[FONT="]VIENNA, Oct 29 (Reuters) - Erste Group Bank AG launched a 1.65 billion euros ($2.43 billion) no-discount rights issue on Thursday to bring its capital base in line with raised expectations as loan losses in emerging Europe mount.[/FONT]
[FONT="]The Vienna-based bank will offer up to 60 million new shares, or 19 percent of the outstanding capital, and will try to sell them at market prices rather than offer the discounts of 30 percent to 40 percent other European banks have granted.[/FONT]
[FONT="]Erste also said third quarter net profit was 228 million euros, 21 percent ahead of the average estimate in a Reuters poll, as interest income rose and costs were kept down. The earnings release had originally been scheduled for Friday.[/FONT]
[FONT="]"Our business model ... has proven to be successful even in a challenging economic environment and ... the Central and Eastern Europe region remains an interesting growth market for us," Chief Executive Andreas Treichl said in a statement.[/FONT]
[FONT="]The cash call, bigger than the expected 1 billion euro, will raise Erste's core Tier 1 ratio to 7.8 percent from 6.5 percent, bringing it closer to the 8 percent that has become the new informal standard markets and regulators want to see.[/FONT]
[FONT="]Erste, the No.3 lender in the crisis-ridden and foreign debt-laden former Communist part of Europe, has so far navigated the crisis with one of the thinnest cushions among European banks, despite a 1.76 billion euro injection of state aid.[/FONT]
[FONT="]At the same time, Erste owns the biggest bank in Romania, the Balkan country surviving on a 20 billion euro lifeline from the International Monetary Fund to fend off financial crisis. Bad loans rose to 6.3 percent of the book in the third quarter.[/FONT]
[FONT="]But the deal comes as investors overcome their scepticism on emerging European banks, which bordered on panic in February and March. Erste's share price has more than quadrupled since a low of 6.84 euros reached on Feb. 24.[/FONT]
[FONT="]NO DISCOUNT[/FONT]
[FONT="]Unlike other European banks, Erste does not plan to pay back the state capital with the fresh cash, although it will walk away from plans to raise more from the Austrian government.[/FONT]
[FONT="]Banks including Baltic-exposed Swedbank AB , emerging European market leader UniCredit SpA , Poland's PKO BP and Societe Generale have started or announced share issues in the past two months.[/FONT]
[FONT="]Erste shareholders will be able to subscribe to 3 new shares -- with full dividend rights for 2009 -- for every 16 they own at prices close to the market, but capped at 32 euros, Erste said. The stock closed up 7 percent at 27.50 euros on Thursday.[/FONT]
[FONT="]Pricing at the market level puts Erste in sharp contrast with other bank cash calls in recent weeks. Swedbank's deal was sold at a 41 percent discount; SocGen's was offered 27 percent below the market rate and BNP Paribas SA's was 29 percent cheaper.[/FONT]
[FONT="]The subscription period will run from Monday to Nov. 16, and investors eyeing the new shares not picked up by existing shareholders will be able to bid until Nov. 17, when the final pricing for the issue will be determined.[/FONT]
[FONT="]Spain's Criteria Caixa intends to buy all the subscription rights of Erste's main shareholder, the Erste Foundation charity, Erste said.[/FONT]
[FONT="]This will raise Criteria's stake to 10 percent from 5 percent and let the Foundation dilute to 26 percent from 31 percent, according to Reuters calculations. (Reporting by Boris Groendahl; editing by Andre Grenon)[/FONT]
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