(Bloomberg) -- Erste Group Bank AG, the largest lender in eastern Europe, said it expects risk provisions to rise amid a slowdown in economic output and property market headwinds. Shares slipped.

The Vienna-based lender expects risk costs to reach as much as 0.25% of average customer loans this year, up from 0.06% in 2023, according to management goals published Thursday. Net interest income, the bank’s main source of revenue, will dip an estimated 3% this year, the bank said. Fourth-quarter net income came in at €688 million ($745 million), above estimates. 

The bank confirmed a €2.70 per share dividend payment on last year’s results. It last week completed the repurchase of €300 million of own shares, further adding to investor payouts. The bank is targeting share buybacks of about €500 million in 2024.

The buyback may start after the European Central Bank’s approval, which usually lasts 3-6 months, Chief Financial Officer Stefan Doerfler said on a call with analysts. Plans for further capital use, including dividends or acquisitions, would be made once incoming Chief Executive Officer Peter Bosek starts his role in July, he said.

Shares of the bank fell as much as 3.9% in Vienna on Thursday, trading down 3.3% as of 10:17 a.m. Analysts at KBW said the capital return plans were less than expected, with consensus at €600 million to €1 billion. 

Erste’s performance is normalizing after a year of record revenue and profits in 2023, helped by high interest rates and a slowing of inflation. That outlook is changing as central banks across its eastern European markets ease policy, while investors are also assessing the fallout from broader headwinds for property markets across Europe.

“We still have a very slow economy in central Europe, with a relatively weak German economy, so we shouldn’t be too optimistic about it,” Doerfler said in an interview with Bloomberg Television. “We expect economic activity to come up stronger at the end of the second quarter or the beginning of the third.”

Erste is among the smaller creditors of insolvent Austrian real estate conglomerate Signa with a secured loan of less than €200 million. 

Erste said it booked most of its risk costs in the second half of 2023 at Austrian savings banks, related to an increase in defaults at small and medium-sized real estate projects. That trend may continue in 2024, but the bank has about €740 million of overlays and provisions to absorb losses, a third of which could be released in the year.

In Germany, Aareal Bank AG said on Thursday that the amount of money put aside for real estate risks, particularly in the US, rose eightfold in the fourth quarter.

Read More: Aareal Provisions Soar Eightfold on Souring US Office Loans 

(Adds timeline for shareholder remuneration, share reaction.)

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