Fitch keeps negative outlook on Hungarian banks for 2014.

By bne IntelliNews December 19, 2013

Fitch Ratings has maintained a negative outlook on Hungary’s banking sector citing high non-performing loans, muted credit demand, a sluggish economy and subdued performance, the rating agency said in a report on CEE banking sector. 

The sector returned to a profit in the first nine months of 2013 after two consecutive annual losses but profits were mainly concentrated at six banks while the other lenders or either around breakeven of suffered heavy losses, Fitch said adding that it expects this trend to continue in 2014. Stable interest income and lower funding costs helped margins held up in Jan-Sep. Credit demand is likely to stay weak as borrowers are wary of an uncertain operating environment, according to the ratings agency. Asset quality is likely to remain under pressure in 2014 due to high legacy exposures mainly concentrated in the construction sector and retail FX mortgages.

Fitch sees a possible M&A activity on the Hungarian banking sector, as foreign parents are scaling down their unprofitable subsidiaries and revising their strategic presence on the local market.

The rating agency expects the government’s unorthodox measures to weight on the banks’ performance in 2014. An aggressive solution regarding the ease of repayment of FX mortgages would cause large losses for the banking sector and consequently may drive some foreign owners to contemplate exit strategy from Hungary, Fitch said.

Related Articles

Hungarian unions in full gear for first country-wide strike at Tesco stores

Union leaders are preparing for the first country-wide strike at Tesco stores in Hungary, which has unanimous support from workers, local media reported on September 4. This is just the latest in ... more

Russian development bank IIB signs off on debut Hungarian credit facility

The Moscow-based International Investment Bank (IIB) announced on August 9 that it has signed off on its debut credit facility in Hungary. The Russian-led IIB decided around five years ... more

Central Europe’s factories remain busy despite a summer lull in PMIs

Manufacturers in Central Europe reported a step back in activity and confidence in July, purchasing managers’ indices (PMI) released by IHS Markit on August 1 showed. While, the indicators still ... more