Belgium-based KBC Group is provisioning EUR 162 million for anticipated losses Hungarian daughter K&H Bank may incur as a result of the government's foreign currency debtor assitance scheme, Reuters reported. The news has now been confirmed by K&H Bank itself.
Similarly to Erste Group and OTP Bank, KBC Group is anticipating massive losses resulting from the government's FX debt relief package in Hungary, the group said on Tuesday. In Q2 2014 KBC is provisioning EUR 162 million for losses its local unit K&H Bank may be forced to write off.
K&H Bank has almost immediately confirmed the above in a Hungarian-language statement, specifying the forint amount of provisions required. "In Q2 2014 our company is creating a net provision of HUF 49 billion pursuant to legislation based on the Highest Court's (Curia) legal interpretation of the currency spread employed in retail banking loans and of one-sided contract modifications."
An additional EUR 70 million impact is potentially expected depending on the specific rules of claims settlement calculations between banks and clients, KBC said. The group remains committed to Hungary, and the capital strength of its local unit is not going to be compromised as a result of the losses, the statement added.
Erste Group released a profit warning earlier last week due to the FX debt assistance measures in Hungary and developments in Romania. OTP is likewise projecting losses on an epic scale.
The market was not surprised by KBC's announcement. On Tuesday the stock opened less than 1% down from Monday's closing price. Investors began pricing in FX debt losses as soon as last Friday, subsequent to Erste's announcement on Thursday evening.
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