Hungarian credit institutions see a combined after-tax loss of HUF 446.5 bln


Hit hard by provisioning for compensation for retail clients mandated under the new FX law, Hungarian credit institutions had a combined after-tax loss of HUF 446.5 bln last year, following after-tax profit of HUF 31.2 bln in 2013, National Bank of Hungary (MNB) statistics released on Friday showed.

Hungary's economy minister on Friday reminded banks that they were supposed to start settlements with their clients from Monday. Erste Group's Hungarian operation returned to profit in the fourth quarter of last year, but the group's CEO expects profit for a whole year at the unit only next year as a result of Erste's agreement earlier this month with Hungary's government which involves the Hungarian state and the London-based EBRD taking 15-15% stakes each in Erste Bank Hungary, and the government slashing the banking tax gradually from next year over four years.

Hungary's largest, indigenous, high street bank, OTP is expected to publish Q4 results next Friday, and first analysts' forecasts on portal Portfolio pencil in after-tax loss of HUF 3.5 bln after one-offs due mainly to the Ukrainian operation, following a positive HUF 1.4 bln a year ago and HUF 34.1 bln in Q3, from revenue falling 7% year-on-year and down 5% quarter-on-quarter. Before one-offs, analysts expect after-tax profit to grow from a year ago, but still sharply down from Q3. After three months of slight annual rises, deflation hit Hungarian producer prices again in January, official statistics out Friday showed.

Annual deflation prevailed for most of last year. Meanwhile, another batch of statistics from the MNB showed net corporate borrowing continued to slow in January while corporate lending stock fell. Hungary's economic growth is set to slow as investment momentum fades, Commerzbank said in a note on Friday. Fixed-asset investment growth slowed sharply to 1.9% on the year in Q4, from 16% in Q3, driven by declining public-sector investment.

The bulk of the slowdown was due to a surge in EU-funded projects at the end of 2013. But, "a part of the deceleration is fundamental also, as a huge boom in auto-sector investments is reaching its peak and the economy is unlikely to maintain this extreme capital expenditure momentum through 2015 unless the central bank were to extend its lending schemes to new sectors such as construction," Commerzbank added. Commerzbank forecasts a still healthy 2.5%-plus GDP growth rate for coming quarters but slower than the 3.5% growth of 2014.

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