RBI: Capital Injection for Hungarian Subsidiary Likely

As a consequence of the Hungarian government’s recent announcement to convert foreign currency loans at the expense of banks, Raiffeisen Bank International (RBI) will have to give a capital injection to its local subsidiary. “It is very likely that there will be a capital increase”, confirmed CFO Martin Grüll on Friday, without giving concrete numbers. The Hungarian government’s new law was “painful but manageable” for the bank, he stated.

RBI’s losses from the conversion of foreign currency loans are expected to amount to approximately € 100m. Given that the current deadlines remain in place, impairments for the full amount would have to be made in the first quarter of 2012 at the latest. However, RBI might account for part of the losses in the third quarter of 2011 already, Grüll explained.

In Hungary, Raiffeisen has granted foreign currency loans totaling € 1.5bn to € 1.6bn. The Parliament has recently adopted a highly disputed law which allows early repayment of mortgage-backed foreign currency loans at a fixed exchange rate that “would correspond to a haircut of 20% to 25%”, according to Grüll. RBI expects that 30% of the borrowers concerned will make use of the special repayment.