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MNB posts HUF 95 bln profit in 2015

The National Bank of Hungary (MNB) today said it had posted a record HUF 95 billion in profit last year, Hungarian news agency MTI reported. 

Following the approval by the board of directors, the profit will be added to profit reserves, which will rise to above HUF 150 bln, nearly 0.5% of GDP and a new high, the MNB said.

In 2014 the MNB recorded net profit of HUF 27.4 bln, earlier information shows. Profit reserves stood at HUF 36.1 bln at the end of 2014.

The high profit reserves would act as a buffer against eventual losses, preventing in the longer run the need for central budget transfers to make the bank profitable, the MNB said.

The MNB press release noted that the MNB has been profit-making now for the third year although HUF 203 bln in losses were projected for 2013 in December 2012. The bank also noted that measures significantly contributed to high profit in 2015.

The MNB said that the reduction of the central bank base rate reduced its interest expenditure by more than HUF 250 bln from three years earlier. Compared to a stable base rate, the bank said it saved a combined HUF 800 bln in interest expenditures in the period.

Programs designed to improve vulnerability, such as the conversion of FX retail loans into forints, and the so-called self-financing program – measures to increase the forintʼs and local banksʼ share in the financing of the government – helped to improve net interest income and also produced significant exchange rate gains for the bank, the MNB said. 

These measures also counter-balanced the increase in the central bankʼs total assets as a result of the MNBʼs Funding for Growth Scheme (FGS) under which banks provided low-interest loans to SMEs on the back of the central bankʼs zero-interest refinancing, it added.

The above two programs supported the drop of government security market yields, and reduced central budget interest expenses by nearly 1% of GDP annually, the MNB calculated. The savings will rise to 1.7% of GDP if all debt is repriced, the bank said in an analysis of the impact of central bank measures on its profit and on other sectors. 

Net interest expenditure of the business sector fell by about HUF 170 bln or more than 0.5% of GDP since 2013 as a result of the interest reduction cycle and the FGS, the MNB calculated. FGS also helped SMEs reduce their FX exposure by switching their FX loans into forints.

The gross interest expenditure of the population fell to less than half in the past three years, the document said, the drop being mainly attributed to measures taken or initiated by the MNB, such as the conversion of FX loans or the legislation on fair banks.

György Matolcsy, the current governor of the MNB, was appointed in March 2013.