Fitch sees Bulgarian banks among most vulnerable to new crisis in east Europe.

By bne IntelliNews October 22, 2010
Commercial banks in Romania, Hungary and Bulgaria are the most vulnerable in east Europe if the crisis is to reoccur, Michael Steinbarth, a senior director at Fitch, told Bloomberg in an interview. In those countries, the value of bad loans is high, the weak economic recovery hampers credit growth, and the bank asset quality is weak, Steinbarth added. The macroeconomic imbalances have a negative impact as well. Steinbarth considers the situation of the Romanian banks the worst in the region, followed by the lenders in Hungary and then in Bulgaria. In addition to the efforts of the banks in the region to roll over debt, the lenders in Bulgaria and Romania should fear from contagion effects from the debt crisis in Greece, as Greek banks control a considerable share of the bank assets in those two countries (some 30% in Bulgaria). Also, Bulgaria should bring its budget deficit level within the EU requirements. Fitch holds negative outlooks on 15 of the 44 banks it rates in the region, six of which are located in Bulgaria. The outlook actions take into account the unwinding of the credit growth, the share of the foreign currency debt in the balance sheets and the reliance on funding from parents' institutions. Steinbarth warned that non-performing loan ratios are likely to remain high this year, similarly to loan impairment charges, which however are to decrease in 2011. He recommended that foreign-currency lending should be pressed down in the future and stated that the credit expansion is unlikely to reach its pre-crisis levels. Steinbarth projected that eastern European countries have better growth perspectives than the more developed countries.

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