November 16, 2018 / 3:50 PM / 10 months ago

CEE MARKETS-Polish bank stocks hit 19-month low amid corruption scandal

    * Polish bank stocks hit 19-month low, zloty a 2-week low
    * Corruption scandal knocks down Polish bank shares
    * Brexit chaos weighs on zloty

 (Recasts with plunge of Polish stocks and zloty)
    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, Nov 16 (Reuters) - Warsaw's bank stock
index plunged to a 19-month low on Friday, extending a week-long
rout amid a corruption scandal which caused the head of Poland's
financial markets regulator to step down earlier in the week.
    Bank shares have fallen 8 percent since Tuesday when Marek
Chrzanowski resigned after the owner of Getin Noble Bank
, Leszek Czarnecki, alleged he tried to extract a
multi-million dollar bribe from him. Chrzanowski denies the
    The scandal has compounded concerns over the financial
health of Czarnecki's lenders Getin Noble Bank and Idea Bank,
and the wider sector. 
    Getin's shares plunged 17.5 percent. PKO Bank and
Alior Bank shed almost 6 percent and Bank Pekao
 almost 5 percent.
    "(Investors) are afraid of what could happen over the
weekend with Leszek Czarnecki's banks as an effect of this
week's events," said Lukasz Janczak, an analyst with brokerage
    Warsaw's stock index fell 2 percent by 1408 GMT, with
the part-index of listed banks shedding over 4 percent.
    On Friday Polish central bank (NBP) Governor Adam Glapinski,
who had proposed Chrzanowski to succeed him, denied speculation
that he might also quit.
    The turmoil came as the latest Brexit developments weighed
heavily on sentiment. Central European currencies reversed early
gains after a report that British lawmakers planned to bring a
vote of no confidence against Prime Minister Theresa May over a 
deal to quit the European Union.
    The forint and the crown later regained
some ground, but the zloty sank further, touching a 2-week low
at 4.3184 against the euro. At 1418 GMT it traded at 4.307, down
0.4 percent. 
    The Polish currency's decline was in part due to the
corruption scandal, but Brexit was also a factor, said Mateusz
Bieniek, dealer at Santander Bank Polska.  
    "Brexit is very important for Poland, even more so than for
other countries in the region, because the United Kingdom is  a
really important trade partner for Poland," Bieniek said.
    Other market participants said the main impact of the twists
and turns of the Brexit talks on the region's markets came via
flows into and from big currencies such as sterling, the euro
 and the dollar.
    "The Brexit news caused quite fast movements in sterling and
the euro/dollar. The forint got affected via the dollar," one
Budapest-based dealer said.  
    Polish government bond yields rose due to domestic factors,
said Michal Zak, fixed income dealer of mBank.
    "The main reason is yesterday’s bond auction. The turnover
was bigger than usual and a big chunk of bonds sold during this
auction were long-term, he said.
    The yield on 10-year Polish bonds rose 4 basis points to
3.2775 in the secondary market.
            CEE       SNAPSHOT   AT                         
            MARKETS             1518 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.9800   26.0000    +0.08%    -1.69%
 crown      >                                       
 Hungary    <EURHUF=  321.6200  321.7900    +0.05%    -3.33%
 forint     >                                       
 Polish     <EURPLN=    4.3070    4.2901    -0.39%    -3.03%
 zloty      >                                       
 Romanian   <EURRON=    4.6650    4.6640    -0.02%    +0.32%
 leu        >                                       
 Croatian   <EURHRK=    7.4310    7.4253    -0.08%    -0.01%
 kuna       >                                       
 Serbian    <EURRSD=  118.1000  118.1900    +0.08%    +0.34%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1078.86  1081.030    -0.20%    +0.06%
 Budapest             39131.59  39070.97    +0.16%    -0.62%
 Warsaw                2163.02   2202.91    -1.81%   -12.12%
 Bucharest             8571.10   8573.66    -0.03%   +10.54%
 Ljubljana  <.SBITOP    817.42    815.59    +0.22%    +1.37%
 Zagreb                1747.73   1749.13    -0.08%    -5.16%
 Belgrade   <.BELEX1    745.70    752.56    -0.91%    -1.86%
 Sofia                  595.05    595.74    -0.12%   -12.16%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.5750    0.1110   +223bps    +11bps
   5-year   <CZ5YT=R    1.8420    0.0230   +207bps     +1bps
   10-year  <CZ10YT=    2.1110    0.0160   +174bps     +1bps
   2-year   <PL2YT=R    1.6170   -0.0050   +227bps     -1bps
   5-year   <PL5YT=R    2.5180    0.0430   +275bps     +3bps
   10-year  <PL10YT=    3.2970    0.0580   +293bps     +5bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.20      2.34      2.44      2.00
 Hungary                  0.34      0.60      0.94      0.13
 Poland                   1.77      1.82      1.88      1.72
 Note: FRA  are for ask prices                              

 (Additional reporting by Jan Lopatka from Prague and Marcin
Goclowski in Warsaw
Editing by Keith Weir and Raissa Kasolowsky)
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