Economic activity has recently picked up again in the CEE-region. Banks that are doing business in this region might make a few extra bucks soon – the positive development of the national currencies reflects the improved macroeconomic outlook: Let's take the Forint as an example: On 5 March '09 Hungary's currency reached its interim low,, 316 forint had to be paid to buy one Euro. Now 273 Forint are worth one Euro. The Polish Zloty shows a similar development - in February 2009, 4.9 Zloty bought a Euro - now the price is at 4.1 Zloty.
Banks closely follow the changes of FX rates, since they were one of the reasons for the long-lasting negative sentiment within the industry torwards the CEE-region. During the economic boom tons of foreign currency loans had been granted in the CEE region. As these currencies then slipped into a tailspin, many borrowers were not able to afford the increased interest rates and repayments. The result: The provisioning for impaired loans increased dramatically in the banks' balance sheets. All of this might change again with the currencies gaining strength again. Given this fact, Erste Group rates the shares of Raiffeisen Int. (pictured CEO Herbert Stepic) to be a 'buy' with a target price of 50 euros.
(gill)
