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Industry insiders dismiss report banks weighing withdrawal from Hungary

Banking industry insiders dismissed a report by daily Népszava on Tuesday that three big Hungarian banks are thinking of pulling out of the country because of the extraordinary levy on financial sector companies.



Népszava said the three banks planning to withdraw are “not far behind” OTP Bank, Hungary's biggest commercial bank, in terms of total assets, without citing any sources.

The recently introduce levy is set to generate HUF 182 billion of budget revenue in 2010, or about 0.7% of projected GDP. It is seen halving the profitability of Hungarian banks.

Asked about the report at a press conference on Tuesday, National Bank of Hungary deputy-governor Júlia Király said she knew nothing about any bank planning to withdraw from the country because of the bank levy. The central bank believes the levy presents significant risk in that it will hurt the bank sector's ability to attract capital and reduce the possibility of lending, causing the corporate and retail loan market to narrow further, she added.

“To our knowledge, not a single foreign owner of a big Hungarian plans to withdraw in the foreseeable future or end its activities in Hungary,” János Müller, an advisor to the Hungarian Bank Association, told MTI. Muller noted, however, that there could be changes in the business policies as many foreign-owned banks have signaled that they will weigh the profitability of their foreign units when deciding whether to supply them with more capital to finance lending.

Representatives of Raiffeisen Bank, KBC and Erste said in press reports on Tuesday that they have no plans to pull out of Hungary.

An analysis by Hungarian bank institute NBK shows that banks will pay about HUF 135 billion on the levy in 2010. They paid the first installment in September – exactly half of the amount for the full year. Twelve banks could not pay the full amount from their first-half pre-tax profit and had to cover the HUF 20.5 billion shortfall from other resources, NBK said. (MTI-Econews)