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Hungarian companies repay both forint and foreign currency loans in June

Hungarian non-financial companies were again net repayers of loans to domestic banks in June; and they repaid both forint and foreign currency denominated loans after repaying forint loans but borrowing foreign currency-denominated loans in May, the National Bank of Hungary's (MNB) latest monthly report shows.

Companies were net loan repayers in May and June after being seasonally-adjusted net borrowers in March and March -- for the first time in two consecutive months since the start of last year.

They started to pay back forint loans in May and continued in June after being net borrowers in forints between January and April. Excluding seasonal factors, the NBH data show that companies again started to borrow in foreign currency in April-May of this year. They steadily repaid their foreign currency-denominated loans between July 2010 and March 2011.

In real terms, Hungarian companies borrowed 5.8% less in June than a year earlier, the MNB's data on transactions show. Lending by domestic banks to companies has fallen steadily in real terms since February 2009, with forint lending starting to drop in October 2008 and foreign exchange lending falling since September 2009.

Companies repaid net HUF 87 billion of loans in June. Some HUF 81 billion of the repayments were on forint loans, unadjusted figures show. The forint repayments during the month were the largest ones recorded either in unadjusted or adjusted terms since April 2010.

On an adjusted basis, Hungarian non-financial companies repaid net HUF 40 billion in June, as a balance of HUF 55 billion of forint loan repayments and borrowing of HUF 15 billion in foreign currency-based loans.

Companies' loan stock fell by HUF 97 billion -- more than repayments implied -- in June to HUF 7,190 billion, as exchange rate and other revaluation changes also cut the stock. The stock of forint loans fell by HUF 86 billion to HUF 3,211 billion and the stock of foreign currency denominated loans fell by HUF 11 billion to HUF 3,979 billion.

The loan stock fell HUF 589 billion or 7.6% in a year as a HUF 95 billion, or 3.0%, rise of the forint loan stock failed to compensate for a HUF 684 billion, or 14.7%, drop in the forint value of their foreign currency-denominated loan stock.

Foreign currency-denominated loans made up 55.3% of domestic banks' corporate lending stock at the end of June. The proportion rose from 54.8% at the end of May but fell from 59.9% a year earlier.

Businesses placed HUF 65 billion in forint deposits and withdrew HUF 9 billion from foreign currency deposits in June. Excluding seasonal factors, they have been depositors every month since last September.

Including exchange rate and other effects, the stock of corporate deposits fell HUF 19 billion in June, and was down HUF 69 billion in one year, to HUF 3,954 billion. The bulk of the monthly drop or HUF 17 billion was in foreign currency deposits which fell to HUF 135 billion. Forint deposits were hardly changed at HUF 2,508 billion. In twelve months, forint deposits fell more than HUF 200 billion and foreign currency deposits rose HUF 135 billion.

The changes include the effect of a 0.4% strengthening of the forint against the euro and a 1.1% weakening against the Swiss franc -- the two main currencies for foreign currency-based borrowing -- in a month and a 7.3% strengthening of the forint to the euro and a 1.5% slip against the Swiss franc in twelve months.