MKB back in profit after six years
After-tax profits at MKB Group hit the HUF 9.5 billion mark in 2016. The positive figure is due to an 18-month comprehensive restructuring procedure carried out under EU supervision, the bank said on Tuesday.
The state acquired the troubled lender from BayernLB in 2014. It was initially restructured by the National Bank of Hungary (MNB), and sold on to a consortium of two private equity funds, Blue Robin Investments and METIS Private Capital Fund, and Hungary’s Pannonia Pension Fund for HUF 37 bln last year.
The turn of the tide in its fortunes came about thanks to several simultaneous measures. Operational costs were greatly cut to start with. Large-scale redundancies, renegotiating favorable rental contracts and optimizing ICT expenses were part of the austerity package, and so was shrinking the corporate car pool. Professional efficiency also went up and reserves for liabilities were created in a more prudent fashion, the bank says.
The return on equity ratio, a key benchmark figure in banking, improved as well from 11.28% to 12.04%, while the ratio of non-performing loans (NPLs) dropped from 20% to 12% via well-targeted portfolio cleansing. Another positive phenomenon in this regard was that, for the very first time, more NPLs became performing than vice versa.
“Retail needed more restructuring, but in the end, we did so well that we managed to carve out a larger market share,” CEO Ádám Balogh said. “Our main focus area, our corporate banking portfolio grew by 31% which puts us among the top three banks in this segment in Hungary.”
Retail rode the wave of new loans; for that matter, mortgages more than doubled. Private Banking saw further expansion, with the total of managed assets reaching HUF 340 bln. Interest for this particular service has become so intense that a separate Premium Banking category needed to be established to offer select clients an elite financial services package.
There was a substantial hike in loans granted for export incentive purposes. In 2016, a total of HUF 20 bln was lent to corporate clients to support their export activities, a year-on-year increase of 54%. MKB subsidiaries fared exceptionally well too. MKB Asset Management closed its best financial year ever, while MKB-Euroleasing doubled its projected operating result by adding asset financing to its scope of activities, which previously had been restricted to vehicle financing.
“The past few years were about restructuring, but now it is time to put an end to it,” Balogh said. Digital banking will certainly help in meeting ambitious targets. MKB’s entire ICT system is being replaced by a new standard and the process should be completed by this summer.
“Such a migration normally takes three-four years. We want to get it done in one and half years,” Balogh noted. Internal procedures are bound to be accelerated significantly, follow-up will become a lot easier and every administrative step will become trackable via a mobile app that, all together, will result in a whole new customer experience.
“We believe consolidation of the banking sector should continue,” Balogh added. “The market would need four-five big banks and we should be able to make it to the top three in three-five years.”
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