Erste has c.EUR1bn of excess capital). Our EUR37 price target (from EUR35.5) no longer includes the EUR0.50 DPS to be paid at the end of May.
A sizeable increase in EPS estimates post Q1 results We increase our adj. EPS estimates for 2021-22-23e by respectively 30%, 18% and 16%. We now estimate significantly higher NII and fee income (CAGR 2020-23e of 3.4% and 4.7%) and a visibly lower cost of risk (50-40-34 bps in 2021-22-23e). On our estimates Erste will generate an average ROTE of 10.2% in 2022-23e. Our revised estimates are c.10% above consensus for 2022-23e. 2021 outlook unchanged, but meaningful positive revisions are coming Erste did not change its outlook statement for 2021, pointing to flattish NII growth, mid-single-digit fee income growth, higher trading income and cost growth below revenue growth. Management however highlighted upside risks vis-a-vis fee income and stated that the bank is on track to achieve a cost of risk at the lower end of the 30-50bps range ''soon''. We estimate a 7.6% y/y growth in fee-income as AM inflows are likely to continue and payment fees will pick-up when restrictions are lifted. EUR660m of covid provisions booked 2020 (macro scenario + overlays) appear excessive since moratoria have largely expired with c99% of customers resuming payments. Q1 operating costs fell by 2.7% y/y net of deposit insurance which in 2020 was not upfronted in full. Since loan growth remains healthy we expect Erste to book the 0.5% TLTRO kicker in Q2 and Q4 (we estimate EUR108m in 2021e and EUR45m in 2022e). NII should thus grow by 1.9% y/y without any benefit from a possible rate hike in CZ (25bps = EUR25m). Profitable, well capitalised and predictable On our revised estimates Erste trades at a 5% P/E discount vs the sector. This is despite a structurally higher ROTE, a FL CT1 ratio in excess of 14% over the forecast period and exposure to countries which are likely to raise rates well before the ECB. Small cash funded bolt-on acquisitions (management is currently looking at Commerzbank Hungary and Sberbank Europe) should be EPS accretive due to cost synergies and...
Strong but not special Erste''s prospective profitability is good (8.3% and 9.3% ROTE respectively in 2022e and 2023e), solvency is strong (FL CT1 ratio ranging between 13.9% and 14.2% over the forecast period) and asset quality deterioration is likely to remain contained. But these reassuring traits are already well reflected in the bank''s 13% P/E premium vs the sector in 2022e in our view. We downgraded Erste to Neutral just over a month ago on valuation grounds and our view has not changed post Q4. A possible interest rate hike in CZ looks already reflected in consensus estimates and the upside risk related to an earlier normalisation of cost of risk is not company specific. Consensus estimates are already consistent with the 2021 outlook Management guides for a low to mid-single digit lending growth and for flattish NII. Fee-income growth is expected to be a low single digit percentage and trading income should be higher. Cost growth should be below revenue growth and land at around the 2019 level. Cost of risk is confirmed at below 65bps. Our estimates are broadly unchanged with higher revenues and lower LLP offset by higher costs, a slightly higher tax rate and higher coupons on AT1 bonds (EUR148m in 2020). Asset quality deterioration is contained Due to proactive UTP classifications the gross NPE ratio increased from 2.4% to 2.7% q/q with a 4.3ppt decline in stage 3 coverage to 54.1%. Management guides for a 3-4% gross NPE ratio in 2021 and for a further decline in coverage. Only 2.9% of loans remain under moratoria and other forbearance measures vs 7.6% in Q3 20 and 10.9% in Q2 20. The post moratoria default rate is just 1% with the caveat that the moratoria expired only very recently in most countries. Dividend yield is on par with the sector average Erste will pay a EUR0.50 DPS in June and an additional EUR1 will be distributed if/when ECB restrictions are lifted. We model a small DPS increase over the forecast period...
Downgrade to Neutral on valuation grounds Since the beginning of the pandemic we have been of the view that Erste had the right characteristics to outperform in an uncertain macro environment: solid capital, strong asset quality and profitability structurally above the sector average. None of these features have changed. However, having outperformed the sector by 12% in the past 3 months, the stock is now trading at a non-negligible P/E premium (2022e P/E of 9.3x vs 8.1x for the sector) despite a) a similar earnings trajectory in the next two years and b) a comparable amount of excess capital. We downgrade to Neutral but increase our TP to EUR30 on a roll-forward of our valuation to 2023e. CEE/Austria lockdown measures and macro prospects are not dissimilar to those in WE... In 2020 most CEE countries as well as Austria rolled back restrictions after the first wave of the Covid pandemic relatively quickly, containing 2020e GDP contractions. However, as the second wave is affecting the region much more, restrictions similar to those reintroduced in Western Europe have been in place since October in most countries. Similar levels of restrictions will likely result in a pace of macro recovery in CEE and in Austria in 2021-22 not dissimilar to that of WE. ...leading to a very similar earnings recovery trajectory On our estimates Erste''s PPP will grow by c.6.5% between 2020e and 2022e with the cost of risk declining from 79bps to 47bps. Although with a different mix (lower revenues, but also lower costs), we estimate almost the exact same numbers for the sector as a whole. Over the period Erste''s ROTE should increase by 3.1ppt to 8.2% vs a 3.4ppt improvement to 7.4% for the sector. Ample excess capital, but on par with that of many other banks As dividend restrictions have been extended, we believe the 2019 DPS of EUR0.75 won''t be paid on Feb 15. The 2020e DPS payable in May is capped at 20bps of CT1 capital, equal to EUR0.55-0.60 per...
Erste Group Bank AG
A stock to own in an uncertain world We remain of the view that Erste has the right characteristics to outperform in the current volatile macro environment. Capital ratios are very strong, prospective profitability is well above the sector average and asset quality shows no sign of deterioration. Following Q3 results, we increase our adj. EPS forecasts for 2021e and 2022e by 6% and 8% respectively, primarily on higher NII. We reiterate our Outperform rating and increase our TP to EUR27 (from EUR25). Oozing Capital Solid solvency is in our view a pre-condition to resume distributions if and when the dividend ban is lifted. We estimate a FL CT1 ratio of 14.2-14.3% in the next few years despite factoring in a 50bps cumulative drag from procyclicality. The AGM next week is called to approve the distribution of a EUR0.75 DPS for 2019 next February, conditional on the removal of the dividend ban. We expect the same amount also for 2020 (EUR0.32 already accrued in H1). At the current share price this is equal to a combined 8.5% dividend yield. Profitability is structurally well above the sector average On our estimates, Erste will deliver a ROTE in 2021e and in 2022e of 6.6% and 8.5% (vs 5.4% and 7.3% for the sector respectively). Interest rates in CEE remain positive, lending volumes continue to grow and tax rates in the region are comparatively low. Additionally, the pandemic has curbed wage inflation and removed certain bank levies (in Slovakia and Romania). Reassuring asset quality datapoints Similar to most banks, Erste''s NPEs remain broadly stable (-EUR159m YTD). The gross NPE ratio still stands at 2.4% with 59% coverage. Importantly, only 7.6% of performing loans are under moratoria or other forbearance measures vs 10.9% in Q1 20 (-EUR5.2bn q/q). Excluding Hungary and Serbia, which have opt-out moratoria schemes, the percentage falls to 6.2%. We also point out that, apart from the Czech Republic, COVID 19 restrictions in CEE (and in...
• Net profit decreased by 30% to €343m for Q3 20 compared to Q3 19 • Loan loss provisions increased from €0m in Q3 19 to expenses of €195m for Q3 20 due to COVID-19 • Erste confirmed estimated risk cost in the range of 65bp to 80bp for FY2020
Our estimates were too high... Following Q2 20 results we reduce our adj. EPS estimates for 2020/21/22e by respectively 16%, 19% and 12% primarily on lower NII and a higher tax rate. Nonetheless we reiterate our Outperform rating and EUR26 target price (higher solvency and a 1ppt reduction in the cost of equity offset lower earnings). ...but management NII guidance is too conservative For 2020 vs 2019 Erste guides for flattish underlying net loans, a slight NII, a mid-single digit fall in fee income, lower operating costs and a 65-80bps cost of risk. We are aligned with the upper-end of the cost of risk guidance and see operating costs declining by c1% y/y. We are however more optimistic on revenues. In our view NII will marginally increase y/y as: a) stated volume growth will be significantly higher than ''flattish underlying net loans'' due to positive FX tailwinds (CZ and HU), additional government guaranteed lending and the likely extension of the moratoria in some countries and b) Q2 included a negative one-off of EUR26m in relation to contract modifications (primarily linked to the moratoria) which is unlikely to occur in the same extent in future quarters. Asset quality. So far so good. Only c.10% of loans benefit from COVID 19 forbearance The gross NPE ratio was stable q/q to 2.4% and coverage of stage 3 loans increased by c1ppt to 57.7%. Loans under moratoria stand at 9%, or 7% excluding Hungary and Serbia where participation rates are very high due to the opt-out nature of the measure. A further c.2% of loans benefits from other COVID 19 forbearance measures. Somewhat surprisingly only c.EUR0.6bn of government guaranteed loans have been granted, c0.5% of total loans (71% average guarantee). Excess capital is building Erste''s Q2 FL CT1 ratio stood at 14.2%. On our estimate it will remain above 14% throughout the forecast period. With the dividend ban extended to Jan 2021 we remove the payment of the 2019 dividend, but now model a...
• Loan loss provisions increased from releases of €7m in Q2 19 to expenses of €614m for Q2 20 due to COVID-19 • Net profit decreased by 84% to €59m for Q2 20 • Erste now estimates risk cost in the range of 65bp to 80bp for FY2020
More resilient economies The COVID lockdown measures in many CEE countries (and in Austria) have been less pervasive relative to Western Europe. Most CEE countries have adopted similar support initiatives as in WE (though somewhat less comprehensive in the Balkans and in Eastern Europe) and prevailing economic forecasts point to shallower recessions. Many other factors are in play (e.g., oil price developments for Russia, tourism season for Croatia, car manufacturing prospects for central Europe), but on the whole we do not foresee an above average deterioration of asset quality in the region. Erste and RBI''s cost of risk guidance for 2020 is in our view realistic (respectively 50-80bps and 75bps) and we see 2021 at similar levels. More resilient banks As European banks'' earnings visibility will likely remain low for several quarters we believe pre-provisioning profit margins and solvency levels will remain the most important drivers of investment decisions within the sector for a while. Erste and RBI score well on both fronts. Average pre-provisioning profit margins in 2020e-2022e stand at respectively 1.89% (ex savings banks), and 2.18% compared to a sector average of c.1.6%. Both banks should maintain FL CT1 ratios above 13% over the forecast period and we estimate average 2020-2022e ROTEs of c.7.5-8%. The removal of the bank levy in Slovakia from 2021 leads to an EPS upgrade For Erste we also reduce NII as we incorporate recent rate cuts and shift some provisions from 2021 to 2020. For RBI we also reduce FX fees due to prolonged travel restrictions (they represent c.20% of commissions). Prospective solvency is higher than previous estimates due to a partial reversal of Q1 20 currency depreciations in several countries. We favour RBI, but both banks offer safe haven status RBI''s discount vs the sector (and vs Erste) should narrow. With earnings uncertainty everywhere we believe the overexposure of RBI to Russia (+Ukraine/Belarus)...
Erste Group Bank AG Raiffeisen Bank International AG
• Net profit attributable to shareholders decreased by 38% to €235m • Impairments on loans were €62m or 15bp for Q1 20 • Erste estimates risk cost in the range of 50bp to 80bp for FY2020
• Net profit attributable to shareholders decreased by 18% to €1.47bn for 2019 • Normalisation of loss allowances and the tax ratio in 2019 compared to 2018 • RoTE of 11.2% was in line with the FY2019 target of above 11%. The group confirmed its aim to achieve a return on tangible equity (RoTE) of more than 10% in 2020 • Dividend per share proposal increased to €1.50 for FY2019 compared to €1.40 for FY2018
• Net profit increased by 8% to €491m for Q3 19 compared to Q3 18 • RoE of 14.3% for Q3 was clearly above the FY2019 target of above 11% RoTE • The group confirmed its aim to achieve a return on tangible equity (RoTE) of more than 11% in 2019
• Net profit attributable to shareholders decreased by 19% to €355m, but above the consensus forecast of €328m • A provision of €151m for a court decision in Romania burdened Q2 19 • The group confirmed its aim to achieve a return on tangible equity (RoTE) of more than 11% in 2019
• Net profit attributable to shareholders increased by 12% to €377m, above the consensus forecast of €350m • Group confirmed its aim to achieve a return on tangible equity (RoTE) of more than 11% in 2019
Net profit attributable to shareholders increased by 25% to €454m for Q3 18 compared to Q3 17. Net interest income was up by 7% to €1.16bn for Q3 18 compared to Q3 17. Risk provisions for loan losses were a profit of €29m for Q3 18 compared to a profit of €33m for Q3 17. Operating income increased by 5% to €1.72bn in Q3 18 compared to Q3 17. General administrative expenses rose by 2% to €1.03bn for Q3 18. Other operating result decreased from a loss of €87m for Q3 17 to a loss of €32m for Q3 18. The expenses for bank levies rose €23m for Q3 17 to €25m for Q3 18. Pre-tax profit was up by 14% to €694m for Q3 18. The tax ratio declined from 23% for Q3 17 to 17% for Q3 18. RoE was 14.4% for Q3 18 compared to 11.7% for Q3 17. ROTE was 16.4% for Q3 18. The Basel 3 phase in Core tier 1 ratio was 12.5% at the end of September 2018 compared to 13.4% at year-end 2017. Erste Group upgraded the expected return on tangible equity (ROTE) of more than 10% to more than 12% in 2018. The underlying assumptions for 2018 are growing revenues (assuming 5%+ net loan growth and interest rate hikes in the Czech Republic and Romania) and flat expenses with risk costs remaining at historically low levels.
Net profit attributable to shareholders increased by 21% to €438m for Q2 18 compared to Q2 17. Net interest income was up by 4% to €1.13bn for Q2 18 compared to Q2 17. Risk provisions for loan losses rose from €39m for Q2 17 to a profit of €18m for Q2 18. Operating income increased by 3% to €1.72bn in Q2 18. General administrative expenses rose by 3% to €1.0bn for Q2 18. Other operating result declined slightly from a loss of €84m for Q2 17 to a loss of €77m for Q2 18. Pre-tax profit rose by 12% to €654m for Q2 18 compared to Q2 17. The tax ratio was down from 22% for Q2 17 to 18% for Q2 18. RoE was 12.8% for Q2 18 compared to 11.1% for Q2 17. RoTE was 14.6% for Q2 18. The Basel 3 phase in Core tier 1 ratio was 12.6% at the end of June 2018 compared to 13.4% at year-end 2017.
Net profit attributable to shareholders increased by 27% to €333m for Q1 18 compared to Q1 17. Net interest income was up by 3% to €1.08bn for Q1 18 compared to Q1 17. Risk provisions for loan losses rose from €66m for Q1 17 to a profit of €54m for Q1 18. Operating income rose by 2% to €1.65bn in Q1 18. General administrative expenses were up by 5% to €1.07bn for Q1 18 compared to Q1 17. Pre-tax profit increased by 19% to €517m for Q1 18. The tax ratio was unchanged at 22% for Q1 18 compared to Q1 17. The minorities share declined by 9% to €70m for Q1 18. RoE was 10.4% for Q1 18 compared to 8.7% for Q1 17. RoTE was 11.8% for Q1 18 compared to 9.8% for Q1 17. The Basel 3 phase in Core tier 1 ratio was 12.6% at the end of March 2018 compared to 13.4% at year-end 2017.
Preliminary net profit attributable to shares increased by 4% to €1.29bn(e) for FY2017 compared to FY2016. Net interest income was slightly down by 0.5% to €4.35bn for 2017 compared to 2016. Commission income rose by 4% to €1.85bn in 2017. Operating income was flat at €6.7bn for 2017. Risk provisions for loan losses dropped by 33% to €132m in 2017 compared to 2016. General administrative expenses increased by 3% to €4.16bn in 2017. Other operating result was a loss of €457m for 2017 compared to a loss €665m for 2016 as bank levies declined from €389m to €106m in the same period. Pre-tax profit was up by 7% to €2.08bn for 2017 compared to 2016. The tax ratio was 20% for 2017 after 21% for 2016. The Basel 3 phase-in Core Tier 1 was unchanged 13.4% at the end of 2017. Return on tangible equity (ROTE) was 11.5% and RoE 10.1% for 2017 compared to ROTE 12.3% and RoE 10.8% for 2016. The dividend proposal per share increased from €1.00 for FY2016 to €1.20 for FY2017.
Net profit attributable to shareholders increased by 8% to €363m for Q3 17 compared to Q3 16. Net interest income was down by 0.5% to €1.09bn for Q3 17 compared to Q3 16. Risk provisions for loan losses were a profit of €33m for Q3 17 compared to a loss of €37m in the same period last year. Operating income was unchanged at €1.64bn in Q3 17 compared to Q3 16. General administrative expenses rose by 3% to €1.0bn for Q3 17. Other operating result increased from a loss of €60m for Q3 16 to a loss of €87m for Q3 17. The expenses for bank levies declined from €44m for Q3 16 to €23m for Q3 17. Pre-tax profit was up by 8% to €609m for Q3 17. The tax ratio rose from 22.3% for Q3 16 to 23.3% for Q3 17. RoE was 11.7% for Q3 17 compared to 11.1% for Q3 16. ROTE was 13.2% for Q3 17. The Basel 3 phase-in Core tier 1 ratio was 12.8% at the end of September 2017 compared to 13.4% at year-end 2016. Erste Group confirmed an expected return on tangible equity (ROTE) of more than 10% in 2017 and aims to achieve a ROTE of more than 10% in 2018 (based on average tangible equity in 2018). The underlying assumptions for 2018 are flat to slightly growing revenues (assuming 5%+ net loan growth and interest rate hikes in the Czech Republic and Romania), currency-adjusted flat costs (± 1%) due to lower project-related costs and an increase in risk costs, albeit remaining at historically low levels.
Net profit attributable to shareholders decreased by 36% to €363m for Q2 17 compared to Q2 16. Net interest income was down by 1% to €1.09bn for Q2 17 compared to Q2 16. Risk provisions for loan losses were €39m for Q2 17 compared to a profit of €31m in the same period last year. Operating income declined by 1% to €1.68bn in Q2 17. General administrative expenses rose by 1% to €1.0bn for Q2 17. Other operating result increased from a loss of €53m for Q2 16 to a loss of €83m for Q2 17. Pre-tax profit decreased by 31% to €583m for Q2 17. The tax ratio rose from 21% for Q2 16 to 22% for Q2 17. RoE was 11.1% for Q2 17 compared to 19.7% for Q2 16. RoTE was 12.6% for Q2 17. The Basel 3 phase in Core tier 1 ratio was 13.2% at the end of June 2017 compared to 13.4% at year-end 2016.
Net profit attributable to shareholders decreased by 5% to €262m for Q1 17 compared to Q1 16. Net interest income was down by 4% to €1.05bn for Q1 17 compared to Q1 16. Risk provisions for loan losses rose by 17% to €66m in the same period. Operating income declined by 1% to €1.62bn in Q1 17. General administrative expenses rose by 1% to €1.0bn for Q1 17. Other operating result declined by 9% to a loss of €140m for Q1 17 due to lower bank levies. Pre-tax profit increased by 2% to €435m for Q1 17. The tax ratio declined from 24.5% for Q1 16 to 22% for Q1 17. RoE was 8.7% for Q1 17 compared to 9.8% for Q1 16. RoTE was 9.8% for Q1 17. The Basel 3 phase in Core tier 1 ratio was 13.0% at the end of March 2017 compared to 13.4% at year-end 2016.
Preliminary net profit attributable to shareholders increased by 31% to €1.26bn for FY2016 compared to FY2015. Net interest income was down by 2% to €4.37bn for 2016 compared to 2015. Commission income declined by 4% to €1.8bn in 2016. Operating income decreased slightly by 1% to €6.7bn for 2016. Risk provisions for loan losses dropped by 73% to €196m in 2016 compared to 2015. General administrative expenses increased by 4% to €4.0bn in 2016. Other operating result was a loss of €665m for 2016 compared to a loss of €636m for 2015. Pre-tax profit was up by 19% to €1.95bn for 2016 compared to 2015. The tax ratio was 21% for 2016 after 22% for 2015. The Basel 3 phase-in Core Tier 1 ratio improved from 12.3% for 2015 to 13.4% at the end of 2016. Return on tangible equity (ROTE) was 12.3% and RoE 10.8% for 2016 compared to ROTE 10.8% and RoE 9.3% for 2015. The dividend proposal per share doubled as guided from €0.50 for FY2015 to €1.00 for FY2016.
Net profit attributable to shareholders increased by 22% to €337m for Q3 16 compared to Q3 15. Net interest income was down by 4% to €1.07bn for Q3 16 compared to Q3 15. Risk provisions for loan losses were down by 74% to €37m in the same period. Operating income declined by 3% to €1.64bn in Q3 16. General administrative expenses rose by 3% to €983m for Q3 16. Other operating result was down from a loss of €177m for Q3 15 to a loss of €60m for Q3 16. Pre-tax profit rose by 29% to €562m for Q3 16. The tax ratio was slightly up from 20% for Q3 15 to 22% for Q3 16. The Basel 3 phase in Core tier 1 ratio was 13.2% at the end of Q3 16 compared to 12.3% at year-end 2015. Erste released very early a doubled dividend per share outlook of €1.00 for FY2016 compared to €0.5 for FY2015.
Erste Group announced yesterday that it expects to report Q2 16 net profit of about €560m, resulting in H1 16 net profit of about €830m. The Q2 16 performance was primarily driven by the releases of risk provisions of about €30m (mainly due to releases in Hungary and Romania and the declining risk costs in all other geographies), the P&L recognition of the VISA sale one-off with a pre-tax amount of about €139m and the significantly improved operating as well as other operating results vs Q1 16.
Net profit attributable to shareholders increased by 22% to €275m for Q1 16 compared to Q1 15. Net interest income was unchanged at €1.1bn for Q1 16 compared to Q1 15. Risk provisions for loan losses were down by 69% to €56m in the same period. Operating income declined by 4% to €1.63bn in Q1 16. General administrative expenses rose by 6% to €1.0bn for Q1 16. Other operating result was down from a loss of €154m for Q1 15 to a loss of €140m for Q1 16. Pre-tax profit came up by 3% to €427m for Q1 16. The tax ratio declined from 29% for Q1 15 to 25% for Q1 16. The Basel 3 phase in Core tier 1 ratio was 12.1% at the end of March 2016 compared to 12.3% at year-end 2015.
Preliminary net profit attributable to shareholders was €968m for FY2015 compared to a loss of €1.4bn for FY2014. Net interest income was down by 1% to €4.4bn for 2015 compared to 2014. Operating income decreased slightly by 1.5% to €6.8bn for 2015. Risk provisions for loan losses were down by 65% to €729m in 2015 compared to 2014. General administrative expenses increased by 2% to €3.9bn in 2015. Other operating result decreased from a loss of €1.75bn for 2014 to a loss of €636m for 2015. Pre-tax profit was €1.64bn for 2015 compared to a loss of €728m for 2014. The tax ratio was 26% for 2015. The Basel 3 phase-in Core Tier 1 ratio improved from 10.6% (2014) to 12.3% at the end of 2015. Return on tangible equity (ROTE) was 10.8% and RoE 9.3% for 2015. The dividend proposal per share is €0.50 for FY2015 compared to no dividend for FY2014. As a result of the 2015 Supervisory Review and Evaluation Process (SREP) performed by the European Central Bank (ECB), Erste Group on a consolidated level is required to meet a transitional Common Equity Tier 1 (CET1) ratio of 9.5% as of 1 January 2016. This minimum CET1 ratio of 9.5% includes Pillar 1, Pillar 2 and capital conservation buffer requirements. In addition, the systemic risk buffer required by the Austrian Financial Markets Authority (FMA) to be applied on top of the SREP ratio is equal to 0.25% for the group from 1 January 2016, resulting in a prudential capital requirement of 9.75%, relating to total risk, for Erste Group as of 1 January 2016. The systemic risk buffer will increase in the following years to 0.5% (2017), 1% (2018) and 2% (2019).
Net profit attributable to shareholders was €277m for Q3 15 compared to a loss of €554m for Q3 14. Net interest income was down by 1% to €1.1bn for Q3 15 compared to Q3 14. Operating income was flat at €1.7bn for Q3 15 compared to Q3 14. Risk provisions for loan losses were down by 84% to €144m in the same period mainly due to higher risk costs in Romania for Q3 14. General administrative expenses increased by 8% to €956m for Q3 15. Other operating result rose from a loss of €357m for Q3 14 to a loss of €177m for Q3 15. The Q3 14 figure included charges of €231m resulting from the Hungarian consumer loan law. Pre-tax profit was €437m for Q3 15 compared to a loss of €414m for Q3 14. The tax ratio was 20% for Q3 15. The Basel 3 phase-in Core tier 1 ratio was 11.5% at the end of September 2015 and was 11.2% on a pro-forma fully applied basis. Management lifted its return on tangible equity (ROTE) from a target range of 8-10% to around 10% for 2015. ROTE was 12.2% for Q3 15 and 11.5% for 9M 15. It also released a new ROTE target for FY2016 which is 10-11%.
Net profit attributable to shareholders was €261m for Q2 15 compared to a loss of €1.03bn for Q2 14 and a profit of €226m for Q1 15. Net interest income was flat at €1.1bn for Q2 15 compared to Q2 14. Operating income declined by 1% to €1.71bn for Q2 15 compared to Q2 14. Risk provisions for loan losses were down by 56% to €191m in the same period. General administrative expenses increased by 2% to €949m for Q2 15. Other operating result rose from a loss of €1.15bn for Q2 14 to a loss of €47m for Q2 15. The Q2 14 figure was burdened by a write-down of intangible assets for a total of €956m, mostly in Romania (€854m). Pre-tax profit was €549m for Q2 15 compared to a loss of €781m for Q2 14. The tax ratio was 28% for Q2 15. The Basel 3 phase in Core tier 1 ratio was 11.6% at the end of June 2015 and was 11.3% on a pro-forma fully applied basis. Management confirmed its return on tangible equity (ROTE) target range of 8-10% for 2015. ROTE was 11.8% for Q2 15 and 11.2% for H1 15.
