Raiffeisen anticipates profit in Romania

Erste – record loss expected in 2014.

Raiffeisen Bank International’s business in Romania is holding up well, the Austrian lender said on Friday, a day after rival Erste Group said fresh hits from Hungary and Romania would push it to a record 2014 loss.
“In Romania we continue to see good performance of our local operations so this is not really a problem for us,” a spokeswoman for emerging Europe’s second-biggest lender said, reuters.com informs, quoted by Mediafax.
The Raiffeisen spokeswoman said: “We don’t have a problem on that,” adding that her bank needed a few more days to assess the impact of a new Hungarian law that will make banks absorb more costs for foreign-currency loans in Hungary that went sour when the forint exchange rate fell.
Erste Group Bank AG, the Austrian bank earning most of its income in Eastern Europe, plunged as a bad-debt clean-up forced by Romanian regulators and fee refunds in Hungary will cause a record loss this year, Bloomberg informs. Erste, which owns the second-largest Hungarian and the biggest Romanian bank, will post as much as a EUR 1.6 billion (USD 2.2 billion) loss this year as bad-loan provisions will rise 40 percent more than forecast earlier and trigger additional writedowns, it said in a statement yesterday. The shares fell 16 percent to EUR 19.52 in Vienna as of 3:37 p.m., the lowest level in almost a year. “This is a clearly bad surprise as it comes in addition to the already ‘badly surprising’ warning issued by the group at the beginning of this year,” Natixis Securities SAS analyst Steven Gould said in a note to clients. “These announcements hurt the management’s credibility going forward.”
Erste, the third-biggest bank in Eastern Europe after UniCredit SpA (UCG) and Raiffeisen Bank International AG (RBI), invested in the former communist bloc in the past decade, seeking higher growth and profit than available in its domestic market. That bet turned sour in Hungary and Romania after 2009 when the economic downturn caused borrowers to miss repayments.
Bad-debt charges to fall to 1.5 pc
Erste said it faced increased risk provisions in Romania to reflect the central bank’s stepped-up efforts to speed reductions of non-performing loans in the banking system ahead of ECB-led health checks of big European banks’ balance sheets. The provisions are caused by new rules due to be approved by Parliament in Hungary today, forcing banks to refund “unfair” loan fees, and by the Romanian central bank’s push for faster bad-debt reduction amid the European Central Bank’s bank health check, Vienna-based Erste said. Writedowns on goodwill and deferred tax assets, triggered by the loan-loss provisions, may reach as much as EUR 1 billion. The Romanian measures will cause bad-debt charges to fall to 1 percent to 1.5 percent of gross loans next year, from more than 4 percent in the first quarter. The stock of bad loans will decline by EUR 800 million, or 25 percent, this year. Treichl, the longest-serving CEO of a major European bank, told Austrian radio in an interview that he didn’t rue having invested in Hungary and Romania and thought he was still the right head for the company.

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