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PREVIEW-East European debt crisis still in slow motion
Reuters - 23/07/2009 13:00:45
* Q2 bank results may surprise as bad debt rise subdued
* But too early to call end of crisis as bad debt peak lags
* Only three major E.Europe banks forecast to have 2009 loss
* Central Europe seen resilient; Ukraine, Baltics tough
By Boris Groendahl
VIENNA, July 23 (Reuters) - Crisis-ridden emerging Europe's banks are expected to remain profitable in the second quarter despite rising bad debt, giving investors comfort that full-year losses are unlikely this year and capital ratios will remain resilient.
This expectation has underpinned share prices in the region's banks in the past month, with Greek, Austrian and Swedish banks, all heavily exposed relative to their size, outperforming the DJ Stoxx European banking sector index .
But because banks are effectively postponing loan loss charges, and unemployment and insolvencies have only just begun to rise in the former Communist bloc, it is too early to tell whether they have turned a corner or if the worst is yet to come.
"The second quarter won't show a material worsening compared to Q1 and Q4," said Francois Boissin, a banking analyst at Exane BNP Paribas. "But we still have no clarity about the timing and the intensity of the recovery and that's still the key issue."
"The deterioration in the credit cycle is going to take a longer time than is expected at the moment," he said. "More and more banks say non-performing won't peak before 2011."
Central and Eastern Europe's economies are on track to shrink by 5 percent this year, and the former Soviet Union by 5.8 percent, as exports to western Europe dwindle and capital inflows dry up, according to the IMF. (news)
The impact of the crisis is made worse by the credit binge, bankrolled by the banks' mostly western owners, that fuelled the region's economic boom between 2000 and 2008. (news)
"The banks are in the throes of a severe bad debt cycle similar to that of Asia in 1998," Morgan Stanley said in a note last week. "Non-performing loans should peak at 15 percent ... with some variance across countries and customer segment."
"Only when provisions rise in the next few quarters will we get clarity on the differentiation between franchises."
Reuters - 23/07/2009 13:00:45
* Q2 bank results may surprise as bad debt rise subdued
* But too early to call end of crisis as bad debt peak lags
* Only three major E.Europe banks forecast to have 2009 loss
* Central Europe seen resilient; Ukraine, Baltics tough
By Boris Groendahl
VIENNA, July 23 (Reuters) - Crisis-ridden emerging Europe's banks are expected to remain profitable in the second quarter despite rising bad debt, giving investors comfort that full-year losses are unlikely this year and capital ratios will remain resilient.
This expectation has underpinned share prices in the region's banks in the past month, with Greek, Austrian and Swedish banks, all heavily exposed relative to their size, outperforming the DJ Stoxx European banking sector index .
But because banks are effectively postponing loan loss charges, and unemployment and insolvencies have only just begun to rise in the former Communist bloc, it is too early to tell whether they have turned a corner or if the worst is yet to come.
"The second quarter won't show a material worsening compared to Q1 and Q4," said Francois Boissin, a banking analyst at Exane BNP Paribas. "But we still have no clarity about the timing and the intensity of the recovery and that's still the key issue."
"The deterioration in the credit cycle is going to take a longer time than is expected at the moment," he said. "More and more banks say non-performing won't peak before 2011."
Central and Eastern Europe's economies are on track to shrink by 5 percent this year, and the former Soviet Union by 5.8 percent, as exports to western Europe dwindle and capital inflows dry up, according to the IMF. (news)
The impact of the crisis is made worse by the credit binge, bankrolled by the banks' mostly western owners, that fuelled the region's economic boom between 2000 and 2008. (news)
"The banks are in the throes of a severe bad debt cycle similar to that of Asia in 1998," Morgan Stanley said in a note last week. "Non-performing loans should peak at 15 percent ... with some variance across countries and customer segment."
"Only when provisions rise in the next few quarters will we get clarity on the differentiation between franchises."
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