CEE MARKETS 2-OTP shares fall on concern over Hungarian forex loans

* OTP off lows, but weaker on concern over banks * Equities firm, year-end flows move currencies * IMF to return to Romania for talks, leu slightly stronger By Sandor Peto BUDAPEST, Dec 23 (Reuters) - Shares in OTP Bank fell to five-month lows on Monday, lagging moderate overall market gains in Central Europe, on concerns Hungary may soon introduce new measures to help out its foreign currencies borrowers.

Romania's leu firmed a shade against the euro after the IMF said it would return to Bucharest for talks on how the government plans to plug a projected revenue gap caused by the postponement of a tax hike.

Hungary's central bank Governor Gyorgy Matolcsy urged new legislation in a weekend interview to offset the cost of such loans, which has risen as the forint has weakened.

The government is meeting on Monday and it may discuss possible measures according to media reports, though it is unlikely to adopt a final scheme until courts rule in coming months on lawsuits against banks filed by borrowers.

Fears of further government reforms of such loans at the expense of banks have been weighing on OTP, Hungary's biggest lender, for months.

OTP shares traded at 4,080 forints at 1500 GMT, off 5-month lows hit at 4,036, but still half percent lower from Friday.

Most other shares in Hungary and the region were rising on Monday. Currency markets were mixed in thin year-end flows.

The Hungarian forint and government bonds shrugged off guidance from Matolcsy in the same interview that the key central bank rate may go down to 2.5 percent in the next months, lower than analysts' 2.8 percent consensus forecast.

The bank has cut the rate to 3 percent from last year's 7 percent, and the Hungarian government bond yield curve steepened on concern that it could reduce rates sharply.

The 10-year Hungarian bond yield dropped 20 basis points to 5.55 percent.

"Somebody bought (10-year) 2023/A probably to arrange positions ahead of the year-end," one Budapest-based trader said. "If there are huge worries that should have affected the forint and bonds." HARD TO CALL Hungarian dealers said worries over possible new measures at the expense of banks ahead of elections in April and May meant market developments early next year were hard to predict.

Matolcsy said half of the eight biggest banks in Hungary's mostly foreign-owned bank system could quit the country within 18 months and local banks or Asian investors take their place.

In theory that could offer expansion opportunities for OTP which has its headquarters in Hungary, and has healthy profits unlike some foreign-owned banks.

"That is fine, but in what kind of a market?" one equity trader said. "Matolcsy's comments suggest that conditions in the entire banking system could become worse for all, including OTP." Foreign banks with operations in Hungary include Austria's Raiffeisen and Erste and Italian lenders Intesa Sanpaolo and Unicredit.

The Czech crown firmed 0.4 to 27.521 per euro, lifted by year-end positioning rather than hopes the country may have a new government soon.

"The crown is largely ignoring politics," a Prague-based dealer said. "It will probably stay locked in the 27.400-700 range in the remaining market days of the year, however it can move quite rapidly within that range." Overall, central European currencies were mixed against the euro, with the zloty flat at 4.159, the forint gaining 0.3 percent to 297.43, while the leu firmed 0.1 percent to 4.478.

The main equity indices of Prague and Warsaw rose 0.6 percent, while the fall of OTP pushed down Budapest by 0.1 percent.

CEE MARKETS SNAPSHOT AT 1601 CET ************************** CURRENCIES ************************ Latest Previous Daily Change bid close change in 2013 Czech crown 27.521 27.637 +0.42% -8.99% Hungarian forint 297.430 298.400 +0.33% -2.18% Polish zloty 4.159 4.157 -0.05% -2.04% Romanian leu 4.478 4.482 +0.08% -0.79% Croatian kuna 7.636 7.635 -0.01% -1.11% Serbian dinar 114.510 114.570 +0.05% -1.93% Note: daily change calculated from previous close at 1700 GMT **************************** STOCKS ************************** Latest Previous Daily Change close change in 2013 Prague 982.02 977.78 +0.43% -5.46% Budapest 18445.95 18459.33 -0.07% +1.50% Warsaw 2420.09 2408.84 +0.47% -6.31% Bucharest 6416.22 6376.63 +0.62% +24.60% ***************************** BONDS ************************** Yield Yield Spread Daily (bid) change vs Bund change in Czech Republic spread 2-year 0.130 0.000 -10bps 0bps 5-year 1.001 +0.018 +11bps +1bps 10-year 2.489 -0.014 +60bps -3bps Hungary 3-year 3.970 -0.080 +360bps -9bps 5-year 4.600 -0.080 +371bps -9bps 10-year 5.550 -0.200 +367bps -22bps ******************* FORWARD RATE AGREEMENTS ****************** 3x6 6x9 9x12 3M interbank Czech Rep 0.370 0.370 0.390 0.38 Hungary 2.890 2.930 3.060 2.99 Poland 2.730 2.730 2.780 2.71 Note: FRA quotes are for ask prices **************************************************************