Business 11 August 2021, 12:37pm

Erste Bank Hungary rides wave of economic rebound

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Erste Bank Hungary closed the first half of 2021 without risk costs, and so its after-tax profit reached 31.8 billion forints, the bank has announced at a press conference on Wednesday. The rebound of the economy was beneficial for the activity of Erste's customers, but new lending showed growth only when including bond financing too.

Chairman-CEO Radován Jelasity shared the specifics about Erste Bank Hungary's first-half performance:

growth was dynamic in H1, with a host of one-off impacts;
HUF 31.8 bn after-tax profit, about HUF 6 bn more than two years ago (the bank largely broke even in H1 2020);
profit growth was driven by a 24% jump in operating profit, about 10% of which was brought about by one-off impacts, while operating expenses went up by only 5.1%;
among the one-off items, Jelasity highlighted the increase in interest income that had been booked in relation to the moratorium on loan repayments, as well as the fair value revaluation of baby expecting loans;
the marked increase in profit is also attributable to the fact that contrary to last year's HUF 17 bn the bank did not have risk costs in H1 this year;
the stock of loans grew by 7% and that of deposits increased by 17% yr/yr at a 19% expansion of retail assets, which helped the loan-to-deposit ratio reach an extremely low level at 54%;
Erste Bank Hungary is one of the most efficiently operating banks in the country with a cost/income ratio of 44.8%;
new lending declined 10.6% in annual terms, mainly in relation to corporate lending, but volumes of the corporate segment did grow when including the bond programme;
the bank's non-performing loan ratio rose to 2.9% by end-June from 2.1% a year earlier.

Remarks by Deputy CEO László Harmati (Retail):

retail lending declined only marginally yr/yr, but its structure changed significantly;
the leading role of the baby support loan (-26% over H1 2020) was taken over by housing loans (+34%), and personal loans also started to show growth, and there was an increase in the number of credit card applications and lending to micro businesses, as well;
the changes to transactions and card payments indicate the disappearance of the negative impacts of the coronavirus pandemic. A growth of 12% was recorded here in July, which had a positive effect on revenues too;
the share of online purchases rose to 18% from 16% a year ago and 13% two years ago;
58% of Erste's customers are 'digital' which is still far from the strategic ratio of 75%, but it highlights the role of the introduction of the bank's Google platform. Nearly half of the bank's customers primarily use their smartphones for transactions;
people's willingness to save and the savings ratio have not been falling, and the share of security investments is also high (greater than in the case of deposits at Erste).

Róbert Cselovkszi, Chairman-CEO of Erste Investment Ltd. said retail assets managed by Erste grew by 19% yr/yr in H1, total assets managed increased by 26% and the stock of securities grew by a quarter.

Richárd Szabados, member of the Board of Directors in charge of the corporate business said that while corporate lending declined in annual terms, it did grow by 9% when including bond financing. The total stock stagnated (+0.1%), mainly as only about 10% of Erste's borrowers made avail of the repayment moratorium, which is under the market average.

Lending to SMEs was up 11%, while lending to large enterprises dropped 14% (but it grew when including bond subscriptions), and lending to commercial real estate decreased by 12%. Erste expects growth both in lending and bond financing (full-year growth estimated at 5%).