Romania and Hungary push Erste to a record 2014 net loss

Newsroom 04/07/2014 | 09:38

Fresh hits from Hungary and Romania will push Erste Group Bank to a record 2014 net loss of up to EUR 1.6 billion, emerging Europe’s third-biggest lender said on Thursday, quoted by Reuters. Erste owns the second-largest Hungarian and the biggest Romanian bank (BCR).

The Austrian bank said it expected risk costs to rise from a planned EUR 1.7 billion to about 2.4 billion this year, while its group operating result would slightly miss guidance this year “due to weaker operating results in Romania and Hungary”.

“Increased risk provisions in Romania reflect recently increased efforts by the Romanian National Bank, ahead of the ECB’s asset quality review, to reduce non-performing loans in the banking system in an accelerated manner,” the bank said.

The group also lowered its expectations for what it could get by selling packages of bad loans there.

“As a result of increased provisions in Romania, Erste Group will carry out an impairment test on the entire amount of Romanian intangibles (goodwill, brand, value of customer relationships) of about EUR 800 million, which may result in the full write-off of such intangibles,” according to Erste.

This could also trigger a write-off of deferred tax assets of about 200 million euros.

Business in Hungary would suffer from government plans to get banks to swallow more losses on foreign-exchange loans that went sour when the forint depreciated.