Hungarian credit institutions posted 72.7 billion forints worth of after-tax profit combined in the third quarter of 2016, according to data released by the central bank (MNB) on Wednesday. This corresponds to a not overly high 8.5% return on equity (ROE). Nevertheless, they are up at a profit of HUF 416 bn for the January-September period, which is a new all-time high. Although the end of the year is the time for the largest write-downs, the banks seem to be on track to have a good year-end. The reversal of provisions keeps contributing to profits, but these reserves are not to be there forever.
Hungarian credit institutions posted HUF 72.7 bn combined after--tax profit in Q316, after HUF 343.5 bn profit booked in the first half. We should highlight a few factors behind the Q3 result:
the interest income erosion in the sector seems to have stopped; the HUF 207.3 bn NII is practically the same that was posted in the base period;
the reversal of provisions has continued; HUF 21.1 bn more were freed than how much were generated, which already marks a decline over the previous quarter;
operating expenses rose 4% yr/yr to HUF 172.3 billion;
HUF 83.4 bn profit were posted as extraordinary result, which is much more than the base period’s print.
The press release of the MNB also puts the spotlight on a few additional pieces of information:
Combined total assets of the credit institutions rose 2.1% q/q to HUF 33,311.2 billion by the end of September.
Gross loans expanded by 2.3%, particularly over a 15% or HUF 280.1 bn growth of loans extended by credit institutions.
Gross loans of non-financial corporations decreased by 0.3%, whereas gross loans to households increased by 0.3%.
The ratio of non-performing exposures dropped to 8.4% from 9.3%: to 15.8% from 16.9% in the household sector and to 6.9% from 7.6% in the non-financial corporation sector.
Capitalisation of the credit institutions did not change meaningfully compared to the second quarter, and their capital adequacy ratio fell to 20.4% from 20.9%.
The market share of domestically-controlled credit institutions based on their total assets was 54.4% at the end of September, versus 54.8% at the end of June.
