Hungary's Erste says real estate fund unit stable

BUDAPEST, Nov 10 (Reuters) - The Hungarian banking unit of Austria's Erste Bank ERTS.VI will extend loans to those clients of its real estate funds, who want to withdraw their capital, it said in a statement.

Erste Bank's statement followed Friday's suspension of trading in the notes of all Hungarian real estate funds by Hungary's financial market watchdog PSZAF. The suspension is to last for 10 days to protect savings.

The market watchdog and the Association of Investment Funds (BAMOSZ) will hold a joint news conference about the suspension of trade in real estate fund notes at 1400 GMT on Monday.

Erste said the suspension of trading in its real estate fund notes was "unjustified and unnecessary".

The PSZAF measure followed a wave of capital withdrawals in the past weeks from the funds, which reduced their liquid assets, as households rechannelled savings into bank deposits which they regarded as safer amid the global financial crisis.

Erste, the owner of Hungary's biggest real estate fund management company, said it would extend loans accepting the notes of its real estate funds as a collateral to clients who want to withdraw their capital from the funds.

"(Erste) continues to trust that its real estate funds will perform well," it added.

Erste said its funds, whose net assets exceeded 116 billion forints ($569.9 million) at the end of October, ensured an average yield of 8.41 percent in the past years.

Interest rates paid on bank deposits rose to above 10 percent in the past weeks after the central bank hiked its own base rate by 300 basis points to 11.5 percent on Oct. 22 to stabilise the forint currency.

Hungarians held about 550 billion forints in real estate funds at the end of September according to BAMOSZ's figures.

BAMOSZ said in a statement that real estate funds were stable.

According to press reports investors withdrew about 120 billion forints from the funds in October.

The biggest real estate fund managers are owned by commercial banks including OTP OTPB.BU and Raiffeisen (RIBH.VI).

(Editing by Sharon Lindores)