Erste Group Bank AG (EBS), the Austrian owner of Hungary’s second-biggest lender, won’t predict when it will return to profit in the country because that may give the government an excuse to come up with a new tax to take it away.
“Quite frankly, if we would now announce a return to profitability in 2013, we would just trigger some form of action from the Hungarian government,” Erste Chief Executive Officer Andreas Treichl told analysts in a conference call today. “It would say, ‘Erste has just announced it will return to profits in 2013, that’s why we increase taxes to make sure they will not.’”
Erste had two consecutive quarters of profit in Hungary, reporting net income of 8.6 million euros ($11 million) in the three months through September today, helped by lower bad debt charges. That followed seven periods of losses peaking at 480 million euros in the third quarter of 2011 due to Hungary’s banking levy and to a law that forced lenders last year to swallow currency losses on Swiss-franc denominated mortgages.
The quick succession of policy changes that is a trademark of Hungarian Prime Minister Viktor Orban’s administration made forecasting earnings difficult at any rate, Treichl said.
“There are so many open questions,” he said. “The government is changing its taxation and economic plans on a biweekly basis. This isn’t an environment where we want to predict something.”
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