REUTERS: Eastern Europe's banks have underestimated bad debt, says EBRD chief econ/Hungary ready to come off IMF aid, says Central Bank's Deputy Gov/C

REUTERS NEWS ADVISORY
For Immediate Release
Tuesday, September 29, 2009

Below are Links to News Stories Filed Tuesday from the Reuters Central European Investment Summit Held in Vienna and Warsaw

E.Europe bad debt underestimated -EBRD
LONDON (Reuters) - Eastern Europe's banks have underestimated the value of bad loans they hold in the aftermath of the financial crisis and their impact will be felt across the region next year, the chief economist at the European Bank for Reconstruction and Development (EBRD) told Reuters on Tuesday.

Warning that the region's banking system remained fragile, Erik Berglof told the Reuters Central European Investment Summit the push for Western lenders to sell assets as part of conditions for obtaining state aid could also hurt the region.

He said Russia was one economy where bad debt levels were still "significantly worse" than officially reported.

"We know that non-performing loans are increasing. They haven't been increasing at the pace we were worried about (at the start) but that is because in some countries the way official statistics report them is not satisfactory," Berglof, who is also special adviser to the EBRD President, said.

He said the European Commission's demand that Western banks get rid of non-core assets could prompt these lenders to sell off Eastern and Central European subsidiaries and further tighten credit to the region.

"They are asking for...the disposal of non-strategic assets. But some of these assets are strategic for our region. Most of these subsidiaries are systemic for our region," Berglof told Reuters.

The full text of the story is on Reuters.com at: http://www.reuters.com/article/CentralEuropeanInvestment09/idUSTRE58S3VG20090929

Hungary ready to come off IMF aid: cbank
VIENNA (Reuters) - Hungary should not need to use the remainder of its package of International Monetary Fund-led aid, though its recovery remains fragile as it returns to market financing, the central bank's deputy governor told Reuters on Tuesday.

The central bank will continue to aid recovery but further cuts in interest rates will have to remain predictable and gradual to maintain investor confidence, Ferenc Karvalits told the Reuters Central European Investment Summit.

"The current government would like to show, and up until now, they've been successful, that they can return to market financing," Karvalits said.

"Therefore we expect that in the upcoming period, until the elections, we won't need additional sources from the IMF or the from the European Union. These are just safety cushions."

The full text of the story is on Reuters.com at: http://www.reuters.com/article/CentralEuropeanInvestment09/idUSTRE58S1WE20090929

CEE needs fiscal cuts, no upgrades soon: Moody's
LONDON/VIENNA (Reuters) - There is little chance of rises in eastern European countries' debt ratings in the next few years given recent fiscal expansion and worsening growth prospects, analysts from ratings agency Moody's told Reuters on Tuesday.

Moody's vice-president and senior analyst Dietmar Hornung, told the Reuters Central European Investment summit that support from the European Union and International Monetary Fundhad helped to stem the slide after the financial crisis.

But both he and colleague Kenneth Orchard said that economies and markets in the region were still fragile and that governments must tackle their fiscal problems before any upgrades of outlooks could be expected.

"The governments have to get their fiscal (positions) in order. We don't expect to be moving over to positive in the next few years," Orchard, who covers Poland, the Baltics and the Balkans, told the summit in Reuters London office.

Moody's latest sovereign report earlier on Tuesday said Hungary's rating outlook could be upped to stable if the country continues fiscal stabilization. But outlooks tend to be upped to positive before an upgrade of the actual rating.

"It takes some time to work through the system until we really see improvements," Hornung, who among other countries covers the Czech Republic, Hungary and Slovakia.

"Even in central Europe it is about stabilizing the debt trend. I don't expect for my countries that there are imminent outlook changes in the pipeline," he said.

The full text of the story is on Reuters.com at: http://www.reuters.com/article/CentralEuropeanInvestment09/idUSTRE58S38D20090929

OTP profit on track, risk costs may fall soon-CFO
VIENNA (Reuters) - Hungary's OTP Bank remains on track to meets its 2009 profit target and as the global recovery picks up pace, its risk costs could begin falling as early as the second quarter, Chief Financial Officer Laszlo Bencsik told Reuters on Tuesday.

OTP's OTPB.BU, Central Europe's biggest independent bank with capitalization of $8.1 billion, expects risk provisions in the second half to remain in line with first half figures. If market condition do not change significantly, a decline could start early next year, Bencsik told the Reuters Central European Investment Summit.

"We would be surprised if it happened in the first quarter, but if we look at the momentum we have now, it could already come through in the second quarter but it could be delayed until the third or fourth," Bencsik told the summit, held in the Reuters office in Vienna.

"Our profit target is on track," he added.

The full text of the story is on Reuters.com at: http://www.reuters.com/article/CentralEuropeanInvestment09/idUSTRE58S3ZM20090929

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