* Shares fall more than 14 percent on profit warning
* Bank cites higher risk provisions in Romania, Hungary
* Says does not need fresh capital
(Adds details on Hungary, analyst comments, updates shares)
VIENNA, July 4 (Reuters) - Investors wiped more than 1 billion euros ($1.4 billion) off Erste Group Bank's stock market value on Friday after emerging Europe's third-biggest lender warned it would post a record loss due to fresh hits from Romania and Hungary.
Erste, Austria's biggest bank, said late on Thursday it could post a net loss of up to 1.6 billion euros this year, citing rising risk provisions in Romania as the central bank stepped up efforts to reduce non-performing loans ahead of European Central Bank-led health checks on big European banks.
It was also hit by the impact of a new Hungarian law soaking banks for foreign-currency mortgages that went sour when the forint fell.
The news was another reminder of the challenges of operating in central and eastern Europe, a region that generated fat profit margins for banks for years after the Iron Curtain fell but now causes headaches as the region's economy struggles.
Erste's shares tumbled 14.1 percent to 20.03 euros, a 12-month low, by 0950 GMT, pulling Austria's benchmark ATX down 3.2 percent.
"The latest profit warning reduces significantly the book value and will also likely lead to the stock derating versus the EU banking sector, until Erste shows stability in the operating performance and an end to cleaning up exercises," Barclays said in a note.
It downgraded Erste to "underweight" from "equal weight" and cut its target price to 21.40 euros from 28 euros.
The profit warning put other banks exposed to Hungary and Romania in focus, UBS said in a note, citing Raiffeisen Bank International, KBC, Intesa Sanpaolo, UniCredit and Hungary's OTP, which it saw as the most exposed by far.
Their shares all fell on Friday.
Shares of Erste's Austrian peer Raiffeisen dropped nearly 5 percent, even though it said it did not have the same problems in Romania as Erste.
"In Romania, we continue to see good performance of our local operations so this is not really a problem for us," a spokeswoman for emerging Europe's second-biggest lender said.
Challenges in eastern Europe have also prompted profit warnings from Telekom Austria and utility EVN in the past two weeks.
Erste's latest woes raised questions about the broader impact of the ECB-led asset-quality review (AQR) of major European banks being conducted this year.
Erste said it did not need to raise fresh equity but would not be paying a dividend for 2014. Analysts had previously expected a profit of around 570 million euros and a 37 cent dividend.
UBS noted that shares of banks active in central and eastern Europe had underperformed the European sector by around 15 percent this year, due to a mixture of political, monetary policy and specific issues.
Hungary's government moved on Friday to reduce bank charges on foreign-currency mortgages, submitting legislation to parliament that could also help people with similar concerns about their forint loans.
The costs from Friday's bill alone could reach 600 billion to 900 billion forints ($3.95 billion), the central bank's deputy governor told a newspaper at the weekend, potentially twice analysts' estimates of 400 billion.
Barclays said risks of more losses in Hungary remained for Erste, with no final rules announced for a potential complete phasing out of foreign-currency mortages.
UBS said Hungary's OTP faced a more significant hit from the Hungarian law, and that a 20 percent haircut on foreign-currency mortgages could erode its core capital by around around 100 basis points.
OTP shares were down 2.6 percent. ($1 = 227.9600 Hungarian forints) ($1 = 0.7331 euros)
(Additional reporting by Georgina Prodhan and Angelika Gruber; Editing by David Holmes and Susan Fenton)