Austria’s Erste Bank warns of $1bn loss

Austria’s Erste Group Bank warned on Monday it would make a net loss this year of up to 800m euros ($1 billion) and not pay a dividend after taking hits on its foreign currency loans in Hungary and euro zone sovereign debt, Reuters reported. The bank’s shares were down more than 14 per cent at 17.75 euros.  The losses at the Eastern European-focused lender resulted from the marking down of exposure to the sovereign debt of struggling euro zone countries and big writedowns in Hungary and Romania on foreign exchange-related loans. The bank also changed the way it handles credite default swaps. Erste Bank said the volatility in financial markets would see it delay the repaying of 1.2bn euros in non-voting capital which it got from Austria during the global banking crisis for at least a year and skip a 2011 dividend. The steps should not trigger demand for more capital at group level. Due to a “continued strong underlying operating profitability” its core tier 1 capital solvency ratio was set to end 2011 at 9.2 percent of assets, the same level as a year before.