Writing_Sample_Eastern-Europes-Banks-Little-Cause-for-Alarm_2014-08-22.pdf

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1、EMERGINGEUROPEANDCIS1August22,2014Page

2、1EasternEurope’sBanks:LittleCauseforAlarmByJelenaVukoticAflurryofnegativedevelopmentsacrossEasternEuropeanbankingsectors—bankrunsinBulgaria,adversepolicymeasuresinHungary,profitwarningsfromAustrianlendersoperatin

3、gintheregion—havesparkedfinancialstabilityconcernsanddrivendownbankstocks.Wewouldarguethatthesearelargelyisolatedevents—thelegacyofpastimbalancesratherthanasignalofburgeoningsystemicriskswithinEasternEuropeanbankingsectors.Bottomline:Byandlarge,Easter

4、nEuropeanbanksemergedfromtherecentcrisisonamoresolidfooting,theresultofsignificantdeleveraging,reduceddependenceonexternalfundingandagreateremphasisonlocalcurrencyloans.Wewouldarguethateurozone-basedbankswillmaintaintheirexposuretoEasternEurope(whoseec

5、onomicrecoveryoffersthepromiseofsolidreturns),buttheywillbecomemoreselectivewithintheregion.Incountriesthatarestillstrugglingunderadebtoverhangand/orweakinstitutions,foreignbankswillshyawayfromexpandingtheiroperations(Romania,Bulgaria,andSerbia)orevenc

6、onsiderpullingoutaltogether(Hungary).Marketimplications:TheECB’slending-boostingmeasuresandimprovedcross-bordercapitalflowsbetweenbankswillsupportEasternEurope’sdebtandcurrencymarketsinthenearterm.Inaddition,theregion’sshifttowardamoresustainablebanki

7、ngmodelwillmitigateexternalfinancingrisksandbolsterlocalassetsinadvanceofmonetarypolicynormalizationbyDMcentralbanks.Hungarywillremainaregionaloutlier,astheupcomingFXmortgageconversionwillincurheavylossesonlocallendersin2015,draggingdowntheforintandfac

8、ilitatingafurthersteepeningofthecountry’sbondyieldcurve.Figure1:Region’sBanksGenerallyStrongerPost-Crisis(BankingSectorVulnerabilityIndicator,Q12014;0=weak,10=strong)Bulgaria10UkraineCroatia8CzechTurkey6Republic4Serbia2EstoniaMar-070Mar-14RussiaHungary

9、RomaniaLatviaPolandLithuaniaSource:RGENote:See“IntroducingCountryInsights”and“MeasuringVulnerabilitytoaBankingSectorCrisis”formoredetails.ROUBINIRESEARCH+1(212)6450010NEWYORKAmericas@Roubini.comYOURINSIGHTMULTIPLIER+44(0)2070928850LONDO