MNB deputy governor sets ambitious targets for lenders

MNB

An increase in incomes, expanding investments and lending growth are all necessary for Hungary to achieve sustainable convergence by 2030, Márton Nagy, deputy governor of the National Bank of Hungary (MNB), said at a conference organized by business news site portfolio.hu on Wednesday.   

MNB Deputy Governor Márton Nagy

None of these factors can independently achieve sustainable convergence, Nagy noted, adding that Hungarian banksʼ total assets need to reach an annual growth rate of 11% by 2030. Corporate lending should grow an annual 12%, with SME lending climbing 13%, while retail lending has to grow 15% a year, as the annual increase in home loans reaches 18%, the deputy governor was cited as saying by state news wire MTI. 

To achieve this degree of growth, Nagy stressed, banks need to lend to a broader range of clients and offer cheaper products.

Hungaryʼs economic growth rate must reach 4-4.5% a year by 2030 as productivity improves and the investment rate climbs to 23-25%, Nagy continued. Internal savings need to grow and innovation must be placed at the forefront, he added.

By 2030, the banking sectorʼs total assets should rise to 160% of GDP,  from 95% at present, said Nagy. The stock of loans to the private sector should climb to 70% of GDP, from the current 32%, as the home loan stock increases from 8% to 30% of GDP.

Nagy noted that Hungarian households and businesses are less indebted than their peers in neighboring countries as well as the European Union as a whole. He added, however, that the banking systemʼs low loan-to-deposit ratio is "unhealthy." The deputy governor urged banks to boost efficiency. 

Banks more cautious

Banking sector leaders participating at the conference projected more moderate growth for lenders than the MNB. They also questioned the possibility of lowering costs for as long as they must pay the bank levy and financial transaction duty, as well as dealing with the effects of what they perceive as still excessive regulation, MTI reported.

László Wolf, deputy CEO of OTP Bank, Hungaryʼs biggest commercial lender, put annual lending growth at around 10% for the time being. He said growing payroll costs, as well as digital developments, make it difficult for banks to lower the price of credit and interest margins. 

The Hungarian banking sectorʼs capacity at present should be able to accommodate a 50% increase in client assets and liabilities, said Radován Jelasity, chairman and CEO of Erste Bank Hungary. He noted that Erste had raised its own stock of loans by 20% over the past two years, while reducing its NPL ratio to a record low.

Jelasity concurred that achieving the MNBʼs goals for lending growth would scarcely be possible without a reduction in the bank levy and the financial transaction duty. 

Cutting the financial transaction duty would put a squeeze on the shadow economy, said József Vida, chairman and CEO of TakarékBank. Hungarians will continue to pay their bills with postal checks as long as the transaction duty makes it costlier to pay by bank transfer, he added.

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