Business 12 November 2019, 1:51pm

Hungarian operation of Erste continues to soar

Portfolio

Erste Bank Hungary posted 47 billion forint pre-tax profit in January-September 2019, 11% more than in the first nine months of 2018, the bank reported on Tuesday. Erste's loan portfolio grew by 21% year on year, well over the sector average. Demand for the prenatal baby support loan was multiple times what the bank had expected.

Erste Bank Hungary's operating income rose 9.7% yr/yr, while its operating expenses went up 4.1% in the first three quarters of this year. The bank's operating profit increased by 17.2% yr/yr to HUF 59.3 billion, announced Chairman-CEO Radován Jelasity .

Erste Hungary's pre-tax profit was HUF 47 bn, up 11.2% in annual terms. Its cost-to-income ratio improved further, dropping to 52.1% from 55.1%. When adjusted for the impact of the financial transaction tax (FTT) it came in at 48.4%, which makes Erste the best in this respect in the local banking sector. The bank's stock of performing loans expanded by nearly 21% over January-September compared to the base period, while the non-performing loan (NPL) ratio dropped to 2.5% from 3.9%. Jelasity reminded that retail loan penetration in Hungary is low (it is around 15% of GDP) and there is great room for growth here. The bank's loan/deposit ratio rose to 75.0% from 69.1%.

On the retail side, the stock of performing loans grew by 16%, owing to a 47% jump in new lending, said Deputy-CEO László Harmati. The stock of non-collateralised loans increased by 62% to HUF 253 bn, mainly on the back of the prenatal baby support loan, for which Erste received over 6,000 applications. The bank had initially expected the whole banking sector to extend HUF 300 bn of this loan annually, while the count may easily be close to HUF 400 bn in the second half (it was up at HUF 330 bn in early November).

Customer assets managed by Erste grew by 13% yr/yr in January-September to HUF 2,914 bn, 60% of which are investment products, as the bank managed to stabilise asset withdrawals at investment funds. The number of active users of mobile banking more than doubled in annual terms (+120%) at Erste Hungary. Although the number of cards issued did not change, the number of transactions with plastics held by households rose 20% to 102 million and their volume went up 21% to HUF 756 bn.

The stock of performing corporate loans amounted to HUF 726 bn by end-September, up 26% yr/yr, said Richárd Szabados, head of the corporate segment. This puts Erste Hungary to the 5th or 6th spot on the local market. The NPL ratio in this segment remained well under 1%. The bank manages HUF 679 bn worth of corporate savings, 11% more than in the first nine months of 2018. All three corporate segments (SME, large enterprise, commercial) grew at a double-digit rate. The expansion was particularly sharp (+38%) at large enterprises, versus +23% at the other two. The bank expects its corporate loan portfolio to reach HUF 780-790 billion this year, reaching the size of the retail loan portfolio.

Erste Hungary has been active both on the organiser and the buyer side in the central bank's Bond Funding for Growth Scheme (BGS). It has so far participated in three subscriptions as buyers, and it strives to achieve a share on a par with their market share (7.7%).