* "Real possibility" of bank crisis, Capital Economics says
* Hungary, Balkans and Baltics remain weak spots
* Turkey, Poland, Czech Republic "in decent shape"
* Small Russian banks could be hit by liquidity squeeze
VIENNA, June 16 (Reuters) - Banks in emerging European
countries with high levels of foreign currency loans and
external debt could still enter into crisis due to turmoil in
the euro zone periphery, Capital Economics said on Wednesday.
"Capital levels have been rebuilt and loan to deposit ratios
are falling," said Capital Economics analyst Neil Shearing in a
note. "But familiar vulnerabilities remain, particularly in the
Baltics, Balkans and Hungary."
The main problem for banks in those countries remains the
large stock of credit denominated in euros or Swiss francs,
which makes up between around 60 percent of the loanbooks in
Hungary, Romania and Bulgaria, and 92 percent in Latvia.
The flip side of this exposure is large short-term external
debt, mainly provided through the western parents of the
region's banks, Shearing said in the note.
"Banks in this group of countries will remain vulnerable to
shifts in global risk appetite and much will depend on the
willingness (and ability) of parent banks in the West to roll
over debts," he said.
"This is a particular concern for banks in Bulgaria and
Romania, where financial linkages to the beleaguered Greek
economy are strong," he said.
Greek and Austrian banks own major lenders in the countries
bordering the Black Sea. Austrian banks also have the biggest
exposures in Hungary, while Swedish banks rule banking in the
Baltics. [] []
"The upshot is that at best credit conditions in this group
of countries will remain extremely tight as the excesses of the
past decade are unwound," he said.
"At worst, however, there remains a real possibility that
the deepening turmoil in the euro zone's periphery could trigger
a fresh banking crisis," Shearing added in his note.
Bank credit, which had turbo-charged emerging Europe's boom
years from 2003 to 2007, is growing only in a few countries in
the region, including Turkey, Poland, the Czech republic,
Romania and Bulgaria, according to Capital Economics.
Loanbooks are still shrinking in Hungary, the Baltics and
Russia, the research firm said, and with non-performing loans
still on the rise throughout the region, there is still little
chance of a boost for the economies from credit growth.
"With bad debts rising just about everywhere, this is still
likely to be a credit-less recovery," Shaering said.
(Reporting by Boris Groendahl; editing by Andrew Torchia)
