Banks facing more bad loans

RIGA - Bad loans are likely to increase in parts of Central and Eastern Europe as the economy there continues to stagnate, Austria’s Raiffeisen Zentralbank (RZB) warned in a report published last week, reports AFP. “Until a few months ago, it was generally expected that the level of non-performing loans would peak in 2010,” an RZB report on the banking sector in central and eastern Europe said. “However, this might not be the case at least for some of the CEE countries that continue to suffer from a protracted period of economic stagnation or even contraction, resulting in a further increase in unemployment and little, if any, real wage growth,” it concluded.

“[Despite] a sharp increase of non-performing loans... a peak seems not to have been reached so far,” Raiffeisen’s analysts noted.
Sweden’s Swedbank had seen its ratio of bad loans in Central and Eastern Europe increase the most in the first quarter of 2010, to 18.1 percent, compared to 7.3 percent in the same period last year, the report found. France’s Societe General was next with 11.2 percent, ahead of Hungary’s OTP with 10.4 percent, Russian state bank VTB with 10.2 percent, and Austria’s Volksbank with 9.9 percent.

In the whole Central and Eastern European region, total banking loan volumes in 2009 had dropped by 1.8 percent year-on-year to 962.2 billion euros, after recording 45 and 20 percent hikes in the previous years, RZB also noted. Following the economic crisis, this “modest drop” was proof, however, of the stabilizing factor that banks, especially foreign banks, had had in Central and Eastern Europe, it insisted.

Total banking assets meanwhile rose slightly, by 0.7 percent, to 1.6 billion euros last year, compared to 2008. “Based on current expectations for a muted recovery of the economies at varying speeds, both in the global economy and for the CEE economies, our forecasting model unsurprisingly projects a moderate growth in banking loans in 2010 and 2011,” Raiffeisen senior CEE analyst Walter Demel noted in a statement.

In its ranking of the five top banking groups operating in Central and Eastern Europe, Italy’s UniCredit came first with consolidated asset volumes of 107.6 billion euros, followed by Austria’s Erste Bank with 79.1 billion euros, the report found. The other three included Raiffeisen International, Societe General and Belgium’s KBC group.