No growth without new lending in Hungary - corporate leaders

Speaking in a panel discussion, FHB CEO in charge of corporate banking László Harmati said he did not believe growth without credit was possible, although FHB was doing its best to employ an anti-cyclical strategy (e.g. launching a corporate banking division in 2008, acquiring Allianz Bank in 2010) with the aim of alleviating the negative impact of government measures afflicting the banking sector. He named unpredictable economic policy as the number one difficulty. Banking products alone will not keep a bank afloat in the next few years, Harmati said, advising banks to complement these with additional services (such as insurance) and look for new opportunities in niche segments as in his view it is not imperative to allocate capital outside of Hungary.

The practice of "brokers doing the lending" as a result of which companies were able to access finance at very low borrowing costs, was not healthy, MOL Chairman and CEO Zsolt Hernádi noted. Any measure with a negative impact on banks will have an even greater negative impact on Hungarian-owned and smaller businesses, he added.

MOL is no exception to the rule that Hungary's increased country risk is affecting companies negatively, the Chairman-CEO said, adding that another key question for the future is Hungary's relative position compared to other countries in the region.

Hernádi is of the view that banks acted rationally when they followed an aggressive lending strategy.

"It made business sense, and it was legal to do so," he argued. In Hernádi's opinion, banks have already written down the bulk of losses arising from non-performing loans in the corporate sector.

"Banks have now become scapegoats. As long as the banking sector is busy licking their wounds, corporations will turn to stock and bond markets for new finance. MOL has returned to the latter," he said.

Commerzbank CEO András Kozma would not welcome a return of pre-crisis lending practices. "During the era of aggressive lending, the banking system was financing a corporate structure which was unsuitable for this," he said. Kozma agreed that there is now a real threat of limited availability of finance to businesses without a foreign parent company or smaller in size, however in his view this may still be a better situation than the one prevalent in 2006.

He said the government's FX loan termination scheme is clearly affecting banks in a negative way, however he reckoned losses arising from asset depreciation are still higher in the corporate sector than in retail banking.

Erste Bank "would be happy to lend, the big question is, from what?". Chairman-CEO Radován Jelasity is expecting very tough competition for forint deposits, therefore "lending growth from forint resources will be next to impossible," he noted. "As long as there are too many 'if's and 'when's, it is very difficult to plan ahead," Jelasity added.

Without new sources of finance, businesses will be growing at a very slow rate, CEO György Zolnai of Budapest Bank noted in agreement with the other speakers. "However the picture is not so clear-cut; there are in fact credit-worthy businesses in Hungary," he added.

Zolnai sees the performance of export markets as a decisive factor, which in his opinion does not justify the current all-encompassing pessimism. Regarding the European plan to bring banks back to stable capitalization, he said a solution was very much anticipated, it is good news that a decision has been reached.

• Tags:
• erste,
• economy,
• conference,
• bef,
• mol