Hungarian Banking Sector: Industry Report

Hungarian Banking Sector

Product Type: Market Research Report
Published by: Internet Securities, Inc. (Intellinews)
Published: April 2008
Product Code: R337-1140

Description

Aggregate net profit of the banking sector amounted to HUF 316.5bn in 2007, falling by 11.3% y/y, the Hungarian Financial Supervisory Authority (PSZAF) reported. Financial performance thus worsened, compared to a 15.4% y/y profit growth for 2006. The total loan portfolio of the sector expanded by 22.1% y/y to HUF 16.7tn at end-2007, driven largely by retail demand while corporate borrowing rose at a more moderate pace.

Foreign currency-denominated loans increased their share in total loans to 62.7% as they soared by 41.4% y/y. Preliminary data of the central bank suggested that the high growth of loans in foreign currency was predominantly the retail sector and specifically, housing loans demand. Forint loans were barely up by 0.6% y/y in 2007. Despite the significant loan expansion, the quality of the loan portfolio of the banking sector rose as the share of classified loans fell by 1.8pps y/y to 4% and the share of problematic loans declined as well by 0.1pps y/y to 1.4%. It should be noted, however, that the strong increase in forex-denominated loans has been considered as a rising risk for the sector as a higher exposure of households to external interest rate and exchange rate risks could lead to increased default rates in case of unfavourable market developments.

The deposit base of the banking sector expanded at a lower pace than the loan portfolio, rising by 6.9% y/y to HUF 10.7tn at the end of last year. At the same time, total asset volume jumped by 17.3% y/y to HUF 24.4tn. Forint assets represented the larger 61.1% share in the total, climbing by 12% y/y while foreign currency denominated assets increased by 26.6% y/y, possibly reflecting the depreciation of the forint in the last few months of the year.

Table of Contents

Overview
Monetary And Banking
Analysis
Bank News
Financial Reports
Appendix

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