Household FX Loans " Eastern Europe Edition"

Definitely a topic that won´t be included in any ( Austrian.... ) stresstest scenario.... Watching this Heat Map showing the foreign ( and mainly European ) bank presence in Eastern Europe i can understand why... ;-)

Mit Sicherheit ein Themenbereich der im "brutalst" möglichen Stresstest ( denke da besonders an Österreich ) keinerlei Beachtung finden wird....Wenn man sich auf dieser Heat Map den "nicht unwesentlichen" Einfluß der überwiegend europäischen Banken in Osteuropa ansieht, verwundert das wenig.... ;-)

BNP via FT Alphaville

[the forint] is under pressure and that around 70% of household loans in Hungary are FX loans (possibly either in swiss franc or euro), putting pressure on consumer balance sheets.

Now a special report only on CHF dominated loans..... You can do the math estimating the € share ( see next table )....

Nachfolgend eine Betrachtung der in CHF begebenen Kredite.... Daraus kann man die Summe in € in etwa ableiten ( siehe Tabelle )....

UBS via ZH

The total amount of outstanding Swiss franc loans to banks and non-banks rose from CHF 228bn in 1999 to CHF 558bn in the third quarter of 2008, before declining to CHF 488bn in 1Q 2010 (see Fig. 1).

To appreciate the magnitude of these figures, consider that the sum of these loans equals around ten times the sum of all Swiss banknotes in circulation (CHF 48 bn in May 2010), and that they are nearly equivalent to Switzerland's nominal GDP of CHF 535bn in 2009.

Further, the sum of franc loans abroad is equal to nearly 70% of the outstanding amount of loans in Switzerland (about CHF 723 bn in April 2010).

The CHF 488bn loans are roughly double the size of the SNB's foreign currency reserves. That means there is a large franc short position outstanding, which more than counterbalances the francs that the SNB has created with its current FX interventions.

Over the past decade, a growing number of foreign households and companies borrowed in Swiss francs to finance their local currency investments. Franc-denominated loans became popular in Austria and Eastern Europe owing to Switzerland's lower interest rates compared with their local currency loans. Moreover, the depreciation trend of the Swiss franc between 2003 and 2007 triggered demand for franc loans in Eastern Europe. As long as the franc weakened, demand for franc loans grew. And, for a time, mortgage payments denominated in francs (due to the weakening franc) became progressively less expensive. We suspect that many of these borrowers failed to anticipate the risk of rapid currency movements.

Since June 2010, the SNB no longer manages the exchange rate with interventions as it believes deflationary risks in Switzerland have largely disappeared. Since mid-June, the Swiss franc has appreciated sharply against all major currencies, which means that servicing franc-denominated debt has becomes increasingly expensive for foreigners.

•Absolute amounts of CHF loans outstanding to non-banks: In the Eurozone, Austria has the highest amount with CHF 81bn, followed by Germany (CHF 60bn), France (CHF 30bn) and Luxembourg (CHF 25bn). Outside the euro area, Poland is the leader with about CHF 53bn, followed by Hungary (CHF 36bn), the UK (CHF 23bn), and Croatia (CHF 7bn).

•CHF loans outstanding to non-banks as a share of total loans: The highest share can be observed in Hungary (34%), followed by Poland (20%), Austria (14%), and Croatia (13%).

•CHF loans outstanding to non-banks as a share of foreign-denominated loans: the highest share can be observed in Austria •(68%), followed by Poland (65%), Hungary (52%), and Croatia (about 18%).

•Romania and the Baltic states also have large shares of foreign currency-denominated loans, but they prefer the euro or US dollar (see Fig. 3).

Austrians have been borrowing in Swiss francs for more than 15 years (see Fig. 5), while eastern European countries started around 2004. As Hungary, Poland and Croatia have increased their Swiss franc loans aggressively in the last couple of years, the rapid appreciation of the franc and the weakness of their own currencies hurt borrowers in those three countries (see Figs. 6, 7, 8). New borrowers (who requested a CHF loan in 2007 and 2008), are affected more than earlier borrowers, as the latter took out Swiss-franc loans at lower exchange rates

In many cases, the rise of the franc will have lifted the value of the outstanding debt above the value of the asset(s) and made the credit/mortgage shaky.

At some point, franc borrowers might realize that the franc might stay strong for longer, which could induce them to switch their loans. While the franc is affected by many factors, should the borrowers of franc loans at some point decide to switch their loans into local currencies, it could support the franc further, as the borrowers have to unwind their franc short positions.

We therefore conclude that the large amount of outstanding Swiss franc loans to foreign countries remains a threat for the Swiss economy.

Unlike UBS i´m pretty sure that none of the borrowers cares about the stability of the swiss economy .... ;-)

Beim letzten Satz kann ich mir ein Schmunzeln nicht verkneifen... Bin mir ziemlich sicher das keiner der in Franken verschuldeten sich auch nur ansatzweise um die Stabilität der Schweizer Wirtschaft Sorgen macht.. ;-)

ECB "Instability" Report.......

Not much stability to be found in the ECB Financial Stability Review ( Warning : Over 200 Pages ) ......



Ich konnte wenig Stabilität im 226 Seiten langen EZB Stabilitätsüberblick finden.....

FT

Banks in the 16-nation eurozone face $283bn of further losses this year and next as the recession forces them to write off bad loans, the European Central Bank warned yesterday

> Wishful thinking.....



> Denke das die EZB wie im Regelfall der Musik mal wieder gnadenlos hinterger läuft.... Die Summe würde jeder wohl nur allzu gern für bare Münze nehmen.... Na ja , die EZB erwartet ja auch bereits für 2010 wieder Wachstum.....



The warning, which helped push down the euro against the dollar, came just hours before Moody's, the credit rating agency, downgraded 30 Spanish banks and cajas (unlisted regional savings institutions / see Moody’s bank downgrades, pain in Spain edition & Spanish Banks CDS Ouch!!! via Alea), citing the worsening quality of their loans ( see Chart Of The Day - " 90 Day Delinquency Rates In Spanish RMBS" ) and the struggling Spanish economy.



FT Alphaville

MADRID, June 16 (Reuters) - The number of houses sold in Spain fell by 47.6 percent in April compared to a year earlier, marking the largest percentage fall in 16-straight months of decline, the National Statistics Institute said on Tuesday.

The fates of the eurozone economy and its banks have become increasingly interlinked, the ECB said yesterday in its latest financial stability review report, with bank losses increasingly being caused by bad loans, rather than losses on securities.



Risks to the stability of the financial sector remained high, it said, while "uncertainty prevails" over the banking system's ability to absorb further shocks.



> The exposure to Eastern Europe isn´t "helpful"



> Die extrem starke Stellung in Osteuropa wird die nächsten Jahre ebenfalls wenig hilfreich sein.



Banks' exposure to eastern Europe The Economist

Lucas Papademos, ECB vice-president, said that "a negative interplay" between the financial sector and the economy had become clearer since the start of this year. He stopped short of calling for more transparent stress testing. The ECB, which acts as the monetary authority for the countries that share the euro, is not a bank supervisor.

In spite of the scale of the bank losses forecast by the ECB, its prediction was less gloomy than the International Monetary Fund, which in April put expected writedowns this year and next at $750bn, although taking account of loss provisions and write-offs up until May this year would reduce that to about $540bn.

> I´ll go with the IMF...... Especially in the face of news like this Record Job Losses in Europe via Financial Ninja.... I think it is a safe bet that record job losses will be popping up a a regular basis for years to come....



> Ich bin da eher der Meinung des IMF...... Besonders da wir diese Meldung ( Record Job Losses in Europe via Financial Ninjy ) die nächsten Jahre wohl noch öfter zu hören bekommen werden......



The gap between the ECB and IMF forecasts is due to different assumptions, for instance on the performance of loans.

The ECB also expressed confidence that the eurozone's largest banks could endure any further economic deterioration, saying "most . . appear to be sufficiently well capitalised to withstand severe but plausible downside scenarios".

> Needless to say that i beg to differ...... Taxpayer to the rescue....... This is especially true for the German Landesbanken ( seeGermany's Subprime Crisis: Interview With Achim Dubel & A darkened outlook for Germany’s banks ) The "funny" part is that they were once created to support local economies and are owned by regional governments and savings banks aka the taxpayer.......



> Brauche wohl nicht zu erwähnen das ich diese Meinung nicht teile..... Denke das der Steuerzahler schon bald wieder im großen Stil erneut die Zeche zu zahlen hat ( Bad Banks..... ) Da machen solche Geschichten ( Abstruse Investments der Landesbanken ) gleich doppelt so viel Spaß ....... Passender als Extra 3 ( siehe "Werbespot" der HSH Nordbank ) kann man das Debakel aus deutscher Sicht kaum zusammenfassen ( AusnahmeGermany's Subprime Crisis: Interview With Achim Dubel ) ..... :-)

Despite Massive Stimulus / Subsidies..... European Car Market Down 17.2% In First Quarter 2009

After the banking crisis now behind us ( sarcasm ) we can shift our focus to the real economy & the insurers ( see Unprecedented stress’ for US life insurers & Option Armageddon with some ugly insurance charts )......The numbers in 2010 will be fun to watch....... So far the European countries have provided more than € 10 billion ( € 5 billion from Germany / thanks to an upcoming election ) in direct cash incentives to support new vehicle sales ( on top of all the cheap state guaranteed financing for their lending arms ) ..... The UK will follow next week ( UPDATE: U.K. Budget Gives Drivers Cash to Scrap Old Cars for New Models ) .... To my knowledge the US has proposed a similar incentive for the 2nd half of 2009.... The spin attempt is more or less the same in every country ..... Because they are concerned about the environment... Biggest side effect is that the money spent on cars cannot be spend on other big ticket items like furnitures etc..... The auto lobbyist here in Europe are even more powerful than banking lobbyist... Respect!

Nachdem überall erklärt wird das die Bankenkrise hinter uns liegt ( Vorsicht Satire ) und wie durch Zauberhand Mrdgewinne generiert werden können wir uns jetzt ja ruhigen Gewissens der Realwirtschaft sowie einigen ausgewählten Versicherern (Unprecedented stress’ for US life insurers & die dazugehörigen Tabellen) widmen.....Ich befürchte nur das sich hier die Probleme nicht durch Bilanzierungsakrobatik ( Versicherungen selbstredend ausgenommen ) und generösen Notenbanken lösen lassen wird....Das der Steuerzahler auch hier der einzige Freund und Helfer ( in Form von Konjunkturprogrammen, Bürgschaften über staatliche Banken, Zuschüsse für Entwicklung neuer Antriebstechniken, noch höherer Förderung von Dienstwagen usw. ) sein wird setze ich nach den Erfahrungen der letzten 6 Monate schon mal als gegeben voraus...... Die 2010er Zahlen werden sicher "lustig" .....Bisher haben die europäischen Staaten insgesamt wohl mehr als 10 Mrd € an baren Kaufanreizen in den Markt gepumpt um die Neuwagenverkäufe künstlich anzuheizen ( zusätzlich zu den eh schon oftmals staatlich garatntierten günstigen Finanzierungen für die jeweiligen Autobanken )..... UK wird wohl nächste Woche nachziehen ( UPDATE:U.K. Budget Gives Drivers Cash to Scrap Old Cars for New Models ) ..... Nach meinem Kenntnisstand werden wohl auch die USA für das 2 Halbjahr ähnliches verkünden.... Die "Verpackung" für diese Subvention ist in fast allen Ländern identisch... Die Sorge um die Umwelt muß auch hier herhalten...... Über die Nebenwirkungen ( Geld fehlt für andere Anschaffungen, Crash nur auf 2010 verschoben usw ) solcher Eingriffe wird besonders in Wahzeiten nicht sonderlich lange nachgedacht... Die Lobbyarbeit der Autoindustrie ist mindestens auf einer Stufe mit denen der Banken... Respekt!

ACEA Brussels, 16/04/2009 - Declining for the eleventh consecutive month, passenger car registrations in Europe* fell by 9.0% in March compared to the same month last year. The result was lifted by the on average 3 more working days across the region and the effect of fleet renewal schemes in a number of countries. Over the first quarter of 2009, the market was down by 17.2% with a total of 3,439,720 new registrations compared to 4,154,778 units in the same period last year.

Western Europe recorded 1,429,445 new passenger car registrations in March (-8.0%). The result was boosted by the 39.9% expansion of the German market, where consumers continued to respond widely to the government’s incentive scheme introduced in January. Such a development underpinned the markets in France (+8.0%) and Italy (+0.2%) as well.

In the UK, where March is usually a strong month, registrations fell by 30.5%, reflecting the overall persisting lack of confidence in the economy. This sentiment also prevailed in Spain (-38.7%). Three months into the year, new registrations were down 16.3% in Europe*. The German market was the only one to post growth (+18.0%). The downturn hit the Spanish (-43.1%) and the British (-29.7%) markets hardest. The Italian and French markets were down 19.1% and -3.9%. Among the smaller markets, Luxemburg (-10.4%), Switzerland (-12.3%), Austria (-12.9%) and Belgium (-15.3%) performed best while Ireland and Iceland posted a decline of 64.9% and 91.3% respectively.

In the new EU Member States, 76,803 new cars were registered in March, or 25.4% less than last year. Poland and the Czech Republic, two of the major markets in the region, posted a growth of 2.5% and 0.9% respectively. Slovakia also recorded a strong increase of 18.2% following the introduction of a car scrapping scheme. Looking at the cumulative figures from January to March, Poland consolidated its position as the largest market with a total of 87,939 new registrations and a 1.3% upturn. Latvia performed worst with a contraction by 77.9%.

> There are clearly winners & losers ( see table page 3&4 NEW PASSENGER CAR REGISTRATIONS BY MANUFACTURER ) Too bad that one of the biggest loosers is one of my "favourites" for the worst management in the industry Daimler ( see I Want My Buyback Back Daimler Update... Buy Sky High & Selling At Record Low To Abu Dhabi )

> Diese Tabelle auf Seite 3&4 zeigt sehr schön das es eindeutige Gewinner und Verlierer gibt NEW PASSENGER CAR REGISTRATIONS BY MANUFACTURER . Dumm, das selbst die Staatszuwendungen einen meiner Langzeitfavoriten ( siehe I Want My Buyback Back Daimler Update... Buy Sky High & Selling At Record Low To Abu Dhabi ) nicht zu helfen scheinen......

Eastern Europe Carry Trades.......

Over 50 percent of all loans in a foreign currency..... This "conservative" strategie is now backfiring.........No wonder the ATX in Vienna where lots of the dominant banking players are listed is one of the worst performing.. The main players in the Baltics are coming from Scandinavia and especially Sweden (UPDATE : Just in time Sweden braces for a Baltic backlash) ......... Here are more details about the debt & financing troubles in Eastern Europe..... On top of this i recommend this post Baltic Real Estate / Bubble World Tour on the the real epicentre....

Wenn über 50% aller ausstehenden Kredite nicht in der Landeswährung aufgenommen werden kann man nicht gerade von einer "soliden" Finanzierungsform sprechen.... Solange die nur Unternehmen betrifft kann man sicher noch ein Auge zudrücken...Wenn aber private Hypotheken und PKW´s über diesen Weg finanziert werden darf man sich über einen veritablen Kater nicht wirklich wundern......Kein Wunder das der ATX in Wien einer der am übelsten performenden Aktienmärkte überhaupt ist......Hier kommen weitere Details zur Schulden und Finanzierungslage in (der ehemaligen Boomregion ) Osteuropa. Die wesentlichen Spieler im Baltikum kommen aus Skandinavien und da besonders aus Schweden ( UPDATE: Wie passend Sweden braces for a Baltic backlash )....... Darüberhianus verweise ich auf ein früheres Posting aus dem Jahr 2007 Baltic Real Estate / Bubble World Tour das besonders auf das kommende Epizentrum der Krise eingeht.....


WSJForeign-currency borrowing, which is the normal way for Hungarians to buy homes, cars or other big items, are set to become more expensive because of the weak forint, which has lost about 12% of its value against the euro since Oct. 1.

Viktoria Erdos, a 30-year-old professional dancer smoking a cigarette in a café near Budapest's opera house, said her monthly payments on her Swiss-franc mortgage are up about 15%, but it isn't cramping her style too badly. "I'm buying fewer clothes and am partying a bit less," she said. "I'm not really worried yet."


But today's crisis is serious enough. Investors' concern has forced Hungary's authorities to seek a €5 billion ($6.7 billion) loan from the European Central Bank, as well as verbal support from the International Monetary Fund -- two gestures Hungary hopes will persuade investors that the country has strong allies.

All but one of Hungary's major banks are owned by big international banking groups based in Western Europe or the U.S. Around 40% of Hungary's short-term foreign debt is money that banks like Citigroup Inc. lent to their local subsidiaries, according to central-bank figures.

Around two-thirds of Hungary's foreign-currency debt is owed by the private sector, Mr. Simor said -- and most of that is owed by the local units of multinational companies, which dominate Hungary's business scene.