Erste Group Bank AG (EBS) Chief Executive Officer Andreas Treichl said Hungarian political leaders recognize that further pain for the country’s banks would also hurt its economy.
As Prime Minister Viktor Orban heads into elections next year, he needs lenders to foster growth, Treichl told analysts in a conference call today. Vienna-based Erste owns Hungary’s second-biggest lender, which widened losses last quarter and will continue to lose money until next year because of high banking taxes and levies imposed by Orban and due to losses from bad debts, Treichl said.
“There is a growing awareness in Hungary that enough is enough and a further move against the financial system would not only hurt the financial system but the country overall,” Treichl said. “The government wants the country to grow and they know they need the banking system. So, I’m quite hopeful that the ordeal is over.”
After taking power in 2010, Orban introduced Europe’s highest bank levy, banned foreign-currency mortgage lending and introduced an early repayment plan that forced banks to take losses on those loans.
The measures made lenders unprofitable, contributed to a plunge in lending, and were among the reasons Hungary lost its investment-grade credit rating. Orban now plans to help the remaining borrowers of mostly Swiss-franc home loans ahead of the election. He said last week he didn’t plan a “Blitzkrieg” on the banks again, and Treichl said messages he had received so far sounded more reasonable.
The International Monetary Fund expects the amount of credit commercial lenders have in the economy to fall to 15 trillion forint ($66.5 billion) by the end of the year, a 14 percent decline since end-2009, it said in a report in March.
In the same period, Erste’s loan book has shrunk in euro terms to 5.5 billion euros ($7.3 billion), from 7.3 billion euros.
“It appears the government is willing to discuss the issue with the banks and to find a common solution,” Treichl said. “If nothing changes to that, the likelihood is that it will be a long-term viable plan that doesn’t hurt the banks or the economic performance of the country.”
Erste, the second-largest Hungarian lender by assets, competes with Hungarian market leader OTP Bank Nyrt, and units of other foreign banks, including KBC Groep NV (KBC), Bayerische Landesbank, Intesa SanPaolo SpA (ISP), Raiffeisen Bank International AG (RBI) and UniCredit SpA. (UCG)
Treichl cautioned that talks with the government about the mortgage plan aren’t finished yet and his stance on Hungary may still change if it becomes clear to him that he isn’t welcome.
“In the long run, if you have an operation in a country where politicians make clear to you that they don’t want you to be there, at one point in time you have to exit,” Treichl said.
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