(For more from the Reuters Central European Investment Summit,
click on:
http://www.reuters.com/summit/CentralEuropeanInvestment09?pid=500)
*Raiffeisen easing E.Europe credit conditions-CEO
*Czech, Poland, Slovakia have more positive credit outlook
*E.Europe bad loan growth levels 'flattening'
*Too soon for "all clear" on NPLs
*Future credit growth to hit double digits
By Eva Komarek and Boris Groendahl
VIENNA, Sept 28 (Reuters) - Emerging Europe's second biggest
lender, Raiffeisen International <RIBH.VI>, is easing credit
conditions again in the former Communist part of Europe as
economies and currencies have stabilised.
Chief Financial Officer Martin Gruell told Reuters ahead of
the Reuters Central European Investment Summit that restrictive
policies introduced after the collapse of Lehman Brothers were
now loosened in some of the 17 countries were it has business.
He said regional credit growth would return to a
double-digit rate but would fail to reach previous peak levels,
partly due to tighter funding conditions and stricter bank
capital requirements.
"Immediately after the Lehman Brothers crisis we tightened
credit rules, and we are now loosening them again in one country
or the other, countries where we see that the turnaround is
getting closer," Gruell said in an interview on Friday.
He said that the countries for which Raiffeisen was more
confident now included the Czech Republic, Poland, Slovakia and
Slovenia in particular. Ukraine and Hungary are still the
countries with the bleakest outlook, he said.
For the fledgling pickup in economic activity between the
Baltic and the Black Sea, it is crucial that western-owned banks
like Vienna-based Raiffeisen and Erste Group Bank <ERST.VI>, or
Italy's UniCredit <CRDI.MI> turn on the credit taps again.
But Gruell warned that the environment for banks was still
mainly characterised by a rise in bad debt -- non-performing
loans (NPLs) -- that will continue well into next year even if
economic growth returns earlier than that in most countries.
Raiffeisen's stock of NPLs more than doubled since the end
of last year, to 6.8 percent of its total loanbook by June --
mostly in Ukraine, Russia and on the Balkans.
"The development of NPLs is clearly flattening, but it would
be absolutely premature to give the 'all-clear'," he said. "We
expect the peak in 2010 and a significant recovery of earnings
in the banking sector in 2011."
"OVERHEATED"
Western banks had fuelled emerging Europe's economic boom
with loanbooks that grew by a quarter or a third every year --
until the collapse of Lehman Brothers changed it all.
Suddenly, they appeared to be emerging Europe's Achilles'
heel. Had they pulled out rapidly, as foreign investors did in
Asia 1997, some countries may well have fallen into the abyss.
Concerted action by the International Monetary Fund (IMF),
the European Union, and the banks themselves, which made the
unusual move to publicly pledge their long-term commitment to
their investments in the region, averted a meltdown.
Investors' focus has switched since to the mid- to long-term
consequences of the emerging European near-collapse: What will
the changed environment mean for long-term growth and earnings
after the crisis?
Gruell said that credit growth in emerging Europe will be
limited in the long run by more expensive wholesale funding and
higher capital requirements for banks.
Retail lending in hard currencies at lower rates, popular
for mortgages in many countries and a big factor in overall loan
growth, will not go away but become more restrictive.
"There will be more reluctance to lend in foreign
currencies, but it won't work without them, in particular in
countries where interest rates are high," Gruell said. But banks
will ask for more collateral and lower debt-to-income ratios.
Credit growth will return to double-digit percentages but
not to the "excessive" rates of the past, Gruell said.
But without those turbo-chargers, what will happen to
economic growth in the region?
"I see this as a positive change, because we're headed for
sound growth," Gruell said. "Look at countries like Romania or
Ukraine -- growth was overheated, it wasn't healthy anymore."
"Growth will be more controlled, more moderate, but the
region will again be the growth motor for Europe," he said.
(Writing by Boris Groendahl; Editing by Toby Chopra)
