November 19, 2018 / 10:54 AM / 6 months ago

CEE MARKETS-Warsaw stocks extend falls on bank scandal

    * Warsaw banks stocks fall further after initial rebound
    * Shares in troubled Getin Bank hit record low
    * Polish regulator committee says bank system is safe
    * KNF scandal, Brexit continue to weigh on zloty

    By Sandor Peto
    BUDAPEST, Nov 19 (Reuters) - Warsaw shares extended declines
on Monday, led lower by banks,  as regulators tried to assure
investors that a bribe scandal linked to a troubled bank would
not upset the financial system.
    The Polish banking shares index, after an initial
rebound from Friday's 19-month low, was down 0.75 percent by
1032 GMT. Warsaw's broader stock index was down 0.2
    The index has plunged about 10 percent since last Tuesday,
when the head of the financial markets regulator KNF, Marek
Chrzanowski, stepped down.
    He resigned after the owner of Getin Noble Bank,
Leszek Czarnecki, accused him of trying to extract a
multi-million dollar bribe from him. Chrzanowski denies the
    On Friday Polish central bank governor Adam Glapinski, who 
proposed Chrzanowski for the KNF job, denied speculation that he
would also resign.
    Later, the head of Poland's ruling Law and Justice party,
Jaroslaw Kaczynski, was quoted by the tabloid Fakt as saying
that Prime Minister Mateusz Morawiecki would not have to quit
over the scandal.
    The influential Financial Stability Committee said on Monday
that Poland's financial system was stable, but it was ready to
take action if needed.
    But the bank shares index extended its losses. Among them,
loss-making Getin, Poland's ninth biggest lender by assets, lost
a further 12 percent to hit a record low.
    The zloty extended Friday's losses, shedding 0.2
percent against the euro, to trade at 4.323.
    The scandal has weighed on the currency, along with worries
that Britain's looming exit from the European Union could hurt
Polish trade, analysts said.
    "While the EURPLN does not look greatly mis-priced
currently, we cannot rule out further bouts of volatility until
the scandal settles," Erste analysts said in a note.
    According to data released on Monday, Poland's corporate
sector wages rose by 7.6 percent in annual terms in October,
above an analysts' forecast of 6.7 percent.
    The labour market remains tight and wage growth might even
accelerate, Santander bank economists said in a note.
    The Polish central bank, however, is not expected to start
to increase its record-low interest rates any time soon, with
inflation still below the mid-point of its 1.5-3.5 percent
    The zloty's weakness weighed on the forint, which eased by
0.1 percent, dealers said, even though some market participants,
like analysts in a Raiffeisen note, expect Moody's to upgrade
its sovereign rating for Hungary on Friday.
    The Hungarian central bank is expected to keep rates on hold
at a planned meeting on Tuesday.
    "I do not expect hawkish comments either. The forint moved
in tight ranges, and that is perfect for them," one dealer said.
            CEE       SNAPSHOT   AT                         
            MARKETS             1132 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   26.0000   26.0040    +0.02%    -1.76%
 crown      >                                       
 Hungary    <EURHUF=  321.7700  321.5000    -0.08%    -3.37%
 forint     >                                       
 Polish     <EURPLN=    4.3230    4.3141    -0.21%    -3.39%
 zloty      >                                       
 Romanian   <EURRON=    4.6658    4.6675    +0.04%    +0.30%
 leu        >                                       
 Croatian   <EURHRK=    7.4260    7.4285    +0.03%    +0.06%
 kuna       >                                       
 Serbian    <EURRSD=  118.2000  118.2500    +0.04%    +0.25%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1080.92  1080.530    +0.04%    +0.26%
 Budapest             39260.84  39328.39    -0.17%    -0.30%
 Warsaw                2155.35   2165.46    -0.47%   -12.43%
 Bucharest             8554.30   8574.88    -0.24%   +10.32%
 Ljubljana  <.SBITOP    819.22    817.42    +0.22%    +1.59%
 Zagreb                1748.90   1756.44    -0.43%    -5.10%
 Belgrade   <.BELEX1    745.36    745.70    -0.05%    -1.90%
 Sofia                  594.55    595.31    -0.13%   -12.24%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.5930    0.1330   +224bps    +13bps
   5-year   <CZ5YT=R    1.8470    0.0050   +206bps     +0bps
   10-year  <CZ10YT=    2.1220    0.0470   +174bps     +4bps
   2-year   <PL2YT=R    1.6030   -0.0320   +225bps     -4bps
   5-year   <PL5YT=R    2.4960   -0.0160   +271bps     -3bps
   10-year  <PL10YT=    3.2750   -0.0080   +289bps     -2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.22      2.36      2.46      2.00
 Hungary                  0.31      0.61      0.97      0.13
 Poland                   1.77      1.81      1.87      1.72
 Note: FRA  are for ask prices                              
 (Additional reporting by Alicja Ptak in Warsaw
Editing by Gareth Jones)
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