Banksʼ H1 profits down 17% on smaller provisions release

MNB

After-tax profits of Hungaryʼs banking sector dropped 17% year-on-year to HUF 300 billion in the first half of 2018 as lenders freed up fewer provisions, according to data released by the National Bank of Hungary (MNB) on Friday.   

The sectorʼs net interest revenue edged down 4% to HUF 375 bln, but net revenue from commissions and fees rose 4% to HUF 266 bln, state news agency MTI reported.

Banks released HUF 34 bln of provisions in H1, well under the HUF 107 bln freed up in the base period.  

Operating costs rose 18% to HUF 518 bln, but the MNB noted that accounting changes now require lenders to book the bank levy and financial transactions duty on this line, rather than the "other net interest result" line, as in the base period.

Total assets of the Hungarian banking sector stood at HUF 38.409 trillion on June 30, up 10% from twelve months earlier. Net assets were up 5% at HUF 4.107 tln.

Banksʼ net lending stock increased 9% to HUF 19.374 tln. While the corporate lending stock rose 16% to HUF 6.704 tln, retail lending was up 6% at HUF 5.550 tln.

Within corporate lending, FX loans rose 17% and forint loans increased 13%. FX loans accounted for 45% of the total stock at the end of June.

The stock of client deposits increased 14% to HUF 21.504 tln. Corporate deposits rose 22% to HUF 8.080 tln, while the retail deposit stock was up 11% at HUF 8.281 tln.

The stock of interbank deposits and deposits with the central bank rose slightly in Q2, but was still down 14% year-on-year at the end of June, the MNB noted. Banksʼ deposits with the central bank dropped 62% year-on-year to HUF 481 bln because of measures by the MNB to shift the sectorʼs liquidity out of such instruments. Interbank deposits were up 11% at HUF 2.626 tln in the period.

Portfolio quality improves

The ratio of non-performing loans (NPLs) within Hungarian lendersʼ portfolios, meaning those past 90 days due, fell to 2.8% at the end of June, down from 4.6% twelve months earlier, MTI noted. The NPL ratio for corporate loans dropped from 4.3% to 2.9%, while the ratio in the retail portfolio declined from 9.2% to 5.5%.

The broader ratio for non-performing exposure, which includes loans past 90 days due as well as loans for which it can be assumed that the borrower is unlikely to comply with credit obligations in full without realization of collateral, stood at 5.1% for Hungarian lendersʼ combined portfolio at the end of June, down from 7.7% twelve months earlier.

The capital adequacy ratio for the sector stood at 21.3% at the end of June, down slightly from 21.5% twelve months earlier.

The share of foreign-controlled banks in terms of total assets was 44.7% at the end of June 2018, down from 45.6% a year earlier. Some 23 of the 35 credit institutions operating in Hungary were foreign-controlled, including nine operating as a branch of a foreign bank.

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