Vienna - Austria's Erste Group Bank AG reported Friday that its net profit declined by 26.8 per cent to 860 million euros (1.1 billion dollars) in 2008, as it wrote down premiums on asset values in three Central and Eastern European daughter companies.

Hit by the financial crisis, Erste made a net loss of 603 million euros in the fourth quarter ending in December, compared with a profit of 337 million euros in the same period of the previous year.

The bank also confirmed Friday that it had concluded a previously announced agreement with the Austrian government to raise 2.7 billion euros of capital, of which up to
1.89 billion euros will be provided by the state.

All of Erste's Central and Eastern European daughter banks remained profitable in 2008, with the exception of Erste Bank Ukraine, which made a 29-million-euro net loss.

However, taking into account the effects of the global economic conditions, Erste wrote down premiums worth a total of 567 million euros on the value of assets at its Bulgarian, Serbian and Ukrainian banks.

In addition, risk provisions were more than doubled to 1.07 billion euros for the entire banking group.

Owing to a 24.5 per cent rise in net interest income, operating income increased by 13.7 per cent to 7 billion euros.

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