One-offs lift banking sector profits in 2016, says MNB

MNB

Hungarian banksʼ pre-tax return on equity reached 16.9% last year, returning to pre-crisis levels, but profits were lifted by one-offs, the National Bank of Hungary (MNB) said in its biannual Financial Stability Report today, according to Hungarian news agency MTI.

The banking sector had combined pre-tax profit of HUF 517 billion last year. After-tax profit came to HUF 446 bln.

The MNB noted that freed-up provisions lifted profit by HUF 149 bln, while the lower bank levy left lenders with HUF 71 bln more profit and the sale of stakes in Visa Europe with almost HUF 30 bln. Dividends added HUF 26 bln to the bottom line.

The MNB said "no significant improvement" occurred in the drivers of banksʼ core business, such as interest income and revenue from commissions and fees, compared to the previous year.

Adjusted for all of these one-off factors, the MNB estimated the sectorʼs pre-tax ROE was between 4% and 7% last year, which it said "can be considered satisfactory" in light of the low interest rate environment.

Corporate lending expands, retail lending balances out

The report shows corporate lending rose more than 4% last year, driven by a 12% increase in loans to SMEs and sole proprietors. Corporate outlays reached HUF 291 bln and included HUF 110 bln in short-term and HUF 181 bln in long-term loans.

The MNB said overall corporate lending was "close to the level that can be considered sustainable." Corporate credit conditions have eased because of tighter competition as well as an improvement in lendersʼ liquidity positions and the economic outlook, it added.

The MNB noted that corporate lending had expanded faster than nominal GDP and projected a further expansion of "some 4%" in the coming years.

The decline in retail loans came to a halt last year, as repayments balanced out outlays. Although outlays were up 50%, they reached just 70% of the level seen in 2002-2008. 

Home loan outlays were up 42% and accounted for half of the total. About 16% of home loan outlays were linked to the recently introduced Home Purchase Subsidy Scheme for Families (HPS).

Outlays of personal loans climbed 61% and vehicle loan outlays were up 25%.

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