* Bank Austria, Raiffeisen still committed to Hungary -CEOs
* Raiffeisen calls Budapest bank tax change a "low blow"
* Bank Austria says Budapest not a dependable partner
(Recasts with Bank Austria CEO, Bavarian minister)
By Michael Shields and Angelika Gruber
VIENNA, Oct 18 Senior Austrian bankers accused
the Hungarian government of treachery by abandoning a pledge to
halve a controversial bank levy next year.
But they said they had no plans to quit their eastern
neighbour despite the latest run-in with Prime Minister Viktor
Orban and his unorthodox fiscal policies.
Hungary said on Wednesday it would not slash Europe's
highest bank levy and would double the tax on financial
transactions it launches next year, steps it hopes will help
avert European Union sanctions over its budget deficit.
"This is a low blow for all banks. The government has broken
its pledge to halve the levy in 2013," Raiffeisen Bank
International Chief Executive Herbert Stepic said.
The measures, which could dim Hungary's prospects for a
financing deal with the International Monetary Fund, come after
the government saddled banks with losses by letting borrowers
repay foreign-currency mortgages at below-market rates.
"This led to such a mighty bloodletting that the banks will
certainly need some time to recover from this," Stepic said, but
he also took a long-term view of Hungary's market potential.
"I think Raiffeisen will be in Hungary when there is no
longer an Orban government," he told reporters on the sidelines
of an investment conference on Thursday.
The IMF said in July that Budapest should abandon ad hoc tax
measures, focus more on sustainable spending cuts and seek to
restore the soundness of the heavily taxed financial sector.
Well over half the assets in Hungary's banking sector are
foreign-owned. The biggest banks include local subsidiaries of
Austria's Erste Group and Raiffeisen, Belgium's KBC
, and Italy's Intesa Sanpaolo and UniCredit.
Orban has been criticised by foreign governments, the EU and
business lobbies over a series of policies that force banks and
big business to pay for Hungary's budget retrenchment since
2008, in contrast to the austerity applied elsewhere in Europe.
He continues to dominate opinion polls at home.
Willibald Cernko, head of UniCredit's Bank Austria
unit, said he was let down by Hungary's latest policy twist.
"I find it disappointing because especially at times like
these, with all the difficulties we all have ... what we need is
dependability," Cernko told journalists, saying government,
banks and companies had to work together to boost confidence.
"If agreements are scrapped then I have to say it is very,
very regrettable. It is not just a question of whether it is
legal, it is also a matter of ethics," he said.
VOTING WITH FEET
Bank Austria - emerging Europe's biggest lender ahead of
Raiffeisen and Erste Group - nevertheless plans to stay in
Hungary, where Cernko noted it is one of the few banks to make
money thanks to its focus on corporate clients and conservative
Hungary has promised to cut the bank levy in half from 2014,
Bavaria's finance minister said after meeting counterparts from
Hungary and Austria in Vienna.
Thumbing its nose at foreign banks poses potential problems
for Hungary. Lenders are already scaling back business there
amid campaigns to hoard capital as a way to withstand the
European debt crisis and meet tougher regulatory standards.
Ratings agency Standard & Poor's says external financing of
western banks' Hungarian units has fallen by the equivalent of
15 percent of Hungary's gross domestic product since mid-2010.
"Orban thinks he holds the foreign banks captive, but the
reality is that they are voting with their feet - deleveraging
out of Hungary as quickly as they possibly can," Standard Bank
analyst Timothy Ash said in a research note. "This is obviously
going to be bad for growth."
RBI has said bank levies in Austria and emerging Europe were
set to rise in 2012, anticipating an earnings hit of around 190
million euros, of which 40 million euros is from Hungary.
RBI lost 76 million euros before income tax in Hungary in
the first half, while Bank Austria earned 47 million euros
before tax. Erste has said it will make money in Hungary only in
($1 = 0.7621 euros)
(Editing by Catherine Evans)