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Effect of restructuring limited for troubled borrowers

Hungarian banks are restructuring more loans for troubled borrowers, but the percentage of these clients still falling behind on payments is growing, a survey of loan officers at commercial banks by the National Bank of Hungary (MNB) shows.

The survey, carried out in July, shows the percentage of restructured loans rose from 3.5% to 4.4% in the corporate lending portfolio of Hungarian banks and from 5.2% to 6.1% in the retail portfolio in the second quarter compared to Q1. At the same time, the percentage of these lenders who fell behind on repayments grew from 20% to 25%, while the percentage rose from 3% to 6% for big corporate borrowers and from 9% to 18% for SMEs.

The loan officers linked any success of restructuring to an improvement in the macroeconomic situation, more workplaces and an increase in household incomes.

The tightening of corporate lending seen since 2007 came to an end in Q2 2010, but strict lending conditions could remain in place for the long term, the MNB said. Banks no longer see any reason to tighten conditions, based on an assessment of risk and the outlook for the economy, nor do they have reason to loosen them, the central bank added. (MTI-Econews)