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Bank association complains strong forint hurting profits

Hungarian Bank Association chairman Péter Felcsuti said at a press conference in Budapest on Tuesday that the strong forint is hurting the profitability of Hungary’s commercial banks.

Hungary’s banks lend mostly with foreign currency-denominated products, but most deposits are in forints, Felcsuti explained. He added that the forint is firming because of technical reasons, not because of any change in Hungary’s macroeconomic fundamentals. Total assets of Hungary’s banks grew 23% in the twelve months to March 31, 2008. The banks’ Q1 profits dropped 33% from the same period a year earlier. Hungary’s banks must prepare for a slowdown as well as worsening portfolios and bigger risk reserves, Felcsuti said.

Though Hungarian banks’ access to financing on the global market has improved compared to January, banks will not borrow as much as in H1 2007, he said. Felcsuti said the association was not in agreement with pressure that the National Bank of Hungary’s (MNB) tight monetary policy is exacerbating. Though he added that the association is in solidarity with the central bank on a “visceral” level. (MTI-Econews)