Hungary's non-financial companies remained net lenders in the first quarter of 2011; their net financing capacity was HUF 136 billion or 2.2% of GDP during the period, national accounts data recently published by the National Bank of Hungary (MNB) showed.
Except for Q4 2009 and Q3 2010, Hungarian companies have been net lenders each quarter since Q2 2009.
Taking the four quarters ending Q1 2011, businesses' net financing capacity rose to 1.9% of GDP from 1.6% in 2010. Hungarian businesses were net lenders for the seventh four-quarter period in a row.
Net financing capacity rose sharply in Q1 from HUF 57 billion in Q4 2010 and from HUF 35 billion in Q1 2010. The seasonally-adjusted ratio fell, however, slightly from 2.1% of quarterly GDP in Q4 last year to 2.0% in Q1 this year. Using seasonal adjustment, the last time the sector was a net borrower (to the tune of an unusually high 8.4% of GDP) was in the Q3 2008.
Two-thirds of the Q1 net capacity to lend came from reductions in liabilities, mostly from FX loan repayments, and one-third came from increased assets.
Businesses' raised their financial assets by HUF 45 billion in Q1, shifting from cash and deposits to short-term securities and investing in non-listed foreign businesses while extending commercial credit.
They withdrew HUF 179 billion from cash and deposits, after depositing in the previous three quarter, and placed HUF 49 billion in short-term fixed-income assets and HUF 110 billion in non-listed shares, all foreign. Q1 was the first quarter in three years that businesses were net buyers of fixed-income assets. Investing in short-term securities, parallel with bigger sales of long-term fixed-income securities, were not unprecedented in the last three years period.
Businesses extended net HUF 56 billion in commercial credit in Q1, similar to Q2-Q3 last year but as opposed to the commercial credit reduction of the last quarter.
They reduced their gross liabilities by HUF 91 billion in the quarter after raising them by HUF 137 billion (through attracting equity) in the previous quarter. They continued loan repayment (of foreign currency-denominated loans), and equity investments by foreign investors also continued, but they cut their obligation on commercial credit instead of raising them as they did in the previous three quarters.
The companies repaid HUF 268 billion in loans (as a balance of the repayment of HUF 344 billion foreign currency denominated loans, of which HUF 91 billion was in foreign loan repayment, and borrowing HUF 76 billion in forints) in Q1. HUF 220 billion, or the bulk of the repayments, were on long-term loans.
They attracted equity investments of HUF 332 billion, with only HUF 91 billion going into listed companies. Equity investments, the bulk of it foreign, have been ongoing now for the third quarter. Foreign investment into Hungarian companies totaled HUF 351 billion in Q1, up 24% from Q4 although down by a third from Q3 last year. Hungarian investors made a moderate withdrawal in Q1.
Gross liabilities still fell as Hungarian companies repaid HUF 171 billion in commercial credit in Q1 as against taking up HUF 196 billion of commercial credit in Q4.
Liabilities to share- or stakeholders, at HUF 27,866 billion at the end of Q1 2011, made up 55.3% of total liabilities of Hungarian non-financial businesses, followed by a 36.4% share of the HUF 18,465 billion loans. HUF 11,008 billion or most two-thirds of the loans, or 21.8% of all liabilities were foreign loans. Liabilities on commercial credit and advances made up 4.3% of the total, and liabilities on bonds, notes and financial derivatives made up a negligible 1.5%.
Loans made up the largest, HUF 5,114 billion part or 29.0% of companies' gross assets at the end of March, followed by HUF 3,682 billion assets in the form of shares and stakes, and HUF 3,711 billion commercial credit and advances, each making up 21%. Current account deposits, at HUF 2,158 billion, made up 12.1% of the total, and other bank deposits, just exceeding HUF 2,000 billion, made up 11.4%.