Economy 2 February 2024, 12:13pm

Hungary's two large state banks grow into giants, will take part in airport buyback

Portfolio

Hungary's two large state-owned banks, EXIM and the Hungarian Development Bank (MFB), grew at a much higher rate in 2023 than in the previous years, reaching a combined balance sheet total of HUF 7,256 billion, which would make them the country's third largest bank, the Ministry of National Economy and the two credit institutions said at a joint press conference on Friday. This year, the ministry headed by Márton Nagy expects the two banks to contribute 1 percentage point to GDP growth. To this end, the Baross Gábor Re-industrialisation Loan Programme will continue with a budget of HUF 200 billion, while MFB will disburse HUF 396 billion in EU funds this year. The two banks are also expected to play a major role in the purchase of Budapest Airport, with one third of the purchase being financed by their loans.

It was important last year for development banks to support growth and reduce the extent and chances of recession, i.e. to pursue a counter-cyclical policy to avoid a halt in corporate lending, said Economy Minister Márton Nagy. This has been supported by three branches: credit, guarantees and capital, and as a result never before has the balance sheet total increased as much as last year.

the government wants to use every means at its disposal to support lending This year again, he added.

EXIM's balance sheet total (including the Hungarian Export Credit Insurance Company Ltd, (MEHIB)) grew by a record 74% in 2023, an increase of nearly HUF 1,600 billion, bringing the bank's total to over HUF 3,700 billion. The combined total assets of EXIM and MFB reached 7,256 billion last year, up

EXIM Hungary is the official export credit agency of Hungary, specialised in international trade, foreign market expansion and foreign investment. It has also been operating successful domestic credit programmes for many years. EXIM Hungary is the joint entity of two legal persons, the state-owned Hungarian Export-Import Bank Ltd (Eximbank Ltd) and the Hungarian Export Credit Insurance Company Ltd (MEHIB Ltd), operating within an integrated framework.

The bank's loan portfolio grew by almost 50% to nearly HUF 2,500 billion. The Baross Gábor Re-industrialisation Loan Programme has invested HUF 1,000 billion, without which corporate lending would have fallen by more than 40%, Márton Nagy stressed.

EXIM has also helped our "national champions": in food, logistics, pharmaceuticals, construction and trade, it has supported companies that are the backbone of the economy, helping them to invest in even distant countries. In April, EXIM issued $1.25 billion of international bonds to this end, and in October, €1 billion, added Nagy.

In response to a question, the minister said that the German economy is performing poorly, the slowdown in November-December is also affecting the Hungarian economy, but 4% economic growth is achievable in Hungary this year, consumption may recover, the big question will be exports.

MFB increased its activity by 20% last year, with four main programmes contributing to this: 1. financing the Széchenyi Microloan, 2. distributing EU funds, 3. supporting the Baross Gábor Capital Programme, 4. supporting three agricultural-focused loan programmes. In May, this was complemented by a USD 1.25 billion bond issue.

Last year's level of activity is difficult to sustain for long, but the two banks need to support it again this year to avoid a credit-less rebound, i.e. to ensure a credit-led recovery.

EXIM will continue to provide HUF 200 billion in investment loans under the Baross Gábor Reindustrialisation Loan Programme, and should also support Hungarian exports and investments, of which Central Asia will be a priority.

MFB will play a major role in the distribution of EU funds, especially in the enterprise development and employment policy programmes, as well as in the energy efficiency programme, the Széchenyi Microcredit programme and the capital programmes.

Last year, the two bank credit programmes, the Széchenyi Card Programme and the Baross Gábor Reindustrialisation Programme, contributed 0.82 percentage points to GDP growth, while the measures of the ministry, including the utility bills reduction scheme and other programmes, contributed 2.3 percentage points to economic growth. The two banks are expected to generate a 1 percentage point growth surplus this year.

Loans worth HUF 1 244 billion were disbursed last year, most of which came from the Baross Gábor Reindustrialisation Loan Programme. HUF 600 billion was allocated for working capital purposes and HUF 400 billion for investment purposes, said EXIM Chief Executive Kornél Kisgergely.

The former played a major role in refinancing maturing working capital loans with elevated interest rates, as businesses were able to renew them at 6% interest. This year's HUF 200 billion top-up can only be used for investment and only for companies in priority industries.

Interest is still intense, with the loan now available at 5% in HUF and 3% in EUR since 15 January. The HUF 200 billion envelope could be exhausted soon and trickle down into the economy. The head of EXIM said: they are working on a number of investment projects alongside refinancing programmes and are doing their utmost to meet the ministry's expectations.

In response to Portfolio's question, Kisgergely said that the framework of the Baross Gábor loan programme will last until 30 June, after they will work out the framework for the continuation of the preferential refinancing loan programmes, but it is possible that the EU will extend the preferential conditionality.

Overall, the lending plan for this year is similar to last year's HUF 1,400 billion disbursement target, in which Márton Nagy said

the loan for the purchase of the airport, in which EXIM and MFB may also participate, could play an important role. The airport purchase deal could close by the end of February, with technical details still being worked out.

Financing can be roughly one-third each from the state budget, the sale of assets and loans from state banks, EXIM and MFB.

Levente Sipos-Tompa, CEO of MFB, said that the two banks were able to show how much they are needed during the currency crisis and the energy crisis. The bank's balance sheet total rose by 20% to over HUF 3,500 billion last year, and their loan portfolio reached nearly HUF 1,500 billion. In individual transactions, they executed HUF 329 billion of loans, HUF 98 billion of guarantees and HUF 284 billion of equity transactions from their own resources.

As for the individual programmes,

under the Széchenyi Microloan Refinancing Programmes, HUF 35.2 billion of refinancing loans were contracted and most of them were disbursed,
with HUF 305 billion of loans and HUF 12 billion of capital disbursed from EU funds. They closed the 2014-2020 period with 100% absorption, disbursing HUF 1,011 billion to 54,723 clients;
the Baross Gábor Capital Programme disbursed HUF 164 billion in equity financing, with capital investments of close to HUF 1,000 billion;
MFB had three agriculture-focused lending programmes in place;
they launched the Green Loan Programme, which is fully in line with EU taxonomy requirements.

Among their goals for 2024, the MFB chief said that they would disburse HUF 396 billion of EU funds, invest HUF 17.5 billion in the Corporate Energy Efficiency Loan Programme, continue the Széchenyi Microloan Refinancing Programme 2.0 with another HUF 10 billion, continue capital programmes for economic development, and

the MFB Point Plus corporate network is ready to bring funds to market quickly.

Cover photo: Portfolio