(Adds more detail, analyst comment)
By Boris Groendahl
VIENNA, Oct 30 (Reuters) - Austria's Erste Bank <ERST.VI>, central Europe's second-biggest lender, posted a 34 percent rise in third-quarter net profit as gains in its Czech and Romanian units offset a loss in its treasury department.
Net profit after minorities in the quarter to September rose to 272 million euro ($392 million), Erste said in a statement on Tuesday -- broadly in line with estimates in a Reuters poll of 15 analysts which averaged 278 million euros.
Erste's growth hope Banca Comerciala Romana (BCR) expanded profits faster than analysts expected as it released risk provisions. Earnings at Czech arm Ceska Sporitelna, Erste's biggest unit in the former Communist bloc, rose 21 percent, regaining momentum after several quarters in the doldrums.
"We are particularly pleased with the quarterly contributions from Hungary, Croatia and especially the Czech Republic," said Chief Executive Andreas Treichl in a statement. "The results seen at BCR prove that we are on the right track."
But net profit of Erste's domestic business fell by a quarter as its treasury and investment banking department turned to a third-quarter loss due to the negative market environment.
Erste, which said it holds no subprime debt instruments, nevertheless wrote down its portfolio of asset-backed securities and collateralised debt obligations by 20 million euros in the quarter, and wrote off another 14 million euros on other paper.
After the first nine months of the year, net profit was up 26 percent, bringing Erste on track to make good on its promise to raise net profit by at least 25 percent this year.
"Despite a relatively weak trading result, the bank's underlying trends remain strong and overall growth rates high thanks mainly to BCR," brokerage Wood & Co. said in a note, adding that shares in Czech Komercni Banka <> might benefit from Erste's strong Czech results.
REVENUES, COSTS GROW
Interest income, Erste's main revenue source, rose 27 percent, in line with analyst estimates and driven by its Romanian, Czech, Slovak and Croatian franchises.
Loan-loss provisions dropped compared with the previous year and were much lower than forecast by analysts, mainly because of the one-off release of provisions in Romania.
Fee income expanded by 39 percent, slightly faster than expected, growing strongly in Hungary, Croatia and Romania.
General administrative cost growth, investors' main concern about Erste after the first two quarters, remained at 30 percent, as restructuring costs at BCR and strong wage growth in central Europe left their mark.
Tweaking its previous mid-term outlook, Erste said it saw net profit rising by at least 20 percent next year and by at least 25 percent in 2009. It kept its 2009 goal of a 55 percent cost-income ratio and 18 to 20 percent return on equity.
It said its key Czech unit would raise net profit by 15-20 percent next year, while Romania's BCR woudl grow "in line with" Erste's three-year guidance of 40 percent average annual growth.
Erste shares closed at 56.90 euros on Monday, down 3 percent this year and valuing the stock at about 13 times next year's estimated earnings -- less then central European peers reflecting investor scepticism about its Romanian growth hopes. ((Reporting by Boris Groendahl, editing by Elaine Hardcastle; Vienna Newsroom, phone +43 1 531 12-258))
($1=.6939 Euro)
Keywords: ERSTEBANK RESULTS/
