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Erste Group CEO: European banks face better outlook in 2015

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[May 21, 2014]  VIENNA (Reuters) Business conditions for European banks could improve sharply in 2015 after a series of regulatory issues are resolved in the next six months, Erste Group Bank Chief Executive Andreas Treichl told shareholders on Wednesday.

He also said the Austrian lender intended eventually to boost its dividend payouts back to levels of the boom years before the financial crisis, although he gave no clear indication of how long it would take for this to happen.

Treichl reiterated Erste's 2014 forecast for steady operating profit and stable lending while risk costs - impairment charges and provisions for bad loans - fall as much as 5 percent.

It was too early to give an outlook for 2015, he said at the annual shareholders meeting, but added: "When many things are cleared up there is certainly a chance that 2015 will look significantly better than 2014. We will get the answers only in six months, and we don't want to make any clear comments until then."

By then major banks in the euro zone will have gone through a health check of their balance sheets, a process that Treichl complained seemed slanted against lenders like Erste, the third-biggest lender in central and eastern Europe.

He questioned, for instance, why supervisors assumed for its stress test scenario that the economies of core CEE countries would contract a cumulative 5 percent on average from 2014 to 2016, more than in countries like Greece or Italy.

The assumption would be the subject of intense discussions in the weeks ahead, he said.

Sluggish consumer and investment demand from Erste's core clients in the region prompted its subdued outlook for 2014 and made it hard for Erste to earn its cost of capital, a short-term goal that Treichl said would not be met this year.

Shareholders were voting on Erste' proposed halving of its dividend to 0.20 euros per share, but Treichl held out prospects for clearly better payouts in the years ahead.

"We no longer have to plan giant expansion. We are in the region we want to be in," he said while repeating Erste's mid-term strategy to establish itself in Poland. "I don't know if this will happen or 2018 or 2020 or earlier," he said.

Erste paid a peak dividend of 0.75 euro for its 2007 business year.

(Reporting by Michael Shields; Editing by Pravin Char)

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