Austria's Erste Bank cuts guidance, shares drop

By Sylvia Westall

VIENNA (Reuters) - Austria's Erste Bank warned profit growth would fall well short of previous expectations this year as financial market turbulence hits its trading result and some of the securities in its portfolio, sending its shares lower.

Erste Group Bank AG (ERST.VI), the second-biggest lender in emerging European markets after Italy's UniCredit SpA (CRDI.MI), expects a "slight rise" in 2008 net profit, excluding the sale of its insurance unit, a spokesman said.

The group had originally said net profit growth would be around 20 percent.

Erste shares were down 11 percent at 29.20 euros at 0826 GMT, underperforming the Austrian stock market's .ATX 7.6 percent fall and a 5 percent drop in European banks .SX7P. The stock fell as low as 29.05 euros, its lowest since June 2004.

"The cut in 2008 guidance is negative ... for Erste, as well as for Raiffeisen (RIBH.VI) and OTP OTPB.BU as these banks operate in the same markets," analysts at brokerage Wood said in a note.

Raiffeisen (RIBH.VI) confirmed its full-year outlook and mid-term outlook, but its shares slumped 12.6 percent to 39.55 euros. OTP was down 4.6 percent at 5,350 forints.

Analysts said they were looking to see whether Erste's 2009 guidance would also be changed when the company reports results later this month.

Erste said operating growth is expected to increase by about 15 percent in 2008, led by its retail business in central and eastern Europe. Analysts said they had been expecting around 23 percent growth.