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Provisions push banking sector earnings down 97% in Q1

Consolidated net earnings of the Hungarian banking sector reached HUF 3 billion in Q1, dropping to just 2.7% of the HUF 125 bln figure a year earlier because of large write-offs and provisioning against the impact of the coronavirus pandemic, state news wire MTI reports, citing data released by the National Bank of Hungary (MNB).

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In addition to the immediate effect and general uncertainties over prospects of the pandemic, a government-mandated moratorium on repayments of loans, in effect until the end of 2020, hit the bottom line.

The sectorʼs net interest revenue was up 14.7% at HUF 348 bln and net revenue from commissions and fees increased 16.2% to HUF 206 bln. Operating costs rose 13% to HUF 423 bln.

Write-offs and risk provisions came, however, to a negative HUF 159 bln in Q1 against a HUF 1 bln plus in the base period.

MNB said 22 banks made HUF 161 bln in write-offs and risk provisions while 11 banks released a combined HUF 2 bln in Q1. The number of banks reporting losses rose to 13 from nine in Q1 2019.

Several banks reported they set aside provisions for the full-year losses expected from the repayment moratorium in Q1. To a lesser extent a "solidarity tax" levied on banks to share the burdens of the pandemic also reduced earnings.

Consolidated total assets of the sector rose 22.2% in twelve months to HUF 53.956 trillion. Part of the increase reflected the consolidation of four foreign units of one Hungary-based bank, the MNB noted.

Net assets of the sector rose 11.3% year-on-year to HUF 5.365 tln.

The sectorʼs loan stock was up 25.7% from a year earlier at HUF 33.719 tln. The stock of deposits rose 23.4% to HUF 43.417 tln.

The ratio of non-performing loans was 4.16% in Q1 2020, down from 5.22% a year earlier but slightly up from 4.02% in Q4 2019. MNB noted that the ratio rose for the first time in many years but the rise reflected the effect of one single transaction with a foreign partner.