HUNGARY-BANKING Hungary's banks brace for two more lean years: Bank Association

Record ID: 151240

  • Title: HUNGARY-BANKING Hungary's banks brace for two more lean years: Bank Association
  • Date: 12th June 2015
  • Summary: BUDAPEST, HUNGARY (RECENT) (REUTERS) CITY SKYLINE WITH DANUBE RIVER BUDAPEST, HUNGARY (JUNE 11, 2015) (REUTERS) ROOFTOP OF CENTRAL BANK BUILDING VARIOUS OF EXTERIOR OF BANK CENTER BUILDING CITIBANK LOGO VARIOUS OF EXTERIOR OF UNICREDIT BANK CHAIRMAN OF THE HUNGARIAN BANK ASSOCIATION, MIHALY PATAI, TALKING TO JOURNALIST (SOUNDBITE) (English) CHAIRMAN OF THE HUNGARIAN BANK ASSOCIATION, MIHALY PATAI, SAYING: "For the next two years, I am prepared that this struggling [between the government and the banks] will continue. Reconciliation will come, but the road to reconciliation from the freedom fight - and the government is having a freedom fight against the banking sector - will be much longer and bumpier than I anticipated a couple of years ago." BUDAPEST, HUNGARY (RECENT) (REUTERS) CITIBANK LOGOS PEOPLE WALKING PAST CITIBANK OTP BANK LOGO PEOPLE WALKING PAST OTP BANK BUDAPEST, HUNGARY (JUNE 11, 2015) (REUTERS) VARIOUS OF WOMAN TAKING MONEY OUT OF ATM (SOUNDBITE) (English) CHAIRMAN OF THE HUNGARIAN BANK ASSOCIATION, MIHALY PATAI, SAYING: "This brokerage scandal is… the solution was an outrage for us, because it was simple: cheating gangsters were stealing money and the banking sector should pay for that. This is absolutely unjust and we do not take it as a solution." VARIOUS OF EXTERIOR OF HUNGARIAN CENTRAL BANK HUNGARIAN CENTRAL BANK CHIEF, GYORGY MATOLCSY, CHATTING WITH POLICEMEN ON WAY INTO OFFICE PLAQUE READING (Hungarian): "HUNGARIAN CENTRAL BANK" PATAI TALKING TO JOURNALIST (SOUNDBITE) (English) CHAIRMAN OF THE HUNGARIAN BANK ASSOCIATION, MIHALY PATAI, SAYING: "The governor was… before the decision, was very blunt and very straightforward. He wants us to originate more loans. So, his first goal is to put it into loan origination, his second goal is if it's not happening, then to buy Hungarian nominated, Hungarian currency nominated government bonds, or to leave the country. So, I do believe that one small part will leave the country of this liquidity, one third could go into the loan origination and the majority of the money will go into government bonds." STREET AND MARKET VARIOUS OF PEOPLE SHOPPING AT MARKET STALLS (SOUNDBITE) (English) CHAIRMAN OF THE HUNGARIAN BANK ASSOCIATION, MIHALY PATAI, SAYING: "This year could be the first one again when we can make a very modest profit because probably the biggest player OTP and one or two other big banks could make money. [JOURNALIST ASKING: INCLUDING UNICREDIT?] Including, I am absolutely sure that Unicredit will be profitable, we will make more money than last year, and then from 2016 on, a very modest recovery could come as far as profitability is concerned."
  • Embargoed: 27th June 2015 13:00
  • Keywords:
  • Location: Hungary
  • Country: Hungary
  • Topics: General
  • Reuters ID: LVA63MC5MBVVKF9FQOPSIJX2EISI
  • Aspect Ratio: 16:9
  • Story Text: Hungary's banks face two more lean years as the government has begun to cut extra burdens but still remains prone to penalise banks whenever it faces a difficulty, the country's top banker said on Thursday (June 11).
    Hungarian Prime Minister Viktor Orban's government has squeezed banks with a windfall tax and refunds to borrowers since 2010 and topped it off with harsh anti-bank rhetoric.
    Mihaly Patai, Chairman of the Hungarian Bank Association who is also chief executive of Italian lender UniCredit's local unit, told Reuters that banks should brace for at least two more lean years before government measures ease and economic growth allows household lending to recover, calling the government's stance towards the banking sector a "freedom fight".
    "For the next two years I am prepared that this struggling [between the government and the banks] will continue. Reconciliation will come, but the road to reconciliation from the freedom fight - and the government is having a freedom fight against the banking sector - will be much longer and bumpier than I anticipated a couple of years ago," he said.
    He said the government's efforts to improve its finances were welcome but it was "an outrage" to make banks pay for compensating clients when three brokerages collapsed this year.
    "Cheating gangsters were stealing money and the banking sector should pay for that. This is absolutely unjust and we do not take it as a solution," he said.
    He said banks also faced rapid regulatory change driven by both by the government and the National Bank of Hungary, which also serves as the market regulator.
    The central bank launched a monetary policy overhaul last month, which included driving 4 trillion forints ($14 billion) out of two-week deposits at the NBH to new loans or government bonds.
    "One small part will leave the country of this liquidity, one third could go into the loan origination and the majority of the money will go into government bonds," Patai said.
    He said it will be harder for foreign-owned banks than local banks to invest in longer maturity government debt because foreign banks will have to reassess their limits.
    Patai also said Hungary's "creditless recovery" was bound to give way to more classic loan-driven economic growth soon.
    Aiding new lending is portfolio cleansing, which could cut non-performing loan rates quickly in the next 2-3 years as private investors and a central bank bad bank initiative buy up distressed portfolios, he said.
    The bank sector as a whole will make a modest profit this year for the first time in several years, he added.
    "I am absolutely sure that Unicredit will be profitable, we will make more money than last year, and then from 2016 on, a very modest recovery could come as far as profitability is concerned," he said.
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