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Due to limited space, there are no more physical seats, but online tickets are still available for Tuesday’s Lending 2020 conference!
There are credit institutions that operate as banking groups, others as individual banks, and others as branches in Hungary.
In our first chart, we show the order of bank groups, individual credit institutions, and branches based on the balance sheet total. First, of course, OTP, which, together with its domestic and foreign subsidiaries, is shown in the figure as a group. It can be said that, depending on the size of the OTP (more precisely the balance sheet total), it reached 74% at the end of 2019 of all other participants in the Hungarian credit institutions sector.
K&H and UniCredit are on the other two steps of the podium, as before. In terms of the overall balance, the sixth-ranked Takarék Group was also ahead of Erste and Raiffeisen. In our previous article, we showed that the largest banks changed last year according to their different balance sheet items, as we recall in the table below.
Of course, size isn’t everything, owners are primarily interested in profits, even if banks don’t pay dividends to shareholders after last year’s earnings, as required by the MNB. Therefore, the 2019 earnings can be used by the vast majority of banks for growth and even to avoid losses due to this year’s coronavirus. Last year, in absolute terms, the highest profit was obtained by the OTP Group, its profit was almost one and a half times that of all other credit institutions.
In nominal terms, the profits of the Hungarian banking sector have never been higher than in 2019, with an increase of 7.7% in one year. These MNB figures also include OTP’s foreign subsidiaries. According to our calculations, without these, the profit of the banking sector would have been around 476 billion HUF, not close to 700, but last year.
The sheer numbers don’t say it all here either: based on return on equity and assets, last year MKB, Erste, K&H and UniCredit were the best of the big boys, but Takarék, CIB and Budapest Bank fell behind. According to our calculation, the average return on equity of 12.3% for the nine large banks would have been 8% at a cost of risk of 90 basis points (that is, realistic about the cycle average). This year, most banks would likely be very pleased with the latest number, as the first half of the year returned an average return on equity (ROE) of just 3.8% due to near-net impairment of HUF 250 billion, we wrote in detail on the performance of the sector this morning.
As they are credit institutions, it is also worth mentioning the loan portfolio. In the first three steps of the podium, the order is the same as in terms of total balance, but the Takarék Group is ahead of several banks, thus it is in fourth place. Among the banks with a loan portfolio of between HUF 500 and 1 billion, there are also three state-owned.
2019 has brought enviable numbers for bank owners, especially when we look at it from this year’s events. This year, the epidemic struck Hungarian banks at the same point where they had been at the forefront of Europe in recent years. Between 2017 and 2019, thanks to reversals of impairment, they achieved the highest return on equity in the EU as a whole; We predicted a decline in this high profitability, which then ended drastically due to the epidemic. Paradoxically, these are not massive loan defaults thanks to the repayment moratorium, the $ 250 billion net in impairment losses this year are for the future. Also, perhaps only the decline in personal and corporate loans in recent bank figures shows that something is wrong. In detail about all this:
At our Hybrid Lending 2020 conference on Tuesday, September 15, banking industry leaders will also share their views on this, with tickets available online for the event.
Due to limited space, there are no more physical seats, but online tickets are still available for Tuesday’s Lending 2020 conference!
Cover image: Getty Images
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