Hungarian banksʼ corporate loans drop in 2015

MNB

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Banksʼ lending to Hungarian companies dropped last year, in contrast to 2014, when cheap credit available to small- and medium-size businesses in the framework of the National Bank of Hungary (MNB)ʼs Funding for Growth Scheme (FGS) temporarily raised banksʼ overall business lending stock, according to figures recently published by MNB.

The stock of Hungarian banksʼ business loans fell by HUF 784 billion or 12% in twelve months to HUF 5.95 trillion at the end of December 2015 according to unadjusted figures. The decrease was 8% excluding the HUF 247 bln December drop, reflecting a one-off factor, according to Hungarian news agency MTIʼs calculations.

The MNB said that the December drop was mainly due to a one-off effect - a large-volume portfolio clean-up. This could be in reference to state-owned MKB Bank - in mid-December, MNB deputy governor Márton Nagy said that MKB sold or was to sell property loans worth a combined HUF 343 bln for HUF 192 bln.

Banksʼ business lending stock fell year-on-year every month last year, by 5% on average, at a somewhat faster pace than most months in 2014.

The stock rose 1.2% in the twelve months to December 2014, when FGS lending more than offset the contraction elsewhere in the segment, making 2014 the first year with a rise in banksʼ business lending stock since 2008. The December 2014 rise was, however, far from typical. It came after 13 months of steady drops and was followed by renewed drops.

Excluding exchange rate changes and other revaluation effects, companies repaid an unadjusted net HUF 455 bln in loans to local banks last year, the MNB figures show. Cleared from the December contraction as a one-off factor, businesses still repaid net HUF 207 bln last year after borrowing net HUF 152 bln a year earlier.

Although last year approximately HUF 400 bln in FGS loans were disbursed to SMEs, similar to 2014, these outlays were insufficient to offset the continued drop in lending to other non-financial companies.

MNB figures showed that net of repayments, banks disbursed HUF 864.4 bln in loans to SMEs in the framework of the second phase of the FGS between October 2013 and December 31. Banks lent a total of HUF 710 bln to SMEs in the first phase of the scheme between the beginning of June 2013 and the end of September 2013.

Under the FGS, the MNB provides zero-interest refinancing to banks which they can lend to SMEs at an APR not exceeding 2.5%.

The MNB decided to wind up the FGS by the end of this year and has introduced a package of incentives for active lenders, dubbed the Market-Based Lending Scheme (MLS), with the aim of supporting a return to market-based lending. The two schemes which are part of its recently launched Growth Supporting program (GSP) aim to increase the banking sectorʼs lending to SMEs by HUF 250-400 bln, or 5-10% of total corporate lending stock, in 2016.

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