Аналитика и исследования коммерческой и жилой недвижимости Украины


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Bank crisis spreads in Ukraine

2009-04-03 15:34:02

Bank After Ukraine`s currency collapsed in the global meltdown, so did Valery Ilyin`s household finances - and, he fears, his family`s dream of a bigger home. Mr. Ilyin, a 37-year-old information-technology manager at a telecommunications company in the capital, Kiev, has a mortgage in dollars for a new, three-room apartment. His payments doubled because of the falling exchange rate, to more than his entire monthly salary.

”First, I was shocked. Now, I am trying to think of ways how I can protect my family in this situation,” said the father of three, who is now forced to spend 10,200 hryvnia to buy $1,200 to cover his monthly mortgage payment on the new apartment, which cost $110,000. His salary is only $880 a month.

So far, he is up to date on his payments, but he can lose the apartment if he is three months late. “I never expected anything like this to happen,” he said.

Mr. Ilyin`s story is familiar across Eastern Europe, where banks in countries like Ukraine, Poland, Hungary and Romania loaned recklessly in dollars, euros and Swiss francs and are now facing a wave of bad loans and defaults after the currencies of those countries plummeted.

Homebuyers took on debt not expecting that a sharp drop in their country`s currency would balloon their payments.

The crisis dims hopes for quick prosperity for these post-communist countries, which had grown impressively over recent years in part because of foreign lending. The foreign-loan problem threatens to spread to an already shaken banking system in Western Europe, where some banks are heavily exposed to these emerging economies.

Analysts say the banking sector likely can stay afloat thanks to a hefty $31 billion aid package from the European Bank for Reconstruction and Redevelopment, the World Bank and the European Investment Bank.

But the region is learning a painful lesson in terms of personal hardship from imprudent borrowing.

”I think this was a serious failure of government policy, of bank regulation and of banks themselves who should have known better and been aware of the risk of the local currency depreciation,” said Toby Wight, an emerging markets banking analyst with Global Insight.

In Ukraine, consumers rushed to borrow in dollars to purchase vacuum cleaners, cell phones, apartments and the imported cars that brought Kiev a never-ending traffic jam. They were lured by lower interest rates than on hryvnia-based loans - Mr. Ilyin was offered a 13 percent interest rate in dollars as opposed to 23 percent in hryvnia - and the hryvnia`s previous stable record.

A man walks by a bank advertisement showing U.S. dollars in Kiev on Tuesday. Falling exchange rates have ballooned some homebuyers` payments as the region learns a painful lesson of imprudent borrowing.

The central bank ended four years of fixed rates for the hryvnia in May, letting the market set the rate. Since the crisis hit in September, the currency has lost 43 percent of its value, from 4.9 to 8.5 against the dollar, as exports fell and investors fled emerging markets.

About 70 percent of consumer loans, which constitute 36 percent of all loans here, were extended in foreign currency, mainly in dollars, according to the Renaissance Capital investment bank in Kiev, meaning that credit payments for these households almost doubled. About half of corporate loans also were denominated in dollars.

ASSOCIATED PRESS PHOTOGRAPHS Ukranians stand outside a Bank Kiev office Tuesday. Some analysts predict that dozens of Ukraine`s 180 banks will go under this year as many consumers are predicted to default on mortgage loans, and bankruptcies could threaten the solvency the banking system.

As a result, up to 25 percent of loans in Ukraine may go bad this year - some defaulted and some restructured, as opposed to 2 percent to 4 percent during a good year, according to Dragon Capital investment bank.

”The main risk is the growth of problem loans,” said Vitaliy Vavryshchuk, a banking analyst with Dragon Capital.

Troika Dialog Ukraine put the number of poorly performing loans this year at 11 percent to 12 percent.

The central bank already has taken control of eight banks, shaken by deposit withdrawals and bad loan problems.

The crisis threatens losses not only for Eastern European banks, but also their parent banks in Western Europe, such as Austria`s Raiffeisen and Erste Bank, France`s Societe Generale, Italy`s UniCredit and others. Analysts are optimistic that Europe`s banking sector will be revived thanks to the Western banks` support of their local subsidiaries and the hefty aid package.

Raiffeisen bank has said it will inject $160 million of capital to support its Ukrainian unit.

Mr. Ilyin, who shares a two-room apartment with his wife, Lesya, 36, and three children while their three-room apartment is being built, hopes to keep his mortgage current thanks to his wife`s income as a computer programmer. But tens of thousands of other households here may not be so fortunate.

Ukraine moved closer last week to getting a second crucial installment of a $16.4 billion emergency fund from the International Monetary Fund, after the program was frozen last month because of policy disagreements. A chunk of that loan will go toward recapitalizing the banks.

In neighboring Poland, about 60 percent of retail loans were extended in Swiss francs. That is proving to be a questionable choice now that the Polish zloty lost about 60 percent of its value against the Swiss franc since August peaks.

Poland`s National Bank reported that 3.5 percent of loans to consumers and 6.2 percent of loans to corporations were troubled.

In Romania, foreign currency loans, mainly taken in euros, constitute 60 percent of all retail loans. Defaults on personal euro loans grew 8 percent in December compared with November figures, according to the central bank - a rise attributable to a 20 percent drop of the Romanian leu to the euro last year.

Hungary has 70 percent of household loans denominated in Swiss francs, and with the forint down 50 percent to the franc, things are looking bleak.

“It seems that at that level banks start to feel that their foreign-currency debtors are having problems,” said Peter Duronelly, investment chief at the Budapest Fund Management Co.

http://unian.net/

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