Policy measures drive lending growth in Hungary

Banking

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State and central bank credit schemes were an engine of lending growth in Hungary last year, state news wire MTI says, citing a report released by the National Bank of Hungary (MNB) on Friday.

Hungary's government and central bank put lending incentives into overdrive during the coronavirus crisis to avoid a drastic downturn on the credit market and to ensure bank lending supports the economic recovery, unlike the period after the 2008 financial crisis.

Hungarian banks' corporate lending stock rose 9.4%, or HUF 780bn, in 2020. The central bank and state-subsidized credit schemes accounted for about 60% of disbursements during the year. These schemes, focusing on smaller businesses, helped lift banks' SME lending stock by 13.2%.

MNB also acknowledged the impact of a blanket moratorium on loan repayments introduced early on in the pandemic, estimating that without the moratorium corporate lending growth would stand at 0-3%.

About 39% of eligible corporate loans were participating in the repayment moratorium at the end of 2020.

In the retail segment, banks' loan portfolio expanded 14.5%, or HUF 1.028 trillion, the highest rate in the European Union. Growth was supported by prenatal baby support loans, subsidized home loans and the repayment moratorium.

Prenatal baby support loans accounted for 30% of disbursements and now make up 13% of the retail portfolio.

The government introduced unsecured, interest-free, general-purpose prenatal baby support loans up to HUF 10 million for families having children in July 2019 as part of measures designed to address the problem of depopulation. Outstanding stock of the loans, available only through 2022, stood at nearly HUF 1.065 tln at the end of 2020.

Excluding the impact of the prenatal baby support loans, retail lending growth would have been around 9%, MNB estimated.

MNB noted a decline in outlays of home loans, with the exception of subsidized loans for homes in the country's smallest settlements.

About 54% of eligible retail loans were participating in the repayment moratorium at year-end. Adjusted for the effect of the moratorium, the retail lending portfolio would have grown around 8%, MNB estimated.

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