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Bank association chairman sees 2008 sector profits falling 20-30%

Profits of Hungary’s bank sector are likely to drop 20-30% this year because of the global financial crisis, Hungarian Banking Association chairman Peter Felcsuti told MTI.

Bigger risk reserves, higher costs of financing lending activities and the sharp slowdown in the sector’s expansion in the fourth quarter will eat into profits, Felcsuti said.

Excluding the profits of OTP Bank -- Hungary’s biggest commercial bank and one of few without a foreign parent -- the sector’s profits will probably fall 30-40%, he said. “I’m not counting on (Hungary’s) leading commercial banks being loss-making, so capital problems should hopefully not arise in the sector,” he said. It is still too soon to tell if a consolidation will follow, though market shares will certainly move more than earlier, he added.

Hungarian banks will probably slow down their branch expansions in 2009, and they could cut staff. This is a problem because the sector does not need to trim too much fat, Felcsuti said. Though the foreign parents of Hungary’s banks will ensure their subsidiaries liquidity, they are unlikely to increase it, or bring it up to levels that would be necessary for the Hungarian economy, he said.

Only 15-20% of Hungarian borrowers with foreign currency-denominated loans are likely to avail of special conditions allowing them to switch to forint-denominated construction by the end of December, when the conditions -- a result of an agreement between the government and banks -- expire, Felcsuti said. (MTI-Eco)