Bank stocks knock Central European indices

Sinking bank shares knocked Central European stock indices lower on Friday as a profit warning from regional player Erste increased worries over banking health in parts of the region. The warning issued on Thursday came ahead of a Hungarian parliament vote due on Friday on a bill that will cause losses to domestic banks. The stocks of Hungary's biggest lender, OTP, which is also Central Europe's biggest independent bank, eased more than 3 percent at the opening, hitting 10-week lows.
The fall follows a 14 percent slump on the Vienna bourse of the shares of Austria's Erste, which is present in several Central European countries. Erste said late on Thursday that it could post a record net loss of up to 1.6 billion euros ($2.2 billion) in 2014 due to a hit from its operations in Hungary and Romania. Erste stocks also plunged in Prague and Bucharest, dragging down the main Czech stock index by as much as 3.2 percent.
Erste shares account for about a fifth of the Prague stock exchange's market capitalisation, similar to Komercni Banka whose shares were also hit by Erste's fall, shedding 1.6 percent. Erste's warning coincides with a Hungarian parliament vote due after 1100 GMT on the first step of measures that could cause huge losses to the country's heavily taxed banks.
Friday's bill alone could cause a loss of up to 900 billion forints to banks according to an estimate of the central bank, and planned further measures to convert foreign currency loans into forints this year could deepen the losses. OTP shares traded at 4,200 forints at 0951 GMT, down 2.6 percent. Central European banks posted strong profits before the 2008 global crisis but faced difficulties in several countries since then. Slovenia had to inject more than 3 billion euro last year into banks to prevent a meltdown and two Bulgarian banks were hit by a run by depositors last week.
Shares of Aerodrom fell 7.85 percent on Friday to 44.23 euros. Telekom shed 2.21 percent to 135 euros. The Hungarian government's planned legislation on banks has also weighed on the forint in the past weeks. However, the currency still firmed 0.2 percent against the euro on Friday to 310.26, close to the key psychological level of 310, and government bonds in the region firmed slightly.