CEE Bond Outlook 2012

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Erste Group Research CEE Bond Outlook 2012 Page 1

Erste Group ResearchSpecial Report | Fixed Income | Central and Eastern Europe06 February 2012

CEE Bond Market Outlook 2012CEE government bonds provide a reasonable reward to investors at a time whengovernment bonds of the core euro area countries have become extremelyexpensive and bear very low yields (if any). CEE countries have, in general, ahigher threshold for the yields they can afford to pay on their debt, withouttriggering the debt spiral.

Juraj Kotian

[email protected]

Sovereign ratings

S&P Fitch Moody's

Croatia BBB- BBB- Baa3

Czech Republic AA- A+ A1

Hungary BB+ BB+ Ba1

Poland A- A- A2

Romania BB+ BBB- Baa3

Slovakia A A+ A1

Source: Bloomberg

Long-term yields (%)

current Dec-2012

Croatia 7.7 7.5

Czech Republic 3.2 4.0

Hungary 8.8 7.9

Poland 5.6 6.0

Romania 7.2 7.2

Slovakia 5.1 5.0

Source: Bloomberg, Erste Group Research

Implied critical yields (%)average yield at which the interest costswould exceed 10% of government revenues

1.8

2.5

3.3 3

.4 4.0 4

.15.0 5

.1 5.3 5

.6 6.0 6

.26.9 7

.1 7.5 7

.77.7

8.6

10.0

10.2 10.7 11.4

0

2

4

6

8

10

12

14

16

Japan

Greece

Ireland

UnitedStates

Italy

Portugal

UK

Belgium

Spain

Germany

Hungary

France

Austria

Poland

Netherlands

Croatia

Slovakia

Turkey

CzechRep.

Slovenia

Romania

Finland

implied critical rate

average interest on outstanding debt

Source: EC Autumn Forecasts, Erste GroupResearch

Find our full set of forecasts in our weeklyCEE Insights

The ongoing sovereign debt crisis in the Euro Area and increased risk

aversion dented demand for CEE government securities at the end of 2011.However, we have not seen any sizable sell-off comparable to the post-Lehman shock. Surprisingly, even Hungary, which lost its investment gradeand escalated disputes with the EU and IMF over controversial laws, did notwitness any massive sell-off.

Governments in CEE6 (Croatia, the Czech Republic, Hungary, Poland,Romania, Slovakia) are also to continue in their fiscal consolidation thisyear and, after the reduction of the deficit from 6.4% in 2010 to anestimated 4.1% of GDP on average in 2011, the deficit is to further shrink to3.6% of GDP on average in 2012.

Interest rates will remain low both in the US and the Eurozone, plus thegenerous LTROs conducted by the ECB will keep demand for goviesstrong, especially for short-term securities. The ECBs 3Y long-termrefinancing operation has obviously eased tensions in the Europeanbanking sector and reduced borrowing costs for governments, not only inthe Eurozone, but through improved sentiment also in CEE.

Extension of the average maturity of outstanding debt is one of the mainreasons why debt agencies in CEE are looking abroad to issue Eurobonds.The average maturity of government securities still remains relatively shortin CEE, about four years on average, compared to about 6-7 years formajor Euro Area countries. Poland, Romania, Turkey and Slovakia alreadytapped the foreign markets in January with Eurobonds and syndicated bondissues. The Czech Republic and Croatia could issue Eurobonds soon.

The ratings of many CEE countries have been improving in relative termsagainst the widening group of downgraded Euro Area countries. Given thatmany funds and insurance companies have investment restrictions basedon sovereign ratings, the pool of countries in which they can invest hasbeen shrinking. The Czech Republic, Poland and Slovakia may benefit fromtheir relatively good rating and low level of both private and public debt.

Extremely low yields have enabled many advanced countries to stay abovewater and service their high stock of debt without serious problems. But theturmoil in the Euro Area increased pressure on yield spreads and openeddiscussion about the yield level, which would still be affordable from thesolvency/liquidity point of view. The Czech, Romanian and Slovakgovernments have the biggest breathing space for spikes in yields amongCEE countries.
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Supply of government securities in 2012

With the exception of Hungary and Croatia, CEE6 countries have beenadvancing in their fiscal consolidation. Although there is some slippage inthe pace of consolidation compared to their original plans in countries wheregeneral elections were held (Poland, Croatia in 4Q11) or will soon takeplace (Slovakia in March 2012), we have seen decisive action being takenby governments to curb the gap right after the elections (Poland).Governments in CEE6 are also to continue in their fiscal consolidation thisyear and, after the reduction of the deficit from 6.4% in 2010 to an estimated4.1% of GDP on average in 2011, the deficit is to further shrink to 3.6% ofGDP on average in 2012. The newly-formed the six pack should strengthenbudget surveillance and thus make the consolidation process less

vulnerable to sudden turnarounds in politics in the years beyond 2012.

Fiscal deficit 2012F(% of GDP) Fiscal deficit in CEE6 (% of GDP)

1.0%

1.5%

2.2%2.5%

3.1% 3.1%3.4% 3.4% 3.5%

3.6%

4.2%

4.7%4.8%

5.0%5.4%

5.9%

7.8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Germany

Turkey

Italy

Ukraine

Austria

Netherlands

Romania

Hungary

CzechRep.

Poland

Serbia

Belgium

Slovakia

Croatia

France

Spain

UK

6.4%

4.1%3.6%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2010

2011E

2012F

Source: EC Autumn Forecasts, Erste Group Research

When we translate the deficits into monetary terms under conservativeassumptions that governments will not raise money through the sale of stateassets, CEE6 governments would need to issue about EUR35bn of newdebt in 2012. That is a slightly lower volume than in 2011 and a relativelysmall portion compared to estimated net issuance in the Euro Area of aboutEUR 300bn, excluding Ireland, Greece and Portugal, which are under theIMF program. French government securities will contribute about one thirdof overall net issuance in the Euro Area in 2012.

On top of the new debt, CEE6 governments have to rollover redeeming debtworth EUR 72bn (about 8% GDP on average), predominantly in the localcurrency. A more challenging situation will be the rollover of maturing Italian,Spanish, French and Belgium debt worth 13.5-20.5% of their GDP, whereany slippage in fiscal consolidation may be penalized by a reduced rollover,especially by non-residents. Of course, the ECBs generous LTROs willboost demand, but mainly at the short-end.

Juraj [email protected]

Fiscal consolidation advances

further in 2012

Treasury funding needs should

total EUR 35bn in CEE6

Rollover of redeeming debt willbe challenging mainly in Euro

Area


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Redemptions in 2012 (% of GDP)

3.0%

5.9%6.6% 6.8%

7.0% 7.2%7.4% 7.6%

8.1% 8.3%9.1% 9.2%

10.2%

13.5% 13.9%

16.1%

20.2%

0%

5%

10%

15%

20%

25%

Ukraine

Austria

Turkey

Serbia

Croatia

UK

Poland

Slovakia

Romania

Germany

Hungary

CzechRep.

Netherlands

Spain

France

Belgium

Italy

T-bills in LCY T-bonds in LCY FX debt


In total, we assume the gross issuance of government securities in CEE6 tobe EUR 107bn (or 12% of GDP in average). From the perspective of theEuro Area sovereign debt crises, high gross issuance and strongdependence on demand from non-residents represents the major rolloverrisk. High combinations of these two factors are seen in Hungary and, from

the Euro Area, in France and Belgium (if we do not count those countrieswhich are under the IMF program). However, the risks could materialize onlyif investors lose faith in the fiscal discipline of that country or any globalevent (i.e. a Greek default) hits sovereign debt as an asset class.

Estimated gross issuance (% of GDP)

5.5%

8.1%9.0% 9.4%

11.0% 11.0%11.5%

12.0% 12.4%12.5% 12.7%

13.3%

15.0%

19.2% 19.4%

20.7%

22.5%

0%

5%

10%

15%

20%

25%

Ukraine

Turkey

Austria

Germany

Poland

Serbia

Romania

Croatia

Slovakia

Hungary

CzechRep.

Netherlands

UK

France

Spain

Belgium

Italy

Redemptions in 2012 Fiscal deficits in 2012


Hungary, France and Belgiumwill be watched carefully bymarkets due to their high gross

issuance


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Extension of the average maturity of outstanding debt is one of the main

reasons why debt agencies in CEE are looking abroad to issue Eurobonds.The average maturity of government securities still remains relatively shortin CEE, about 4 years on average, compared to about 6-7 years for majorEuro Area countries. The longest average maturity is seen in the CzechRepublic, where inflation is more predictable and the domestic investor basemuch broader than in countries which still have to liberalize prices (i.e.,Romania) or develop their local capital markets.

Average maturity of government securities (years)

0

2

4

6

8

10

12

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

Romania Turkey Hungary Slovakia Ukraine Croatia Poland Czech

Republic

Slovenia

Average maturity of outstanding government securities (years)

Average maturity of outstanding Eurobonds (years)


Actually, all CEE governments tapped foreign markets with Eurobonds orsyndicated loans last year. The Polish government has been the mostactive; they already placed two new tranches of their existing EUR and USDEurobonds in January (EUR 750m and USD 1bn, respectively). Romaniaand Turkey managed to place EUR 1.5bn and USD 1.5bn in 10Y Eurobondsin January, while the Slovak government placed EUR 1bn of 5Ysyndicatedbonds in January. The Czech government, for which the supply ofEurobonds has been particularly benign so far, indicated its intention to tap

foreign markets in the next couple of months, depending on marketconditions. The main reason for foreign issuance would be thediversification of the investor pool and perhaps the further extension ofmaturity (which is already the longest in CEE), The following chart showsthat the Czech Republic gets almost no interest rate discount fromEurobonds compared to locally-issued T-bonds.

CEE government will issue

Eurobonds in order to extendaverage maturity

Poland, Turkey and Slovakiatapped foreign markets inJanuary...

... Czech Republic and Romania

will follow soon


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Average interest on government securities (%)

0

2

4

6

8

10

12

14

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

2009

2010

2011

Poland Hungary Czech

Republic

Slovakia Romania Slovenia Turkey Croatia Ukraine

Average interest on T-bonds (%)

Average interest on Eurobonds (%)


Who is going to buy government bonds?

Foreign demand

The ongoing sovereign debt crisis in the Euro Area and increased riskaversion dented demand for CEE government securities at the end of 2011.However, we have not seen any sizable sell-off comparable to the postLehman shock.

Non-residents in HUF securities (HUFbn)

1500

2000

2500

3000

3500

4000

4500

Jan-2008

Ap

r-2008

Ju

l-2008

Oc

t-2008

Jan-2009

Ap

r-2009

Ju

l-2009

Oc

t-2009

Jan-2010

Ap

r-2010

Ju

l-2010

Oc

t-2010

Jan-2011

Ap

r-2011

Ju

l-2011

Oc

t-2011

Jan-2012

post-Lehman

crisis

recent turmoil

Source: AKK, Erste Group Research

No big sell-off comparable to

post-Lehman so far


6/14



We expect that the environment of very low interest rates both in the US and

the Eurozone, plus the generous LTROs conducted by the ECB will keepdemand for govies strong, definitely for short-term securities. The ECBs 3Ylong-term refinancing operation has obviously eased tensions in theEuropean banking sector and reduced borrowing costs for governments, notonly in the Eurozone, but through improved sentiment also in CEE. CDS onCEE sovereign debt narrowed by about 50-100bp in January and bondyields collapsed further. We expect that there might be some downside riskin the next couple of months, given that the Eurozone sovereign debt crisisis far from resolved and Greek default could hit sovereign bonds as an assetclass globally.

It is important to mention that the bulk of foreign investors who buy CEEbonds are definitely not banks. The detailed breakdown of non-residents

buying holding the CEE government securities has been published only forPolands T-bonds so far. It shows that foreign banks hold only 1/10 offoreign holdings of T-bonds. The foreign insurance companies and funds(mutual and pension) are a far more important player, with an 85% shareamong non-residents holding Polands T-bonds. Thus, potentialdeleveraging in the European banking sector should have a very limiteddirect impact on Polish bonds.

Breakdown of investors in Polish government bonds

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Banks Funds Others Banks Funds Others

Domestic investors Foreign investors

Foreign banks are not

the major buyer

but funds (pension, insurance&mutual)

Source: Ministry of Finance, Erste Group Research

High demand from the non-bank financial sector can be associated withrelatively stable ratings of many CEE countries which have been improvingin relative terms against the widening group of downgraded Euro Areacountries. Given that many funds and insurance companies haveinvestment restrictions based on sovereign ratings, the pool of countries inwhich they can invest has been shrinking. The Czech Republic, Poland andSlovakia (all three with investment grade) may benefit from their relativelygood rating and low level of both private and public debt. Size and liquidityspeaks in favor of the Polish market. Hungary, due to its recent downgradeto Junk, might lose this large investor group. Croatia has to speed up fiscalconsolidation in order not to lose its investment grade (Croatia is at the lastnotch of investment grade scale with a negative outlook from two ratingagencies) Romania is on the edge, given that S&P ranks Romania onenotch below investment grade, while Fitch and Moodys keep Romania ininvestment grade with a stable outlook. An upgrade by S&P wouldsubstantially broaden the pool of investors who could buy Romanian debt.

ECB 3Y LTRO had positive

effect on CEE assets

Foreign demand for CEE bondsis not dominated by banks, as

one would have thought

Investment grade matters,country has access to broader

pool of investors


7/14



Despite huge progress in fiscal consolidation carried out by the Romanian

government, an upgrade would be feasible only after Novembers election, ifthe current course in fiscal policy is maintained.

Relative ratings of CEE countries have improved

Rnb

S&P Fitch Moody's

AAA AAA Aaa AA+ AA+ Aa1 AA AA Aa2

AA- AA- Aa3 A+ A+ A1 A A A2 A- A- A3

BBB+ BBB+ Baa1 BBB BBB Baa2

BBB- BBB- Baa3 BB+ BB+ Ba1 BB BB Ba2 BB- BB- Ba3

B+ B+ B1 B B B2 B- B- B3

CCC CCC Caa CC CC Ca

blue/white/red = stable/positive/negative outlook the rating as of mid 2008

change between Jun 2008 and Dec 2009 change since Jan 2010

Greece

Slovakia

Poland

Hungary

Ukraine

CzechRep.

Croatia

Turkey

Romania

Inmega

S

avga

Ireland

Spain

Austria

Portugal

Italy


Domestic demand

Domestic demand for government securities will be determined mainly bynet increase of deposits over loans and growth of assets undermanagement of mutual funds, pension funds and insurance companies. Inpast two years the net annual inflow of deposits hovered between 1-4% ofGDP in CEE countries. Deposits were primary used for funding new creditsin the past, reducing the liquidity which could be invested into the bonds. But

given likely moderation of credit supply (due to denting demand andincreased regulation), banks can allocate much higher fraction of depositsinto the government securities (which consume less capital).

Moderation of credit supply willfree up liquidity for bond

purchases


8/14


9/14



Net assets of commercial banks in the central bank* (% of GDP, 2011)

0.9%

10.0%

13.0%

7.8%

0.1%

-1.4%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Croatia Czech Rep Hungary Poland Romania Slovakia

Source: Central banks, Erste Group Research, * adjusted for reserve requirementsBesides committed credit lines, governments can spend their cash, sell theirliquid assets and last but not least privatize state-owned assets.

Deposits and cash of general government (% of GDP, uncons. 3Q11)

2.3

3.6

4.8 4.9

5.9 6.06.6

8.08.8

10.010.6

10.911.2

0

2

4

6

8

10

12

Netherlands

Be

lgium

Italy

A

ustria

P

oland

F

rance

Ro

mania

Spain

Slo

vakia

Ge

rmany

Finland

Hu

ngary

Czech

Rep.

Source: Eurostat, BCR (Dec2010), Erste Group Research

But what if demand and supply meet at a high price, causing a debt spiral?What is an affordable interest rate?

Costs of financing and critical ratesFurther escalation of the Euro Area debt crisis also elevated risk premiumson sovereign debt for CEE countries. CDS increased by 100-300bp over thelast year for CEE6, however, the absolute level of bond yields for Poland,and the Czech Republic even declined. The reason is that the swap curve inthe Euro Area went down and, due to the economic slowdown, theexpectations on rate hikes vanished in Poland, the Czech Republic.Hungary, Ukraine and Turkey faced an increase of interest rates and yields,

Financing costs leveled up in

autumn


10/14



given that their currencies came under strong pressure and central banks

had to tighten their monetary policy (Hungary, Turkey) or sell FX reserves(Turkey, Ukraine) draining local currency liquidity from the market andpushing yields higher anyway.

Three years ago, at the peak of the post-Lehman stress, we wereadvocating that risk premiums on CEE debt are not justified and investorsshould shorten some heavily indebted Euro Area countries vs. CEEsovereigns. At that time, we argued that the debt level of CEE countries ismuch lower, not only in the public sector, but also in the private sector.

However, extremely low yields have enabled many advanced countries tostay above water and service their high stock of debt without seriousproblems. But the turmoil in the Euro Area increased pressure on yield

spreads and opened discussion about the yield level, which would be stillaffordable from the solvency/liquidity point of view. Instead of looking at thedebt sustainability criteria, which are a function of the nominal GDP growth,primary balance, the debt level and the average interest costs, we haveopted to look at the ratio of interest costs on state debt to governmentrevenues, as watched by the rating agencies in their heat maps.

Interest costs to tax revenues (2012F)

2.5% 3

.6%

4.0%

4.6%

4.7%

5.2%

5.2%

5.4%

5.8% 6

.7%

6.8%

7.2%

7.3%

7.5%

7.9% 8

.7% 9.

6%

11.2%

12.3%

12.3%

15.3%

16.7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Finland

CzechRep.

Netherlands

Slovakia

Slovenia

Romania

Germany

France

Austria

Spain

Euroarea

Croatia

Poland

Japan

UK

Hungary

UnitedStates

Italy

Portugal

Ireland

Turkey

Greece


This simplified approach better explains how much governments feel thepressure from servicing their public debt. Despite the fact that solvency isdefined as the ability of the country to repay the whole debt in the long-run,we like Otmar Issings view

1(the former chief economist of the ECB and one

of the fathers of the single currency) that solvency of a sovereign debtor istraditionally defined as the state being able to service its debt by collectingtaxes, which is roughly the ratio we mentioned in the previous paragraph.We arbitrarily set the critical level of interest costs at 1/10 of tax revenuesThat is far from thresholds that would lead to default, but high enough totrigger market fears among investors and cause discomfort for governmentswith high interest payments. We calculated the implied critical average yieldfor individual countries at which the interest costs would exceed 10% of taxrevenues.

1FT article on Nov 11

th, Moral hazard will result from ECB bond buying

CEE countries are infundamentally better fiscal

position than Euro Area

Heavily indebted countries stayabove water thanks to very low

yields

Hungary still stays below 10%threshold of interest costs to tax

revenues


11/14



Critical rates and the average interest costs (2012F)

1.8

2.5

3.3

3.4 4

.0 4.1

5.0

5.1 5

.3 5.6 6

.0 6.2

6.9 7

.1 7.5 7

.77.7

8.6

10.0

10.2 1

0.7 1

1.4

0

2

4

6

8

10

12

14

16

Japan

Greece

Ireland

United

States

Italy

Portugal

UK

Belgium

Spain

Germany

Hungary

France

Austria

Poland

Netherlands

Croatia

Slovakia

Turkey

CzechRep.

Slovenia

Romania

Finland

implied critical rate

average interest on outstanding debt


The critical rates have fallen over the past years for all European countries(the US and Japan, too) as the growth of tax revenues has been laggingbehind debt dynamics Mounting debt has increased the importance of theaverage interest rate at which the debt is financed for state debt. In the caseof sudden market turbulence, the debt spiral can be triggered via higher

borrowing costs. Fortunately, Romania, the Czech Republic and Slovakiahave much higher thresholds of average interest rates on state debt thatwould put the public finances under heavy pressure and they are moredistant from it. Hungary should avoid any heavy financing above 6% in orderto stay below the critical rate.

It seems that the policy of low interest rates will remain in place in majoreconomies for a while (in the US, the FED said at least until late 2014). Weforecast that the ECB will even cut interest rates further, to 0.5% andcontinue in providing long-term unlimited liquidity through LTROs. Thatshould stimulate demand from T-bills and short-term bonds, keeping theyield curve relatively steep. In CEE, we expect the easing bias to reemergesoon. It seems that the Hungarian central bank does not need to rush into

hiking interest rates at the moment (just a couple of weeks ago, about two50bp rate hikes were priced in) and it might even cut rates to 6.25%, fromthe current 7%. The Polish central bank is to cut interest rates in the secondhalf to 4%. With the exception of Turkey, inflation eased across the CEEregion in the last month of 2011.There is a chance that the Romaniancentral bank will cut rates as well, but the last rate cut was commented onby the IMF as premature and there are still risks associated with generalelections scheduled for November 2012. We forecast the sharpest declineof yields in Hungary (about 90bp), while for other countries we expect thelong-term yield to remain flat or even increase (the Czech Republic (+80bp),following the steepening of the yield curve in the Euro Area.

Romania, Czech Republic andSlovakia have biggest breathingspace for yield increases,Hungary should avoid financing

at 6%+

Further monetary easing andgenerous liquidity provision byECB might provide temporary

relief


12/14



Conclusion

We think that CEE government bonds provide a reasonable reward toinvestors at a time when government bonds of the core euro area countrieshave become extremely expensive and bear very low yields (if any). Despitea successful 3Y LTRO and its positive impact on sovereign spreads both inthe euro area and CEE, we see some upward risk for yields in the Europeanbenchmarks and a steepening of the yield curve. A global credit event (i.e.,a Greek default) or frustration from mounting public debt, higher capitalrequirements for holding the sovereign debt could have a negative impacton bonds as an asset class worldwide. Fortunately, CEE countries have, ingeneral, a higher threshold for the yields they can afford to pay on theirdebt.

Of the CEE countries, Hungary provides the most appealing interest carry:there is further potential for capital gain, especially after the new programwith IMF is agreed. On the other hand, Hungarian public finances are morevulnerable in terms of spikes in yields compared to the other CEE6. We seePolish bonds as still attractive, given the very strong and diversified demandside (between banks and funds). Croatia, which faces relatively high FXredemptions this year, has to speed up fiscal consolidation in order to avoidrising financing costs and a ratings downgrade. Slovakia will remain focusedon issuing syndicated bonds this year, with the intention of diversifying theinvestor group, and will extend the average maturity. In the event of highervolatility on the bond market, Slovakia should benefit from access for itsfinancial sector to the ECBs LTRO and by being more distant from itscritical rate compared to its euro area peers. Despite monetary easing, wesee Romanian yields as flat. Uncertainty about the continuity of the currentcourse of fiscal consolidation after Novembers elections will preventRomania from being upgraded, despite the significant progress which hasbeen made under the IMF program. Czech bonds are definitely the mostconservative investment out of the CEE6. Czech bonds have the longestaverage maturity out of the CEE6, with an advanced economic anddomestic financial market which enjoys a huge liquidity surplus. The CzechRepublic has one of the lowest ratios of interest costs to tax revenues in theEU, comparable to the best AAA in the euro area (Finland, the Netherlands).Nevertheless, we see some upward risks for LT yield increases associatedwith the steepening of the euro area yield curve. However, in the event ofextreme volatility on global bond markets, having the critical rate for averageinterest costs at 10% (almost twice as high as Germany or the UK couldafford) would pay off.
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ContactsGroup Research Research, SlovakiaHead of Group Research Head: Juraj Barta, CFA (Fixed income) +421 2 4862 4166Friedrich Mostbck, CEFA +43 (0)5 0100 - 11902 Sona Muzikarova (Fixed income) +421 2 4862 4762Macro/Fixed Income Research Maria Valachyova (Fixed income) +421 2 4862 4185Head: Gudrun Egger, CEFA (Euroland) +43 (0)5 0100 - 11909 Research, UkraineAdrian Beck (AT, SW) +43 (0)5 0100 - 11957 Head: Maryan Zablotskyy (Fixed income) +38 044 593 - 9188Mildred Hager (US, JP, Euroland) +43 (0)5 0100 - 17331 Ivan Ulitko (Equity) +38 044 593 - 0003Alihan Karadagoglu (Corporates) +43 (0)5 0100 - 19633 Igor Zholonkivskyi (Equity) +38 044 593 - 1784Peter Kaufmann (Corporates) +43 (0)5 0100 - 11183

Carmen Riefler-Kowarsch (Covered Bonds) +43 (0)5 0100 - 19632 Treasury - Erste Bank ViennaElena Statelov, CIIA (Corporates) +43 (0)5 0100 - 19641 Saving Banks & Sales RetailMacro/Fixed Income Research CEE Head: Thomas Schaufler +43 (0)5 0100 - 84225Co-Head CEE: Juraj Kotian (Macro/FI) +43 (0)5 0100 - 17357 Equity Retail SalesCo-Head CEE: Birgit Niessner (Macro/FI) +43 (0)5 0100 - 18781 Head: Kurt Gerhold +43 (0)5 0100 - 84232CEE Equity Research Fixed Income & Certificate SalesCo-Head: Gnther Artner, CFA +43 (0)5 0100 - 11523 Head: Uwe Kolar +43 (0)5 0100 - 83214

Co-Head: Henning Ekuchen +43 (0)5 0100 - 19634 Treasury Domestic SalesGnter Hohberger (Banks) +43 (0)5 0100 - 17354 Head: Markus Kaller +43 (0)5 0100 - 84239Franz Hrl, CFA (Steel, Construction) +43 (0)5 0100 - 18506 Corporate Sales ATDaniel Lion, CIIA (IT) +43 (0)5 0100 - 17420 Head: Christian Skopek +43 (0)5 0100 - 84146

Christoph Schultes, CIIA (Insurance, Utility) +43 (0)5 0100 - 16314 Fixed Income & Credit Institutional SalesThomas Unger; CFA (Oil&Gas) +43 (0)5 0100 - 17344 Institutional Sales InternationalVera Sutedja, CFA (Telecom) +43 (0)5 0100 - 11905 Head: Christoph Kampitsch +43 (0)5 0100 - 84979Vladimira Urbankova, MBA (Pharma) +43 (0)5 0100 - 17343 Institutional Sales AustriaMartina Valenta, MBA (Real Estate) +43 (0)5 0100 - 11913 Head: Thomas Almen +43 (0)50100 - 84323Gerald Walek, CFA (Machinery) +43 (0)5 0100 - 16360 Martina Fux +43 (0)50100 - 84113International Equities Michael Konczer +43 (0)50100 - 84121Hans Engel (Market strategist) +43 (0)5 0100 - 19835 Marc Pichler +43 (0)50100 - 84118Stephan Lingnau (Europe) +43 (0)5 0100 - 16574 Institutional SolutionsRonald Stferle (Asia) +43 (0)5 0100 - 11723 Head: Zachary Carvell +43 (0)50100 - 83308Editor Research CEE Brigitte Mayr +43 (0)50100 87481Brett Aarons +420 956 711 014 Mikhail Roshal +43 (0)50100 87487Research, Croatia/Serbia Institutional & High End SalesHead: Mladen Dodig (Equity) +381 11 22 09 178 Head: Patrick Lehnert +43 (0)5 0100 - 84259

Head: Alen Kovac (Fixed income) +385 62 37 1383 Antony Brown +44 20 7623 - 4159Anto Augustinovic (Equity) +385 62 37 2833 Abdalla Bachu +44 20 7623 - 4159Ivana Rogic (Fixed income) +385 62 37 2419 Lukash Beeharry +43 (0)50100 - 84125Davor Spoljar, CFA (Equity) +385 62 37 2825 Ulrich Inhofner +43 (0)50100 - 84324Research, Czech Republic Margit Hraschek +43 (0)50100 - 84117Head: David Navratil (Fixed income) +420 224 995 439 Institutional Sales GermanyPetr Bittner (Fixed income) +420 224 995 172 Head: Jrgen Niemeier +43 (0)50100 - 85503Petr Bartek (Equity) +420 224 995 227 Marc Friebertshuser +43 (0)50100 - 85540Vaclav Kminek (Media) +420 224 995 289 Sven Kienzle +43 (0)50100 - 85541Jana Krajcova (Fixed income) +420 224 995 232 Michael Schmotz +43 (0)50100 - 85542Martin Krajhanzl (Equity) +420 224 995 434 Sabine Loris +43 (0)50100 - 85543Martin Lobotka (Fixed income) +420 224 995 192 Carsten Demmler +43 (0)50100 - 85580Lubos Mokras (Fixed income) +420 224 995 456 Jrg Moritzen +43 (0)50100 - 85581Research, Hungary Rene Klasen +43 (0)50100 - 85521Head: Jzsef Mir (Equity) +361 235-5131 Klaus Vosseler +43 (0)50100 - 85560Bernadett Papp (Equity) +361 235-5135 Milosz Chrustek +43 (0)50100 - 85522Gergely Gabler (Equity) +361 253-5133 Andreas Goll +43 (0)50100 - 85561Zoltan Arokszallasi (Fixed income) +361 373-2830 Mathias Gindele +43 (0)50100 - 85562Research, Poland Institutional Sales CEETomasz Kasowicz (Equity) +48 22 330 6251 Head: Jaromir Malak +43 (0)50100 - 84254Piotr Lopaciuk (Equity) +48 22 330 6252 Sales CEEMarek Czachor (Equity) +48 22 330 6254 Pawel Kielek +48 22 538 62 23Research, Romania Piotr Zagan +43 (0)50100 - 84256Head: Lucian Claudiu Anghel +40 37226 1021 Ciprian Mitu +43 (0)50100 - 84253Head Equity: Mihai Caruntu (Equity) +40 21 311 2754 Institutional Sales SlovakiaDorina Cobiscan (Fixed Income) +40 37226 1028 Head: Peter Kniz +421 2 4862-5624Dumitru Dulgheru (Fixed income) +40 37226 1029 Sarlota Sipulova +421 2 4862-5629Eugen Sinca (Fixed income) +40 37226 1026 Institutional Sales Czech RepublicRaluca Ungureanu (Equity) +40 21311 2754 Head: Ondrej Cech +420 2 2499 - 5577Research Turkey Pavel Zdichynec +420 2 2499 - 5590Head: Erkin Sahinoz (Fixed Income) +90 212 371 2540 Milan Bartos +420 2 2499 - 5562Sevda Sarp (Equity) +90 212 371 2537 Radek Chupik +420 2 2499 - 5565Evrim Dairecioglu (Equity) +90 212 371 2535 Institutional Sales CroatiaOzlem Derici (Fixed Income) +90 212 371 2536 Head: Darko Horvatin +385 (0)6237 - 1788Mehmet Emin Zumrut (Equity) +90 212 371 2539 Natalija Zujic +385 (0)6237 - 1638

Institutional Sales HungaryNorbert Siklosi +36 1 235 - 5842

Institutional Sales RomaniaHead: Valentin Popovici +40 21 310-4449 - 59Ruxandra Carlan +40 21 310-4449 - 612


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CEE Bond Outlook 2012

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