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LONDON, Jan 24 (Reuters) - Western banks withdrew money from emerging Europe at a slower pace in the third quarter of 2012 than in the second due to better financial conditions, a survey found on Thursday.
Figures from the Vienna Initiative group of multilateral lenders showed that bank withdrawals from the continent's central and eastern region were equivalent to 0.5 percent of its economic output.
That figure fell to less than 0.1 percent including investments in Russia and Turkey, though there are signs the picture may have clouded since then as some western banks battling persistently tough market conditions closer to home look to repatriate assets.
The Deputy Chairman of Russia's central bank, Mikhail Sukhov, said in Tula, Russia on Thursday that some foreign banks might be preparing to exit Russia because of low profitability.
The Vienna Initiative said in its latest 'Deleveraging Monitor' that the slowdown of deleveraging in the third quarter likely reflected "improved financing conditions for cross-border banking groups based in Western Europe".
It cited action by the European Central Bank last year to keep a lid on the euro zone crisis.
Deleveraging amounted to 0.2 percent of GDP for the broader emerging European region in each of the preceding two quarters, the Vienna Initiative added.
Spearheaded by the European Bank for Reconstruction and Development, the Vienna Initiative also incorporates the European Investment Bank and the World Bank and aims to prevent the disorderly withdrawal of bank funding from emerging Europe.
The three multilateral lenders launched a 30 billion euro joint action plan for the region in November.
Central and eastern Europe has lost foreign bank funding totalling 3.2 percent of GDP in the 12 months to the end of the third quarter of last year, the group said.
There were losses of more than 5 percent of GDP for Bulgaria, Croatia, Hungary, Latvia, Lithuania, Slovenia and Serbia in that period.
Credit growth was also muted, the Vienna Initiative added, with private sector credit growing by only 1.4 percent in central and eastern Europe in the 12 months to Sept 2012.
The Vienna Initiative's steering committee also said in a statement that it had formed a working group on European banking union.
The EBRD has previously said that European banking union should be fully open to non-euro zone countries in emerging Europe, enabling them to access bank bail-out funds. (Reporting by Carolyn Cohn; Editing by John Stonestreet)