July 4, 2014 / 10:36 AM / 3 years ago

CEE MARKETS 2-Bank stocks fall on Erste, Hungarian bill

7 Min Read

(Adds Komercni Banka, Slovenian bank stocks fall)
    * Erste bank warns over profit, drags down bank stocks in
    * OTP bank at 10-week low, Hungary to vote on bill which
hits banks
    * Slovenian Aerodrom, Telekom fall as privatisation seen

    By Sandor Peto
    BUDAPEST, July 4 (Reuters) - Sinking bank shares knocked
Central European stock indices lower on Friday as a profit
warning from regional player Erste increased worries
over banking health in parts of the region.
    The warning issued on Thursday came ahead of a Hungarian
parliament vote due on Friday on a bill that will cause losses
to domestic banks.
    The stocks of Hungary's biggest lender, OTP, which
is also Central Europe's biggest independent bank, eased more
than 3 percent at the opening, hitting 10-week lows.
    The fall follows a 14 percent slump on the Vienna bourse of
the shares of Austria's Erste, which is present in several
Central European countries. 
    Erste said late on Thursday that it could post a record net
loss of up to 1.6 billion euros ($2.2 billion) in 2014 due to a
hit from its operations in Hungary and Romania.
    Erste stocks also plunged in Prague and Bucharest, dragging
down the main Czech stock index by as much as 3.2 percent.
    Erste shares account for about a fifth of the Prague stock
exchange's market capitalization, similar to Komercni Banka
whose shares were also hit by Erste's fall, shedding
1.6 percent.
    Erste's warning coincides with a Hungarian parliament vote
due after 1100 GMT on the first step of measures that could
cause huge losses to the country's heavily taxed banks.
    Friday's bill alone could cause a loss of up to 900 billion
forints to banks according to an estimate of the central bank,
and planned further measures to convert foreign currency loans
into forints this year could deepen the losses. 
    OTP shares traded at 4,200 forints at 0951 GMT, down 2.6
    "(Brokerage) Concorde cut its target price for OTP to 3,740
forints earlier... and it is possible now that we will see a
series of research downgrades for the stock," one Budapest-based
equities trader said.
    Central European banks posted strong profits before the 2008
global crisis but faced difficulties in several countries since
then. Slovenia had to inject more than 3 billion euro last year
into banks to prevent a meltdown and two Bulgarian banks were
hit by a run by depositors last week. 
    Slovenia's government is expected to go ahead with the sale
of Nova KBM, its second-biggest bank, but Miro Cerar, who is
expected to win snap elections on July 13, told Reuters he
opposed the planned sale of Telekom and airport
Aerodrom Ljubljana.
    Shares of Aerodrom fell 7.85 percent on Friday to 44.23
euros. Telekom shed 2.21 percent to 135 euros.   
    The Hungarian government's planned legislation on banks has
also weighed on the forint in the past weeks.
    However, the currency still firmed 0.2 percent against the
euro on Friday to 310.26, close to the key psychological level
of 310, and government bonds in the region firmed slightly. 
    "(The forint) is still buoyed by yesterday's European
Central Bank comments which helped currencies in emerging
markets," one Budapest-based currency dealer said.
    Technical factors also helped the forint after a fall to
3-month lows earlier this week. It outperformed other Central
European units which retreated slightly after Thursday's gains,
with the zloty easing 0.1 percent, the dealer said.
    "Parliament will pass the bill today, there is no question
about that, but we will see the size of banks' losses only later
this year, after banks try to defend their loan contracts in
courts," the dealer added.
                      CEE MARKETS SNAPSHOT AT 1148 CET
 ************************** CURRENCIES ************************
                             Latest  Previous   Daily   Change
                             bid     close      change  in 2014
 Czech crown                 27.428    27.422   -0.02%  -0.35%
 Hungarian forint           310.300   310.830  +0.17%  -4.30%
 Polish zloty                 4.142     4.136    -0.14% +0.19%
 Romanian leu                 4.388     4.387   -0.03%  +1.64%
 Croatian kuna                7.587     7.584    -0.04% +0.41%
 Serbian dinar              116.070   116.010    -0.05%   -1.35%
 Note: daily change calculated from previous close at 1600 GMT
 **************************** STOCKS **************************
                             Latest  Previous   Daily   Change
                                     close      change  in 2014
 Prague                      965.11    997.39   -3.24%  -2.21%
 Budapest                  18379.49  18612.99    -1.25%  +0.25%
 Warsaw                     2368.51   2375.52    -0.30%  -1.49%
 Bucharest                  7001.85   7061.06   -0.84%  +8.09%
 ***************************** BONDS **************************
                         Yield    Yield    Spread    Daily
                         (bid)    change   vs Bund   change in
 Czech Republic                                      spread
   2-year                0.309    -0.044   +29bps     -4bps
   5-year                0.612     -0.035   +27bps      -2bps
  10-year                1.535    -0.055   +26bps     -3bps
   3-year                3.100     0.000   +305bps   +2bps
   5-year                3.350     -0.020   +300bps    0bps
  10-year                4.350    -0.020    +308bps    0bps
   2-year                2.490    -0.010    +247bps    0bps
   5-year                2.990    -0.040    +264bps    -2bps
  10-year                3.410   -0.060    +214bps    -4bps
 ******************* FORWARD RATE AGREEMENTS ******************
                              3x6     6x9    9x12  3M interbank
 Czech Rep                    0.320   0.335  0.340   0.35
 Hungary                      2.340   2.390  2.440   2.34
 Poland                       2.450   2.330  2.320   2.68
 Note: FRA quotes are for ask prices
 (Additional reporting by Marja Novak in Ljubljana/Jakub
Iglewski in Warsaw/Radu Marinas in Bucharest; Editing by Toby

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