Hungarian non-financial companies remain net lenders in Q2

Reducing both assets and liabilities sharply, Hungary's non-financial companies remained net lenders in the second quarter of 2011 and their net financing capacity rose to HUF 325bn or 4.7% of the quarter's GDP, national accounts data published by the National Bank of Hungary (MNB) show.

Non-financial companies reduced their assets by just less than HUF 400bn and reduced their liabilities even more, by HUF 725bn in Q2, both to an extent unseen in the past two decades, as they received large repayments on foreign loans granted, repaid loans and stakes held in the companies by foreign owners fell sharply.

Non-financial companies' net lending capacity reached HUF 535bn or 1.9% of the respective GDP in the four quarters ending Q2 2011.

Their quarterly lending capacity rose both in unadjusted or seasonally-adjusted terms from the previous quarter, but the four-quarter ratio continued to drop slightly after peaking at 2.2% for the full year of 2010.

Except for Q4 2009, Hungarian non-financial companies have been net lenders each quarter since Q2 2009, in the aftermath of the global crisis, and they have been net lenders for the 8th four-quarter period in a row.

At 4.7% of GDP, the quarterly lending ratio reached its highest level since topping at 5.1% in Q2 2010. The seasonally-adjusted ratio rose to 1.8% in Q2 from 0.5% in Q1, but was down from a 3.2% peak, reached first in Q3 2009 and then repeated in Q4 of last year.

The bigger half or HUF 434bn of the unprecedented liabilities drop in Q2 came as a reduction of liabilities to share or stakeholders, with practically all of the reduction in liabilities to foreign owners. The latter reduction came after massive net investments by foreigners, to the tune of HUF 1,065bn, in the preceding three quarters, and was the second biggest drop in capital held by foreign owners in two decades after a HUF 837bn drop in Q4 2009.

Companies also paid back net HUF 281bn in long-term loans and borrowed nearly HUF 40bn of short-term loans in Q4. The bulk or HUF 190bn of the net repayments was on foreign exchange loans, implying repayment of forint loans too, and HUF 135bn of all net repayments were on loans borrowed from abroad.

Companies paid back net HUF 107bn in domestic loans, repaying loans granted domestically each quarter, with the exception of Q3 2010, since the last quarter of 2008.

The foreign loan repayments and outlays have moved without a clear trend since the beginning of 2009, depending on foreign owners' decisions on financing their foreign units directly or through Hungary.

They also continued to cut liabilities on financial derivatives.

On the assets side, Hungarian companies raised their deposits by a little more than HUF 100bn, with two-thirds of the rise in current account deposits, and half of the increase going into foreign currency deposits. They also invested HUF 136bn in unlisted shares, all foreign, during the quarter.

Hungarian companies withdrew HUF 73bn from fixed-income securities, the bigger part of it from government securities in Q2. They reduced their lending by as much as HUF 572bn, with four-fifth of the reduction coming from short-term outlays.

They cut their foreign exchange loan outlays by as much as HUF 724bn, implying new forint outlays of HUF 152bn. The bulk or HUF 559bn of the loan repayments they received was in loans lent to abroad after an almost HUF 190bn rise in foreign lending in the previous two quarters.