Hungary’s K&H Bank, member of the Dutch KBC Group, has reported HUF 10 billion after-tax profit for 2009, a decline of 61% year on year. It is good news, though that thanks to a marked cost reduction the bank’s operating profit grew by 17% yr/yr and K&H closed the last quarter in the black, following losses incurred in Q3. The overall picture, however, is blurred by the fivefold increase in provisioning from 2008 to 2009. K&H boosted provisions for possible loan losses, while the quality of its loan book deteriorated less than the market average, but the phenomenon continues to warrant caution for 2010.
K&H’s parent bank KBC had to resort to financial help from both the Belgian Federal and Flemish Regional Governments. In mid-November, the European Commission cleared the group’s new business plan that will enable KBC to repay a state aid in full and on its own. K&H CEO Marko Voljc said it was clear all along that the stimuli would be only transitional.
K&H Bank’s full-2009 after-tax profit dropped to HUF 10 bn, while its pre-provisioning EBIT grew 17% yr/yr, thanks to stringent cost control, a 16% rise in swap-adjusted net interest income and a 5.2% growth in net commissions income.
Following a moderate after-tax loss in Q3, the bank booked HUF 1.5 bn on this row in Q4. K&H’s market share regarding the size of deposits remained unchanged at 7.5%, while its share in retail lending eroded only to 9.1% from 9.3% in 2009, while FX lending was put on hold last year. The last quarter, though showed a more substantial decline here.
K&H added nine branches to its network last year, completing its expansion programme at 242 units. The number of the bank’s retail clients was up 4% at nearly 850,000 at the end of the year.
As 2009 was a year of adjustment, K&H’s retail loans stagnated, while it recorded a 22% decrease in loans to small and medium-sized enterprises (SMEs) and a drop of 14% in corporate loans.
As of the autumn of 2009, K&H has been concentrating more on retail loans. It introduced a new forint loan with favourable interest rate and started to offer EUR-denominated retail loan packages in mid-February, as a result of the change in the regulatory environment.
K&H’s loan/deposit ratio remains favourable at 91%, so the bank has every right to boast that its liquidity is one of the highest in the local banking sector.
The ratio of non-performing loans in the retail segment was 5.4% at the end of last year, much better than 7.7% recorded in the entire sector. K&H’s capital adequacy ratio improved to 12.3% from 9.9% at end-2008.
K&H’s insurance segment relies 60% on compulsory motor liability insurance (“kötelező") and the results of this market affected the revenues of this business greatly. (Each year car owners had one month to switch insurance companies if they found better conditions at another than their own.)
The campaign turned out to be more fruitful for K&H in 2009 than in 2008, gaining 12,500 new clients, while its rates offered during the campaign for 2010 were not different from what they had during the year. The market share of K&H’s non-life insurance business dropped to 3.8% last year from 4.3% in 2008, while its net operating profit jumped 41% yr/yr.
The life segment was even more successful. In the single-premium life insurance market it boasted a 12.7% share, the third-biggest in 2009. In the entire life segment its market share grew to 5.1% from 3.6%, partly as a result of the introduction of new products.
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