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MNB: Corporate loan NPL ratio edges past 14% as portfolio shrinks

MNB

MNB headquarters in Budapest (Image by Jessica Fejos)

The ratio of non-performing loans in the corporate portfolio of Hungarian banksʼ edged up one-tenth of a percentage point to 14.1% in the first half as the overall lending portfolio contracted, the National Bank of Hungary (MNB) said in a report today.

Even though NPL stock fell by HUF 53 billion to HUF 759 bln in H1, the NPL ratio grew due to a decline in the lending portfolio of some HUF 400 bln, the report shows. The MNB noted that the ratio of loans overdue by 31-90 days had declined by nearly one-half, reducing the likelihood for further deterioration and improving prospects for H2.

More than half of NPL loans in the corporate segment during the period were project loans. Within project loans, the NPL ratio stood at 27.3%, well over the 9.1% rate for other corporate loans.

Banks cleaned out 22.9% of their NPL portfolios in the twelve months preceding H1. At the present rate, selling or writing off the entire portfolio would take more than four years, even when disregarding any additions to the portfolio during that period, the MNB said. The clean-out ratio for project loans is lower than for other corporate loans, though the project loan clean-out rate may rise when the Hungarian Reorganization and Receivables Management Company (MARK), established by the National Bank of Hungary (MNB) a year ago to buy bad commercial real estate loans and properties from banks, starts operating, it added.

MARK will launch after its operations are approved by the European Commission. Talks with the EC on its pricing methodology have "reached the final phase", the MNB said.

MNB director Gergely Fabian said MARK could get the go-ahead from the EC by the end of December and start operating at the beginning of next year.

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