Erste Group significantly increases earnings thanks to acquisition in Poland

In January of this year, Erste Group completed its acquisition of Santander’s 49 percent stake in Poland. Since then, the integration of the new subsidiary into the group has been underway. “The effort was incredible,” said CEO Peter Bosek at the presentation of the half-year figures.

For example, it had been agreed with Santander that the rebranding had to be completed within a single weekend. “That was really intense.” Since that weekend in April, 28 percent of Poles now recognize the brand without prompting (78 percent with prompting). “We want to further increase brand visibility,” said Bosek. This also applies to IT; the switch to the Erste system “will keep us busy for another two years.”

306,000 new customers

But the acquisition has already paid off. Since the beginning of the year, 306,000 new private customers have been acquired. Operating profit, excluding the Polish subsidiary, rose by 12.7 percent year-on-year to €3.34 billion in the first half of the year; including the Polish subsidiary, it increased by 49.3 percent to €4.42 billion. Bosek is therefore considering increasing the stake in the Polish subsidiary.

The acquisition in Poland has also diversified the bank’s overall loan portfolio, said Chief Risk Officer Alexandra Habeler-Drabek. The Polish portfolio is very well balanced between corporate and private clients, and there is no overrepresentation of any single sector or region within any given industry.

This greater diversification results in a better overall risk profile for Erste Group. As a result of one-off effects from the integration of the Polish subsidiary, risk costs rose to €583 million. The default rate remained almost stable at 2.3 percent. In Austria, it declined slightly to 2.6 percent, and Habeler-Drabek is “cautiously optimistic” about future developments.

For CFO Stefan Dörfler, Poland is also a role model with regard to the capital market. “Poland is by far the most active market and has the largest stock exchange in the region.” Speaking of the stock exchange: Bosek would like to float 15 percent of the shares of the holding company ÖBAG on the stock exchange in order to buy back the 61 percent stake in A1 Telekom Austria currently held by America Movil. For Bosek, this would be to protect critical infrastructure (including against cyberattacks), since all three major telecommunications providers in the country are either not (Magenta, Drei) or only partially (A1) domestically owned. However, Bosek clarifies that he considers this renationalization necessary only for A1.

Hungary performs strongly

Loan volume increased by 22 percent across all markets to €283 billion, “a total volume we never dared to dream of,” said CFO Stefan Dörfler. The strongest growth, at 19 percent, was in Hungary. “Hungary gained positive momentum even before the election.” Things aren’t going so well in Romania, where loan volume declined by 2.7 percent. Bosek is convinced that a recovery will follow once the political turmoil in the country ends.

Given the overall positive figures, the group raised its outlook for the full year. It also aims to double its earnings per share by 2030.