Tags: Austria | banks | profit | growth

Austrian Banks' Bad Debt Losses Ate Up 65 Percent of Profit Since 2008

Monday, 07 Jul 2014 08:42 AM

Austrian banks must reconsider a business model that forced them to use 44 billion euros ($60 billion), or almost two-thirds of their profit since 2008, to cover provisions for bad debt, the central bank said.

Austrian banks, led by Erste Group Bank AG, Raiffeisen Bank International AG and UniCredit Bank Austria AG, are the biggest lenders in the former communist part of Europe. Rising levels of bad debt have forced them to set aside increasing provisions and to write down assets acquired at several times book value.

Austria’s central bank, in its half-year financial stability report, urged lenders to reevaluate strategies in eastern Europe that are prone to inflate bubbles and lead to an accumulation of bad debt. Erste said last week it will have a record loss this year after writing down its Romanian unit and setting aside an additional 700 million euros for loan losses in Romania and Hungary, following similar writedowns at Bank Austria in March.

“It’s not the time to pull out of eastern Europe,” said Andreas Ittner, the Austrian central bank’s deputy governor, who’s in charge of banking supervision. “On the contrary, growth rates are still higher there than in western Europe, but it needs to be sustainable growth.”

“What you can’t do anymore is like before the crisis, sell cheap bonds in the west and just pass this on toward eastern Europe,” Ittner said. “The other issue was the pace of growth.”

Erste shares were little changed at 19.49 euros by 11:55 a.m in Vienna trading, after plunging 16 percent on July 4. The stock is down 23 percent this year, the biggest decline in the 30-company Euro Stoxx Banks Index.

© Copyright 2017 Bloomberg News. All rights reserved.

 
1Like our page
2Share
Markets
Austrian banks must reconsider a business model that forced them to use 44 billion euros ($60 billion), or almost two-thirds of their profit since 2008, to cover provisions for bad debt, the central bank said.
Austria, banks, profit, growth
277
2014-42-07
Monday, 07 Jul 2014 08:42 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved