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Loan stock of Hungarian businesses rises but retail loan stock still drops in April

The loan stock of Hungarian businesses via domestic banks rose in April for the time since last August, but the household loan stock fell further; both segments continued to repay foreign currency loans and borrow in forints, the National Bank of Hungary's monthly report published on Tuesday showed.

Based on seasonally adjusted transactions, businesses' net borrowing in forints exceeded their net foreign currency repayments for the second month in a row. In real terms, Hungarian businesses borrowed 6% less in April than a year earlier, and borrowing by households fell 6.7% in one year.

Transaction-based MNB figures show that domestic banks' lending to businesses has fallen steadily in real terms since February 2009, with forint lending dropping since October 2008 and foreign exchange lending falling since September 2009.

Net household borrowing has fallen in real terms year-on-year since September 2009 as borrowing in foreign currency-denominated loans started to decline. Household borrowing in forints has been up year-on-year in real terms since last July after steady declines from May 2006.

In April businesses borrowed net HUF 39.6 billion in forint loans and repaid net HUF 11.3 billion of foreign exchange loans, thus borrowing a combined net HUF 28.3 billion as forint borrowing rose moderately but foreign currency loan repayments fell sharply from March.

Seasonally-adjusted figures show net corporate borrowing of a combined HUF 60.9 billion after net 18.7 billion in March, which was the first significant adjusted-term net borrowing since early 2010.

Net borrowing by businesses was practically offset by revaluation and volume changes in April which reduced the stock by HUF 27.3 billion in the month. The stock was hardly changed from the end of March at HUF 7,224 billion and dropped HUF 197 billion or 2.7% from the end of April 2010, unadjusted figures show. All the twelve-month drop was due to FX loans, the stock of which fell HUF 313 billion or 7.4% in forint terms in one year to HUF 3,887 billion. The stock of businesses' forint loans rose HUF 116 billion or 3.6% in one year to HUF 3,337 billion.

Households repaid net HUF 21 billion of bank loans in April, as they borrowed net HUF 19.8 billion in forints, about a third more than in March, and repaid an identical net HUF 40.8 billion of foreign currency-denominated loans. Seasonally-adjusted figures revealed combined net repayments of HUF 13.5 billion in April, HUF 5 billion less than in March.

Households have been net payers of loans since the autumn of 2009 as foreign currency loan repayments gathered pace, and a shift towards borrowing in forints failed to fill the gap.

Household loan stock fell HUF 19.1 billion in April as exchange rate and other revaluation changes added HUF 1.5 billion to the stock. Including the exchange rate effect, the stock rose HUF 153.4 billion or 2.0% in a year to HUF 7,999 billion at the end of April.

All the twelve-month rise in households' loan stock came from forint loans the stock of which rose HUF 188.1 billion or 7% in one year to HUF 2,860 billion. In spite of the continued net repayments, the stock of their foreign currency-denominated loans fell only HUF 34.8 billion or 0.7% in forint terms due to exchange rate and other revaluation effects. Households' foreign exchange-denominate loan stock, at HUF 5,140 billion still made up 64.3% of all retail loans at the end of April.

Foreign exchange denominated loans made up 53.8% of domestic banks' business loans at the end of April, down from 56.6% a year earlier, and the fx share in retail loans fell to 64.3 billion from 66% in the period.

The forint firmed 0.8% against the euro and 12.1% against the US dollar but weakened 10.4% against the Swiss franc, the main denomination of the outstanding retail fx loan stock, in the twelve months to the end of April.