August 24, 2016 / 9:25 AM / 3 years ago

Hungarian bank profits leap as provisions plunge

BUDAPEST, Aug 24 (Reuters) - Hungarian banks posted pretax profits of 360.1 billion forints ($1.31 billion) in the first half of this year, up 131 percent on the same period of 2015, and their capital standing also improved, the National Bank of Hungary said on Wednesday.

The central bank said that loan losses and new risk provisioning fell by a cumulative 87.1 percent from the same period a year ago, when lenders booked the costs of a court ruling forcing them to repay some past cost increases for retail borrowers.

Hungary’s banks, about half of which are foreign-owned, have had to contend with one of Europe’s highest bank levies under Prime Minister Viktor Orban since 2010.

But Orban’s government has started reducing the levy this year and improvement in the economy has also to strengthen the banking sector.

The central bank said that the capital adequacy ratio of the banking sector rose to 20.9 percent in the second quarter, from 20.2 percent in the previous three months, against a regulatory minimum of 8 percent.

Lenders reported a 9 percent rise in net interest income in the first half of the year to 415.1 billion forints despite a central bank interest rates dropping to record lows.

Interest income fell by 13.4 percent, but interest costs dropped by 36.9 percent on an annual basis while operating costs rose by only 0.9 percent.

The National Bank of Hungary said the proportion of non-performing retail loans dropped to 16.9 percent in the second quarter, from 17.3 percent in the first. In corporate lending, the proportion of loans more than 90 days overdue fell to 7.6 percent from 9.1 percent.

Key players include Hungary’s OTP Bank, Belgian lender KBC, Austria’s Erste Bank and Raiffeisen and the local units of Italian lenders UniCredit and Intesa SanPaolo. ($1 = 274.1200 forints) (Reporting by Krisztina Than; Editing by David Goodman)

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