Erste stays cautious as Ukraine crisis casts shadow over CEE recovery.

Austria’s Erste Group Bank stuck to its forecast for flat operating profit this year, saying the crisis engulfing Ukraine could still derail an improving economic outlook in its main central and eastern European (CEE) markets.

Erste sold its Ukrainian unit last year, but is concerned that disruption to energy flows from Russia – which is accused of destabilising Ukraine by the West and faces sanctions – would hit economies in the region hard.

It said on Wednesday it would keep its forecast for 2014 operating profit of about 3.1 billion euros ($4.3 billion), despite improving clarity about European Central Bank health checks of the banking industry – which it cited in February as a reason for a conservative outlook.

“As some things clear up, other things are unfolding so we don’t see a reason to change our guidance,” Chief Risk Officer Andreas Gottschling said on a conference call after the bank posted a 4 percent drop in first-quarter operating profit.

Excluding the effects of the Ukraine crisis, Erste said its view of the markets where it operates outside Austria – the Czech Republic, Slovakia, Romania, Hungary and Croatia – was improving.

“We anticipate slightly stronger growth in our region than we had initially anticipated,” Chief Executive Andreas Treichl said on the call.

Erste shares were barely changed at 24.42 euros at 1010 GMT, outperforming the European banking index, which was 0.6 percent lower.

Erste’s bigger rivals in central and eastern Europe, UniCredit’s Bank Austria and Raiffeisen Bank International, have said they would also like to sell their Ukrainian units when the market allows.

RBI said last month its ability to meet previous targets for lending and risk provisioning depended on how events in Russia and Ukraine played out. Russia is its single most important market.

Erste’s first-quarter operating profit fell 4 percent to 727 million euros, missing all the estimates in the Reuters poll of analysts, which averaged 760 million euros.

It also posted a 42 percent drop in net profit to 103 million euros, blaming subdued loan demand, persistently low interest rates and unfavourable currency exchange rates. However, that was less steep than expected.

It was helped by a 2 percent fall in risk provisions to 364 million euros, versus expectations of a rise to 435 million, which Gottschling said was mainly due to one major commercial property in the Czech Republic.

“We expect a lower level of provisioning for commercial real estate for this year. Whether it’s going to stay as low as it was in the first quarter, there’s no way of telling,” he said.

Source Reuters

Brewer Lobkowicz plans IPO in Czech, Austrian markets.

Czech brewer Lobkowicz plans to list its shares in the Czech Republic and Austria in an initial public offering (IPO), the company said on Monday.

Lobkowicz said it had named Erste Group Bank as the lead manager of the IPO, which could also include a private placement.

The brewer reported a 2 percent rise in revenues to 1.32 billion Czech crowns ($66.6 million) in 2013.

Source Reuters

Czech leader sees third sales tax rate next year.

The Czech government may cut sales tax on medicine to 10 percent next year, but government spending plans are likely to rule out changes in other tax rates, Prime Minister Bohuslav Sobotka said on Wednesday.

The three-party ruling coalition, led by Sobotka’s Social Democrats, agreed when it came to power earlier this year to create a third value-added tax rate, to make medicines and books cheaper, some time in the future. Medicines and books are now taxed at the lowest rate, 15 percent.

The Finance Ministry has put together a draft EU-convergence report that envisages a third VAT rate from 2015 and cuts the current 15 and 21 percent rates one percentage point from 2016.

Sobotka said on Wednesday a third VAT rate is possible next year, but lowering the top two rates would be difficult, because the government plans raise pensions and increase infrastructure investments next year.

“In the context of those priorities, I see the 10 percent VAT rate for drugs as a decent and reasonable compromise. It is an acceptable compromise for the Social Democrats,” Sobotka said after a weekly cabinet meeting.

The government has pledged to keep its budget deficit below the EU limit, 3 percent of economic output, but it has backed away from the deficit-cutting plans of the previous government, to help an economy still recovering from recession.

The plan for a third, lower sales tax rate was agreed in the government programme, but the cut in current rates was only included in the Finance Ministry’s convergence programme, a document analysing the economic outlook that is sent to the European Union’s executive.

“Any change in other rates (besides a lower VAT on drugs) is not part of the coalition programme, it is not agreed in the coalition and it would have a budget impact that the Czech Republic can hardly afford in the nearest term,” Sobotka said.

The Finance Ministry calculated lowering both VAT rates would cost 16.3 billion crowns ($820.40 million)in 2016. ($1 = 19.8684 Czech Crowns)

Source Reuters

Czech Republic – Factors To Watch on April 15.

Here are news stories, press
reports and events to watch which may affect Czech financial
markets on Tuesday. 

    ALL TIMES GMT (Czech Republic: GMT + 1 hours) 
ECONOMIC DATA
Real-time economic data releases................... 
Previous stories on Czech data............ 
Overview of economic data and forecasts......... 
Updates on CEE currencies........................... 

NEWS

NUCLEAR: The Czech Republic wants to continue expanding
nuclear energy capacity despite cancelling a tender to build two
new units and believes the European Union should be more
supportive of atomic power, Industry Minister Jan Mladek said on
Monday.
Story: Related news: 

REFINERIES: Polish oil firm PKN Orlen PKN.WA is in talks to
buy Italian firm Eni's ENI.MI stake in the Czech Republic's sole
refiner, the Czech industry minister said, a step that could
lead to more investment and help secure its future.
Story: Related news: 

INTERVENTIONS: The Czech central bank will probably keep its
commitment to keep the crown exchange rate weak in place longer
than until beginning of the next year, the bank's board member
said on Monday. 
Story: Related news: 

MINING: The Czech Finance Ministry plans to make changes to
the fee system for miners of brown coal and other commodities to
boost budget revenue, it said on Monday.
Story: Related news: 

CEE MARKETS: Central European financial assets were pulled
down by tension in Ukraine on Monday, although demand for the
region's assets kept the declines modest.
Story: Related news: 

CEE POWER: Central European day-ahead power rose on Monday
with import capacity cuts in the region limiting supplies
flowing south, boosting Hungarian and Slovak spot prices above
those of the Czech Republic, traders said.
Story: Related news: 
---------------------- MARKET SNAPSHOT ------------------------
 Index/Crown Currency Latest Prev Pct change Pct change
                                    close on day in 2014
 vs Euro 27.455 27.448 -0.03 -0.45
 vs Dollar 19.858 19.869 0.06 0.04
 Czech Equities 993.95 993.95 0.13 0.5
 U.S. Equities 16,173.24 16,026.75 0.91 -2.43
 Pvs close or current levels vs prior domestic close at 1500 GMT

PRESS DIGEST 
CZECH ON-LINE COMPANIES JOIN COMPLAINT AGAINST GOOGLE
Czech on-line companies will join a European Commission
probe into Google's search which they claim favors its
own services, especially price comparing aggregators.
Hospodarske Noviny, page 1

Source Reuters

Slovakia ready to take steps for reverse gas flows to Ukraine.

Slovak Prime Minister Robert Fico said the country was ready to take steps to enable reverse gas flows to Ukraine if its eastern neighbor meets financial obligations and contracts on Russian gas supplies to Slovakia.

The Slovak government office said on Wednesday Fico made the comments in a phone call with U.S. Vice-President Joe Biden.

“Prime Minister Robert Fico confirmed Slovakia is ready to take all relevant steps on the condition that the Ukrainian side meets its financial obligations and fulfils the contractual base securing supplies of natural gas from the Russian Federation to Slovakia,” the government office said in a statement.

Source Reuters

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