Vienna - Austria-based Erste Group Bank saw its net profits drop 26.5 per cent in the first quarter of 2009, the bank said Thursday, reflecting its high exposure to loans to central and Eastern Europe.

The bank, one of Central and Eastern Europe's biggest lenders, made a net profit of 232.1 million euros (306.7 million dollars) in the first three months of the current year, down from 315.6 million euros in the same period of the previous year.

With the exception of the Ukraine, all of Erste's Central and Eastern European operations were profitable.

On Wednesday, the Austrian government and other investors increased the bank's capital base by 1.7 billion euros through the signing of bonds.

Reflecting the economic downturn, risk provisions grew to to 370.2 million euros, from 163.1 million euros in last year's first quarter.

However, the group's operating income rose by 5.2 per cent to 1.814 billion euros, boosted by a 6.5-per-cent increase of interest income.

"Even if, as a result of the rapidly deteriorating environment, we expect an increase in risk costs, the earnings strength of a broad-based retail bank should not be underestimated," chief executive Andreas Treichl said.