Erste Bank: The doubling of the extra profit tax hit us like a bolt out of the blue
At the company's press conference, Chairman and CEO Radován Jelasity said:
- Erste Bank's operating income increased by 5% in the first nine months of the year, primarily due to fee income, which was boosted by increased customer activity and an expansion in the investment portfolio. Meanwhile, net interest income remained largely unchanged.
- Operating expenses grew by 12% year-on-year, mainly due to personnel expenses, staff expansion, and IT developments.
- Operating profit exceeded last year's figure by 2%, partly due to a slight reversal of risk costs following last year's reversal and other operating results, including extra taxes.
After-tax profit was HUF 113 billion, which is consistent with the previous year and equates to a 24.5% return on equity.
- Over the course of a year, the loan portfolio grew by 5%, while the deposit portfolio increased by 10.5%. This resulted in a 3.9 percentage point decrease in the loan-to-deposit ratio, bringing it down to 72.4%. New lending increased by 37%.
- Although there was an improvement in lending activity in both business segments, corporate loans decreased by 4% to HUF 1,053 billion, while retail loans increased by 13% to HUF 1,502 billion. The ratio of non-performing loans remained at a record low of 1.7% at the end of September.
- Financing for small and medium-sized enterprises (SMEs) has really taken off, with the portfolio rising from HUF 391 billion to HUF 429 billion and new disbursements increasing from HUF 45 billion to HUF 103 billion in the first three quarters of the year. Meanwhile, the loan portfolio of large companies and municipalities fell from HUF 354 billion to HUF 315 billion, with new disbursements dropping by 19%, from HUF 42 billion to HUF 34 billion. Erste's portfolio of commercial real estate loans fell from HUF 356 billion to HUF 309 billion, while new lending dropped by 26%, from HUF 41 billion to HUF 30 billion. This was because the bank deliberately scaled back its activities in this area.
In response to a question, Radovan Jelasity said that the increase in the extra profit tax could drastically change the bank's financial situation in the coming years. He added that they had expected the burden to be reduced in line with the decrease in the base rate.
Márton Nagy's announcement came as a bolt from the blue for them. They learned about it from the press
and it will certainly not help competitiveness by giving an advantage to those who do not have an active banking licence in Hungary, according to the CEO.
For Erste, this could mean an additional burden of around HUF 20 billion. Radovan Jelasity is eager to hear the government's other justifications besides creating coverege for increasing the budget deficit to 5%.
László Harmati, Deputy CEO for Retail Customers, explained:
- The situation at the end of September does not reveal much about the outcome of the Home Start Programme, as this month was all about approvals. However, Erste expects the volume of the mortgage market to reach around HUF 250 billion in October. Portfolio has learned that nearly HUF 170 billion of this could be attributable to the Home Start Programme, with 75% of their mortgage contracts linked to it.
Erste's Home Start loans in numbers
In September, 68% of applicants for Home Start had a higher education qualification, 60% had their salary paid into a bank account, 25% of customers took advantage of the 10% own contribution option and around 60% were under the age of 35. Half of applicants apply for Home Start independently, while half involve a co-signer, and 28% combine Home Start loans with other products. According to László Harmati, the average loan amount at Erste is HUF 36 million.
In response to a question from Portfolio regarding the Home Start scheme, László Harmati said that,
in terms of contract signings, November appears to be as intense as October, although admissions are already declining.
- At Erste Bank Hungary, the volume of new mortgage loans rose by 30% in the first three quarters of the year, while personal loans rose by 59% and targeted loans by 54%. Meanwhile, microloans fell by 0.2%.
- Digital activity remains strong, with more than 74% of customers using digital channels. Most of these customers use only the George App.
- Retail customer assets have reached a new peak of over HUF 7 trillion, 71% of which is invested in securities. The total value of investments and deposits has grown by 15% in the last 12 months. Furthermore, 29.5% of customers have a securities account, and Erste has a market share of over 35% in both TBSZ (long-term investment account) and NYESZ (long-term retirement savings account).
'In a market distorted by brakes and accelerators, it is impossible to accurately measure the sector's efficiency and growth potential, and planning becomes very difficult,' said László Harmati. 'It would be good to leave the sector alone for once, so that it can prove itself in a fair, competitive environment,' said László Harmati, in response to a question about the planned doubling of the extra profit tax.
