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NPL ratio at bank branches well under that of banks that operate as independent entities

The proportion of non-performing loans in the portfolios of Hungarian branches of foreign-owned banks is well under that of banks limited by shares, fresh data published by financial market regulator PSzÁF show.

Banks are not required to set up a separate unit to do business in Hungary, rather they can operate as a branch. AXA Bank Europe, Banco PrimusBNP Paribas, BNP Paribas Securities, Citibank Europe, Cofidis, Credit Agricole Corporate and Investment Bank, ING Bank and Oberbank all have branches in Hungary.

The ratio of non-performing loans (NPLs) – those more than 90 days past due – in branches' lending portfolios, reached 6.2% at the end of June, well under the 10.5% ratio for banks operating as independent entities in Hungary. The NPL ratio for branches edged up from 5.2% at the end of March.

The NPL ratio in branches' portfolio of loans to domestic companies rose to 6.2% at the end of June, nearly doubling from 3.5% at the end of March.

The NPL ratio in the retail portfolio climbed to 8.4% at the end of June from 7.9% at the end of March. Between the end of 2010 and the end of March, the ratio dropped nearly four percentage points.

The NPL ratio for loans to foreign clients was 0.41% at the end of June, little changed from the end of March or the end of 2010.

The NPL ratios at banks that operate as independent entities rose for all three portfolios in Q2, climbing to 13.6% in the domestic corporate portfolio, to 11.6% in the retail portfolio and to 8.5% in the foreign corporate portfolio.

Branches held HUF 1,105 billion net loans to costumers at the end of June. The stock rose a slight 0.1% in Q2 after dropping 1.9% in the first three months of 2011.

Branches' lending losses and provisioning plunged 40% to a little more than HUF 3 billion at the end of June from the end of 2010.

Total assets of bank branches fell 4.3% to HUF 2,534 billion in the twelve months to June 30, accounting for 8.4% of the total for the banking sector. Branches' total assets fell at a far slower rate than the 7.8% drop for banks operated as independent entities.

Branches' share in the sector's total pre-tax profits was 9.1% in H1, exceeding their share in total assets, and also up from 8.1% in the same period a year earlier.

The PSzÁF data for banks operated as independent entities do not include the Hungarian Development Bank (MFB), Eximbank or clearing house KELER.