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Banks Pull East European Stocks Down as PX Touches 11-Month Low

Hungarian and Czech stocks slumped, with Erste Bank AG dragging the Prague Stock Exchange Index to an 11-month low, as a missed debt payment by a parent company of a Portuguese lender shook investors’ faith in the euro area’s financial stability.

The Czech Republic’s benchmark PX Index retreated as much as 1.8 percent to 931.1, the lowest level since July 31, before closing down 0.5 percent. Erste, which has a 15 percent weighting in the index, dropped 3.1 percent, taking its decline since July 3 to 23 percent. Hungary’s BUX Index (BUX) fell 0.8 percent in Budapest.

The Stoxx Europe 600 Banks Index declined 1.6 percent to the lowest level since December as Banco Espirito Santo SA plunged 17 percent, leading the the Portuguese securities regulator to suspend the shares. Espirito Santo International missed payments on commercial paper to “a few clients,” according to a July 8 statement. The selloff is reawakening concern that the financial system remains vulnerable to shocks as the euro region emerges from the sovereign debt crisis.

“There’s bad market sentiment today for European banks because of Portugal,” Pavel Ryska, an analyst at J&T Banka in Prague, said by phone.

Erste Group Bank tumbled to the lowest level since November 2012. FHB Jelzalogbank Nyrt., a Hungarian mortgage lender, slumped 9 percent. FHB has dropped 21 percent since July 3, the day before Hungary’s Parliament passed a law requiring banks to make refunds on household loan charges deemed unfair.

To contact the reporters on this story: Lenka Ponikelska in Prague at lponikelska1@bloomberg.net; Andras Gergely in Budapest at agergely@bloomberg.net

To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net Matthew Brown, Zahra Hankir

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