Hungary's FHB Q3 profit drops on lending losses

BUDAPEST, Nov 16 (Reuters) - Hungarian mortgage bank FHB FHBK.BU said its third quarter after-tax profit fell 10 percent from a year earlier to 1.44 billion forints ($7.98 million) as higher lending losses eroded a big rise in net interest income. FHB said on Monday that net interest income for the period rose 56.8 percent to 6.65 billion forints as interest income rose 9.8 percent to 20.7 billion forints, while interest expense dropped 3.9 percent to 14 billion.

But the bank booked 2.32 billion forints in impairment and lending losses in the third quarter, up sharply from 244 million forints a year earlier, as portfolio quality deteriorated due to Hungary's steep economic downturn.

Hungary's biggest bank, OTP OTPB.BU, reported last week a 14 percent decline in third-quarter net profit due to soaring lending loss provisions and warned that higher risk provisioning may trigger a slight shortfall in its full-year profit target. [ID:nLD669185] FHB said its portfolio quality remained good despite the ratio of non-performing loans rising to 3.55 percent by end-September from 1.4 percent a year earlier.

FHB's chief executive told Reuters last month the bank expected its non-performing loan rate to hit around 4 percent by the end of the year, but portfolio restructuring would help that rate decline in the first half of 2010. [ID:nLE398656]

The bank's quarterly operating costs increased by 11.7 percent to 3.38 billion forints as personnel expenses rose 1.5 percent and other administrative expenses rose 40.9 percent from a year earlier.

At 0831 GMT, FHB shares traded down 0.4 percent at 1,327 forints on the Budapest Stock Exchange, underperforming a 1.6 percent gain in the wider market .BUX. ($1=180.56 Hungarian Forint) (Reporting by Gergely Szakacs; Editing by Hans Peters)