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In its fresh biannual Financial Stability Report, the central bank and financial market regulator said the Hungarian banking system continued to be characterized by “high profitability, ample liquidity and a strong capital position” in 2025, adding that NPL ratios fell to a historical low: 1.6% for retail loans and 3.2% in the corporate portfolio.
However, the MNB also highlighted a “substantial” increase in the average loan-to-value ratio of newly disbursed home loans amid rising overvaluation.
The local banking sector’s return on equity reached 18.9% at year-end, with net interest income still the primary source of banks’ earnings. However, the report pointed to an increase in the volatility of earnings and sensitivity to the yield environment resulting from the increasingly large share of interest-subsidized home loans in retail portfolios.
Presenting the report, Ádám Banai, a chief economist at the central bank, said interest subsidies accounted for over HUF 400 bln of lenders’ combined net interest income of HUF 2,137 bln in 2025.
The sector’s capital adequacy ratio stood at 20.1% at year-end, with free capital amounting to HUF 2,025 bln. Stress tests show the capital position of the sector would remain “robust,” with a capital shortage affecting only a small number of lenders.
The sector’s average liquidity coverage ratio was 172% in February and no systemic liquidity risks were identified, according to the report, although certain banks might need to implement more rigorous liquidity management in the event of a stress scenario.
The report noted a 7.3% increase in the corporate loan portfolio in 2025 but said the recovery in corporate lending remains “fragile.”
The retail loan portfolio grew 15% during the year, boosted by the launch, from September, of the Home Start subsidized credit scheme for first-time homebuyers. The MNB estimated that around two-thirds of Home Start contracts were ones that would not have been signed in the absence of the scheme.
As a result of the Home Start scheme, the average loan-to-value ratio rose from 59% to 68%, while borrowers took out “substantially” larger loans, both in nominal terms and as a percentage of their annual income. Despite the bigger contracts, the average debt-service-to-income ratio of borrowers did not rise, the report said, adding that installments for Home Start loans are fixed for the entire maturity.
Home prices rose 23.5% in nominal terms in 2025, and overvaluation increased to 22.5%.
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