Garantiqa Credit Guarantee will raise its guarantee premiums by an average 25% from Monday, the company announced.
The company said it believes the processes on the corporate lending market permits what the company long-postponed increase.
CEO György Radnai said earlier that “in order to maintain lending to small and medium-sized businesses, we agreed to maintain a dynamic growth of our stock of guarantees even at a cost of losses.”
“However, with the credit market panic over, we would like to return to the path permitting us to maintain the value of our registered capital in the long-term by approaching our premiums to market rates,” the CEO said.
Garantiqa consulted its shareholders, the National Asset Management Company, and the lending banks regarding the average 25% premium raise.
Radnai said Garantiqa has been striving to maintain lending to SMEs since the outbreak of the crisis, which caused great losses to the company in 2009, noting that Garantiqa did not adjust its premiums to the higher payments resulting from the deterioration of the bank portfolios.
Radnai said the percentage of non-performing loans in the SME portfolios of certain banks has reached or come close to 10%; however, Garantiqa closed last year with a guarantee redemption ratio of 5.5%, thus the further deterioration of the portfolio is already built into the system. “Unless we take action, this year's losses could be far higher than last year's and the company will not be set onto a profitable path next year either. A premium raise, however, could reduce this year's losses and ensure a positive result next year,” Radnai said.
Garantiqa met its annual target by the end of November in 2009, when the total stock of guarantees reached HUF 520 billion, Radnai said late last year, adding that demand in the company's products increased due to the crisis. Radnai said the company received exemption from the obligation to close the business year with profits in 2009-2010 as a result of the effects of the crisis. Due to risk provisions, losses in 2009 are projected at HUF 700 million-800 million.
The CEO has recently told a business daily that the company's total stock of guarantees worth more than HUF 500 billion include new contracts worth HUF 440 billion, through which 32,000 businesses received funding last year, 3,000 more than one year earlier. (MTI-ECONEWS)