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Hungarian banks' external liabilities ratio drops to 30.6% in December

The forint value of the external liabilities of Hungarian banks fell HUF 758 billion, or 6.8%, to HUF 10,440 billion in the year to the end of December 2009, National Bank of Hungary (MNB) figures show.

Their share of banks' total assets fell 3.1 percentage points from the end of 2008 to 30.6%. The ratio returned to its level before October 2008 after peaking at 35.7% last March.

Banks reduced their foreign liabilities by almost HUF 1,200 billion, excluding the effect of exchange rate and other changes.

An unspecified but large part of Hungarian banks' external liabilities is owed to foreign, mostly West European parent banks.

Last year's sizeable reduction in foreign liabilities did not adversely affect banks' combined net assets, which rose HUF 421 billion, or 16.8%, to HUF 2,930 billion at the end of 2009. This is partly due to the drop in domestic lending, especially foreign currency-based lending.

While external liabilities fell, external assets of banks, in forint terms, rose by a slight HUF 29 billion to HUF 3,761 billion in 2009. The rise solely reflected the weakening of the forint as transactions cut external assets by HUF 425 billion.

Banks' net foreign liabilities fell HUF 787 billion to HUF 6,680 billion, reversing almost one-third of a sharp HUF 2,574 billion increase in 2008.

Hungarian banks' external liabilities started to rise steeply as foreign currency-based lending gained popularity in the middle of the past decade. They rose a sharp HUF 3,373 billion in 2008, when banks tapped a combined HUF 573 billion in foreign sources in August-September, and another HUF 890 billion in October-November, as foreign parents increased financing of their Hungarian units when the financial crisis hit the country.

Banks' external liabilities fell a combined HUF 264 billion in December 2008-January 2009 but rose again, by a similar amount in February-March 2009, when the forint weakened sharply on a renewed wave of risk aversion. Transactions and the weakening forint boosted the ratio of foreign liabilities to total assets to a peak of 35.7% in March.

As the market perception of emerging markets improved, Hungarian banks reduced their external debt by a combined HUF 1,226 billion in April-August. Transactions moved both ways during the rest of the year as banks tapped HUF 224 billion in foreign resources in September-October, cut their foreign liabilities almost HUF 200 billion in November, then drew a slight HUF 3 billion in December.

Combined total assets of Hungarian banks rose HUF 869 billion, or 16.8%, to HUF 34,113 billion in the twelve months to December 31, 2010. (MTI – Econews)