Raiffeisen Closes Solid Year, Predicts Stable GDP Growth

“We have a number of pieces of good news this year, the first of which is that we closed last year with a profit of HUF 23 bln,” said George Zolnai, CEO of Raiffeisen Bank at a press conference in Budapest. The CEO emphasized that the 6% increase of the bank’s operating revenue, to HUF 88.6 bln, is a very good result, especially given the low interest rate environment.  

Over the course of last year, the bank managed to decrease operating expenses by 2% compared to the previous year, while the ratio of non-performing loans came in below 6% at the end of 2018. While the numbers point to a solid year, net profits were still lower than in 2017, when total profits amounted to HUF 28.5 bln, an all-time record.  

At HUF 7.8 bln, provisions released in 2018 were also below the HUF 15 bln released a year prior. At the end of last year, Raiffeisen Hungary had total assets of HUF 2.41 trillion, up 11% year-on-year.

The CEO stressed that last year saw a significant acquisition for the bank, when Raiffeisen took over the performing mortgage clients of insurance, pensions and asset management company AEGON in October 2018. The acquisition, in combination with a 19% increase in corporate and institutional loans, contributed significantly to the bank’s growth.  

Banking Challenges

While the nation-wide launch of the Instant Payment System in July and the start of PSD2 (Revised Payment Services Directive) in the fall are expected to pose great challenges to the entire banking sector, Raiffeisen says it is on track to keep all deadlines demanded in the law, although compliance will tie down a significant portion of the company’s resources.

“In the case of home loans, the volume disbursed increased by two-and-a-half times last year, and in this area we are planning a considerable increase, exceeding that of the market in 2019,” said Ralf Cymanek, member of the board and retail head at Raiffeisen Bank Hungary. “We granted 70% more personal loans than in the previous year.”  

More than half of the disbursed home loans were so-called “Consumer Friendly Loans”, while the ratio of loans with fixed interest rates of five or ten years exceeded 90% in the fourth quarter. With the number of CSOK (Home Purchase Subsidy Scheme) claimants constantly on the rise, the number of credit requests is increasing as well. Some two-thirds of CSOK claimants have requested credit, with some 86% of requests relating to the purchase of used homes. About 75% of those who requested loans already have at least one child.

Cymanek also added that the solvency of customers is growing, as the average amount for home loans exceeded HUF 10 million, while in the case of personal loans, the average came to more than HUF 1.6 mln. Personal loans are mostly used to finance home improvements, but increasingly people also seek them to finance car purchases.

Ferenc Kementzey, deputy CEO and head of corporate, markets and investment banking stressed that the corporate and financial institutional sector remains a key area for Raiffeisen Bank. It has achieved “outstanding portfolio growth” of 30% in project finance and syndications, he said. In terms of net SME loan growth, Raiffeisen outperformed its commitments stated in the National Bank of Hungary’s Market Loan Program.

Significant Growth

The bank said that at 16% it achieved a significantly higher growth rate than the market’s 7% in terms of leasing volumes, and extended its services to the SME sector. Raiffeisen Bank, as one of Hungary’s Export-Import Bank’s largest partners, continues to be the market leader in export financing. The bank says it expects good results from the central bank’s new NHP FIX program.

The bank’s analysts put their expectations for Hungary’s 2019 GDP growth at 3-4%, somewhat lower than the 4.9% growth registered in 2018, but still in line with mainstream predictions. With domestic demand becoming more dominant, consumption and the expansion of developments are expected to be the main drivers of growth. Raiffeisen analysts warn that the underlying inflation processes predict a further rise in core inflation. Henceforth, they expect a tightening monetary policy.  

This view was justified a few days after the conference, as the Monetary Council of the National Bank of Hungary (MNB) raised the overnight deposit rate by ten basis points, which represented the first tightening measure in years, although the MNB was at pains to insist this did not represent the launch of a new monetary cycle.  

The exchange rate of the forint is expected to be stable in the range of  HUF315-325/EUR. The euro area is expected to have an unchanged interest environment in both this year and the next. Finally, the analysts expect lending to continue expanding, with a 9% increase in the loan portfolio from retail and 12% from the corporate market predicted.

Raiffeisen also announced an innovation for 2019, in the form of a mobile application. The new app, expected to be launched early in the summer, promises a number of new convenience features, and clean, easy-to-use interface for clients. Pilot testing is already underway, with the help of Raiffeisen Bank International countries and Fintech companies.