Hungarian corporate loans rise for first time in a year

By bne IntelliNews January 30, 2015

In a sign of improving confidence, demand for loans from Hungarian companies increased in December, ending a year-long downward trend, central bank data showed on January 30.

Corporate loans grew 1.2% in annual terms to total HUF6.77tn (€22bn) in December. Loans to businesses should increase further in the coming months, with the central bank seeking to widen the scope of its Funding for Growth scheme to include larger companies.

Lending to households, meanwhile, continued declining in December, falling 1.7% y/y to stand at HUF6.73tn (€21bn). Household loans have been decreasing for the last 37 months. Mortgage lending stayed broadly unchanged on an annual basis, while consumer credits declined 4.3% Credits to the government fell 28% to HUF575.3bn in December, deepening from a 15.9% drop in November.

Bank lending has been struggling over the past few years, as the Orban government's tough treatment of the sector and erratic policy has forced lenders into losses and seen them pull in their heads. The issue is becoming more urgent, with low lending to the economy seen likely to stem economic growth. Hungary's economy probably expanded by over 3% in 2014 but is expected to slow to around 2% this year.

In a bid to boost lending, Prime Minister Viktor Orban said in December that the government is in talks with the banks. The PM has offered to lower the high tax burden Budapest has placed on the sector in exchange for increased lending.

Orban said on January 30 that the bank tax, one of the highest in Europe, may be gradually lowered in the coming years if the economy performs well. The tax could be reduced next year at the earliest if GDP growth in 2015 is closer to 3%, Antal Rogan, the ruling Fidesz party's parliament caucus leader said.


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