* Sees 2014 risks costs around 700 mln euro above plan
* Operating result in 2014 to miss guidance slightly
* Sees year-end core equity ratio at 10 pct at year-end
without raising equity
(Adds spokesman comment, background)
By Michael Shields
VIENNA, July 3 Fresh hits from Hungary and
Romania will push Austria's Erste Group Bank to a
record 2014 net loss of up to 1.6 billion euros ($2.2 billion),
emerging Europe's third-biggest lender said on Thursday.
It said it expected risk costs to rise from a planned 1.7
billion euros to about 2.4 billion this year, while its group
operating result would slightly miss guidance this year "due to
weaker operating results in Romania and Hungary".
The bank, which last year raised fresh capital to repay
state aid and strengthen its balance sheet, did not need to
raise more equity now but would not pay a dividend on 2014
results, a spokesman said.
It said business in Hungary would suffer from government
plans to get banks to swallow more losses on foreign-exchange
loans that went sour when the forint depreciated.
Hungary's government moved on Friday to reduce bank charges
on foreign-currency mortgages, submitting legislation to
parliament that could also help people with similar concerns
about their forint loans.
The costs from Friday's bill alone could reach 600 billion
to 900 billion forints ($3.95 billion), the central bank's
deputy governor told a newspaper at the weekend, potentially
twice analysts' estimates of 400 billion.
Banks in Hungary include units of Belgium's KBC,
Austria's Raiffeisen Bank International and Erste,
Italy's UniCredit and Intesa Sanpaolo, and
German-owned MKB Bank.
In Romania, increased risk provisions reflect the central
bank's stepped-up efforts to speed reductions of non-performing
loans in the banking system ahead of the ECB-led health checks
of big European banks' balance sheets, Erste said.
It also marked down expectations for what it could get by
selling packages of bad loans there.
"As a result of increased provisions in Romania, Erste Group
will carry out an impairment test on the entire amount of
Romanian intangibles (goodwill, brand, value of customer
relationships) of about 800 million euros, which may result in
the full write-off of such intangibles," it said.
This could also trigger a write-off of deferred tax assets
of about 200 million euros.
Erste said it now expected a 2014 group net loss of 1.4-1.6
billion euros before profits rebound in 2015.
It forecast a common equity tier 1 capital ratio of about
10.0 percent of risk-weighted assets at the end of 2014 "without
any need to issue equity". The ratio may lag that level in the
course of the year, it said.
Big writedowns in Hungary and Romania drove Erste to a loss
in 2011 as well, highlighting the risks of operating in central
and eastern Europe.
Erste's losses in Hungary nearly doubled last year to 109
million euros, hit by a 45.5 million euro financial transaction
tax bill on top of a 49 million bank levy.
It lost 54 million there in the first quarter of this year
after booking 48 million for the full-year bank levy.
($1 = 0.7331 Euros)
(Reporting by Michael Shields; Editing by Sophie Walker)