Banking sector profit falls on provisioning

MNB

The combined after-tax profit of Hungarian banks fell 45% year-on-year to HUF 305 billion in Q1-Q3 as provisions jumped, state news wire MTI reports, citing data released by the National Bank of Hungary (MNB).

Provisions added up to HUF 294 bln, compared to just HUF 30 bln in the base period.

Net interest revenue increased 12% to HUF 1.05 trillion and net revenue from commissions and fees rose 7% to HUF 606 bln.

Total assets of the banking sector stood at HUF 57.48 tln at the end of Q3, up 19% from twelve months earlier. The lending stock increased by 21% to HUF 36.55 tln.

The rate of non-performing loans fell to 3.8% from 4.5% during the period.

MNB noted in a report on financial stability issued late in November that it had communicated provisions in an executive circular intended to mitigate a major rise in loan loss provisions with the end of a blanket moratorium and the start of a targeted moratorium on loan repayments from January 1, 2021: until the end of 2021, automatic reclassification will not be required for loans restructured for periods up to two years; and calculation of days past due may be suspended during the period repayments are suspended "due to a possibility provided by law or other legal constraints".

At the same time, MNB also established a minimum loan loss provisioning requirement.

The government-mandated the blanket moratorium on loan repayments in the spring, among the first measures it took to ease the economic fallout from the coronavirus crisis. When that moratorium expires at year-end, it will be extended by a six-month moratorium for families with children, pensioners, the jobless, fostered workers, and companies struggling financially because of the pandemic.

Banks are prohibited from canceling loans during the period, effectively putting the onus on lenders to restructure the credit of distressed borrowers who are not covered by the targeted moratorium.

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