March 12, 2019 / 10:39 AM / 5 months ago

Lending boom drives profit at Hungary's banks up 9.6 pct in 2018 -cbank

BUDAPEST, March 12 (Reuters) - Hungary’s banks saw annual profits rise 9.6 percent, bolstered by a lending boom and higher fee and commission income, the central bank said on Tuesday, as economic growth and record-low unemployment rates boost the sector.

The country’s banks earned a 648.3 billion forint ($2.32 billion) net profit last year, the National Bank of Hungary said, adding that the average return on equity (ROE) in the sector rose to 13.4 percent in 2018 from 13.2 percent in the previous year.

The figures underscore a turnaround in the sector, which was hit hard in the first half of the decade by punitive measures under Prime Minister Viktor Orban to shore up the budget and help borrowers at the expense of mainly foreign lenders.

Hungary has since bolstered domestic ownership in the sector and increased demand for consumer loans and mortgages.

Banks in Hungary, however, are facing rising costs and have called for a further reduction in the country’s bank tax as well as the elimination of a levy on financial transactions.

Operating costs increased by 15.4 percent year-on-year, but the sector’s average cost-to-income ratio, an indicator of operating efficiency, improved to 62.8 percent from 64.8 percent, the central bank said.

Major lenders in Hungary include domestic OTP Bank , K&H, the local unit of Belgian KBC, Austrian Erste Group and Raiffeisen, as well as Italian UniCredit and Intesa SanPaolo.

Central bank Governor Gyorgy Matolcsy has said there was scope for further consolidation in the domestic bank sector, as the market could sustainably accommodate just five or six big players.

Orban’s government is planning to privatise state-owned Budapest Bank this year. Erste Group has said it would be interested in the bank “if the right people approach it”.

Hungary’s government bought Budapest Bank from the financial arm of General Electric in 2015 for $700 million. ($1 = 279.71 forints) (Reporting by Gergely Szakacs, editing by Louise Heavens)

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