Hungary's state-owned development bank MFB expects to losses of HUF 3.171 billion in 2011 because it has to make further risk provisions for big loans, chairman-CEO László Baranyay said at a press conference on Tuesday.
The bank booked a HUF 25.834 billion consolidated pre-tax loss in 2010 on lending losses and risk provision.
In January-May, the MFB set aside risk provisions and had lending losses of HUF 7.4 billion, which took a HUF 1.2 billion bite out of profits, Baranyay said. The bank's management sees lending losses and risk provisions reaching HUF 35.7 billion by year-end, taking HUF 32.8 billion out of profits or more than 96% of the total, he added.
The MFB has launched a number of civil and criminal procedures at institutions in its portfolio on suspicion of criminal activity ranging from fraud to embezzlement to breach of faith, Baranyay said.
Suspicions were raised during due diligence at more than 40 companies in which MFB took over ownership last year, he added.
Charges have been filed in 21 cases at seven companies, and twelve cases at a further five companies are still being investigated, he said.
The MFB also recommended a government investigation in the case of several loans, the chairman-CEO said.
Excluding the effect of lending losses and risk provisions, the MFB was profitable last year, Baranyay said.
The MFB had total assets of HUF 1,189.2 billion at the end of 2010.
The bank's capital adequacy ratio was 13.91% at the end of the year, well over the level required by law.
This year, the MFB issued €500 million of bonds on global markets and in May it signed for a €125 million credit line from the Council of Europe Development Bank (CEB). The bank needs €1-1.1 billion in financing to support its lending activities this year and about the same amount next year.
The MFB's gross lending stock is set to rise to HUF 1,001.2 billion by the end of 2011 from HUF 873.6 billion at the end of 2010. Its gross investment stock is seen falling to HUF 66.9 billion from HUF 71.9 billion. Net assets are expected to rise to HUF 142.9 billion from HUF 121.0 billion.
The MFB has been in talks on cooperation with Chinese partners since the autumn of last year, Baranyay said. The MFB's ties to the Chinese Development Bank could be heightened, which could involve joint financing of Chinese developments and participation in the MFB's bond issue program. A joint Chinese-Hungarian investment fund could also be established.
The MFB is looking for joint projects which could involve Chinese institutions. It is also trying to cooperate with Chinese lenders, he added.