Bloomberg News

OTP Falls From Month-High as Banks Offer Taking More Losses

December 06, 2011

(Updates with prices, analyst from second paragraph.)

Dec. 6 (Bloomberg) -- OTP Bank Nyrt., Hungary’s largest lender, fell from a month-high after the country’s banks proposed taking more losses on foreign-currency loans and a review of euro area nations’ credit ratings hit European stocks.

OTP fell 3.5 percent to 3,270 forint by the end of trading in Budapest. The stock rose 2.5 percent yesterday to the highest close since Oct. 28. The BUX index of shares, in which OTP has a 26 percent weighting, declined 2.1 percent to 17,372.45 by in Budapest. The forint depreciated 0.4 percent to 300.86 per euro.

Hungarian banks are offering to book further losses of as much as 500 billion forint ($2.2 billion) on foreign-currency loans in the coming years in a proposal package submitted to the government, Levente Kovacs, secretary general of the Bank Association said today. The government is in talks with lenders on further measures after allowing holders of foreign-currency mortgages to repay their debt at below-market rates as a slump in the forint increased their costs.

“It’s a big figure and given the lack of profits across the banking sector it’s a commitment to take losses over a very long period,” Attila Gyurcsik, a Budapest-based analyst at Concorde Securities, said in a telephone interview on Kovacs’s comments. “The banking system may be offering to take those losses over 10 years or 20 years.”

Hungary, the European Union’s most-indebted eastern member, last month lost its investment-grade credit ranking at Moody’s Investors Service, which cited government measures hurting banks’ profitability. Germany, France and four other nations may lose their AAA credit ratings depending on the result of a summit of European Union leaders on Dec. 9, Standard & Poor’s said yesterday.

“Market sentiment today will more likely be influenced negatively by Standard & Poor’s decision during last night of placing 15 EMU countries on negative credit watch,” Kata Baller, a Budapest-based economist at DZ Bank AG, wrote in a research report.

--Editors: Linda Shen, Gavin Serkin

To contact the reporter on this story: Andras Gergely in Budapest at agergely@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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