Raiffeisen Bank in Hungary sees no return to profit before 2016

Fri Mar 28, 2014 10:45am EDT

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BUDAPEST, March 28 (Reuters) - The lossmaking Hungarian unit of Austrian lender Raiffeisen Bank International is unlikely to return to profit before 2016, although government policies beyond the elections next month are tough to predict, the unit's chief executive said on Friday.

"We see profit returning from 2016 at this point although it could happen earlier," the chief of Raiffeisen's Hungarian operation, Heinz Wiedner, told a news conference.

"Government policies are not easy to predict more than one year into the future."

Hungary's ruling centre-right Fidesz party, set to win a new four-year term in elections on April 6, has used heavy taxes and other measures in the banking sector to cut debt and bring its budget deficit lower to meet European Union rules.

The process, coupled with a deep recession that hit Hungary in the economic crisis after 2008, meant that many banks, including Raiffeisen, have plunged deep into the red.

"We don't calculate on a profit this year in Hungary," Wiedner said, reiterating comments from its parent on Thursday. "There will be no substantial improvement in results from last year."

He said that government plans to unwind the country's huge stock of foreign currency-denominated housing loans will be crucial to seeing how quickly the bank can return to making profit.

Prime Minister Viktor Orban has said that he plans to do away with all foreign currency loans after a top court ruling allowed the government to modify the terms of the loans retroactively.

Therefore, on balance Raiffeisen expects no favourable change in government policy after the elections, Wiedner said.

The leftist opposition alliance that is the main challenger to Fidesz also plans to maintain what is one of Europe's toughest tax regimes for banks in the near term, the opposition's leader has told Reuters.

Raiffeisen's shares were up 3.2 percent on the Vienna bourse at 1351 GMT compared with a 0.8 percent rise in the wider market . The bank reported better than expected results on Thursday and renewed its commitment to Russia. (Reporting by Marton Dunai; Editing by Greg Mahlich)

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