Hungary's MKB Bank had a loss of €392 million in 2011, its parent bank, Germany's BayernLB, said in its report for the period published Thursday.
BayernLB said a government-initiated scheme allowing early repayment of foreign currency-denominated loans at discounted exchange rates "contributed considerably" to the net loss at MKB.
"MKB's earnings outlook has been permanently impaired by the early repayment of foreign currency loans and the continuously difficult political and economic environment," the German bank said.
BayernLB wrote down €576 million on the book value of MKB in its earnings. The bank booked an after-tax loss of €328 million in 2011, according to preliminary data calculated using German accounting standards.
BayernLB said it started restructuring measures at MKB in 2010 and had accelerated their pace since. It strengthened risk management at MKB "with emphasis on optimizing the loan process" and said the focus for 2012 would be on "continuing the repositioning of MKB, deleveraging, optimizing the capital structure, sale of non-strategic shareholdings, and improved efficiency".