Moody's keeps negative outlook on Hungary's banking system.

By bne IntelliNews August 6, 2013

Moody's Investors Service has maintained its negative outlook on Hungary's banking system citing continued downside risks for local banks from the weak operating environment, which will result in pressures on asset quality and capitalisation. According to Moody’s, Hungarian banks continue to be heavily exposed to wholesale and FX funding, as well as parental support constraints in a system that is predominantly foreign-owned.

Moody's expects Hungarian banks to continue deleveraging their balance sheets over the outlook period, as the challenging operating environment results in subdued supply and demand for loans.

The ratings agency also noted that the weak asset quality and pressure on capitalisation will remain major credit challenges for the Hungarian banking system over the next 12-18 months. The deterioration in asset quality will be driven by the weak economy, high unemployment and the sizeable amount of FX loans in the system, which renders the banks' loan books vulnerable to external currency market dynamics. Many of the foreign-owned banks rely on short-term FX funding facilities from their parent banks to fund their FX portfolios, thus exposing them to significant rollover risk in the current challenging funding environment, Moody's said.

Related Articles

Hungary's MOL strikes licensing deals essential to $1.9bn petrochemical expansion ambitions

Hungary's MOL announced on July 20 that it has struck licensing deals with Germany's Evonik Industries and Thyssenkrupp that will be essential in its plan to roll out a $1.9bn investment in ... more

Evolution Equity Partners closes $125mn cybersecurity-focused fund

Evolution Equity Partners announced on 17 July the final closing of a new fund with total capital commitments of $125mn to make investments in cybersecurity and next generation enterprise software ... more

Hungary signs deal to link to Russia's Turkish Stream gas pipeline

Budapest has signed a deal with Russia's Gazprom to link Hungary with the under-construction Turkish Stream ... more

Dismiss