MNI BRIEF: Hungarian Banks Strong, But Risks Remain - NBH
MNI (LONDON) - Hungary’s banking sector is expected to report “outstandingly high” profitability for 2024, the National Bank of Hungary said on Wednesday, with stress test results showing the sector would remain stable even in the event of a severe shock.
Although the sector may already have reached its cyclical trough, risks relating to commercial real estate lending continue to warrant “special attention,” the Bank said in its second and final Financial Stability Report of the year. The prevalence of housing loans at a 0% interest rate spread is also “unsustainable,” it said, with the resultant squeeze in bank’s profit margins posing a greater risk to financial stability the longer it continues.
Overall, banks enjoyed strong profit levels, ample liquidity, few credit supply constraints, adequate capitalisation and a high quality loan book, the NBH said, with the share of non-performing loans to corporate and household segments falling to an historically low 2.3% in H1 2024. Corporate loans growth is expected to be close to 3% this year, as demand remains relatively weak. By contrast, household credit is seen expanding by 9% in 2024, having picked up by 6% in the first half of the year.