Hungary’s banking sector delivered a record-breaking year in 2024, with consolidated net profits reaching a record HUF2 trillion (€5bn), with OTP Bank contributing half of the sector's record performance.

MBH Bank, the second-largest lender in assets, realised HUF206bn in net income with Erste Bank coming in third with HUF132bn.

The outstanding performance came despite economic headwinds and rising government burdens.

The banking sector shouldered HUF104bn in bank plus HUF128bn in windfall charges and HUF31bn in cap-related losses. The latter extended numerous times to safeguard some 300,000 retail borrowers from rising yields on variable-rate loans. In related news, lenders have turned to the Constitutional Court to challenge the measure implemented in 2022.

The government announced last month that the windfall tax will remain in place in 2026 as well, despite pledged by the government to phase out the levy introduced in mid-2022.

Banks agreed to refrain from passing on inflation or internal cost increases to retail clients until end-June 2026 after being pressured by the government. Banks that had already implemented inflation-linked fee hikes for 2025 will be required to compensate customers through refunds or fixed discounts.

Net interest income rose by 10.1% on average among the top seven banks, led by OTP, despite a lower interest rate environment.

Dividend payouts by the top seven banks surged to HUF762bn. K&H Bank and Raiffeisen Bank distributed 87% and 99% of their earnings, respectively last year.

Retail lending was the primary growth engine for banks in 2024, while corporate credit demand stagnated.

According to the MNB, household loan volumes are projected to rise by 11.5% this year, up from 9.7% in 2023. Corporate lending, meanwhile, is expected to grow by a modest 4.5%, following a subdued 1.6% expansion last year across the financial system.

Investment appetite of Hungarian firms remains subdued, which is reflected in the ongoing decline in corporate investment. Since the April 2022 elections, quarterly investment growth has been recorded in just one of the past 12 quarters. As a result, investment spending is now nearly 25% below the 2021 peak. Hungary's central bank blamed sluggish overall demand, rejecting the government's explanation of excessive lending rates.