Oct. 17 (Bloomberg) -- OTP Bank Nyrt., Hungary’s largest lender, dropped the most in three months after the government said it will increase taxes on the financial industry.
The shares sank as much as 8.9 percent and closed 3.7 percent lower at 4,230 forint, the biggest slump since July 23. The benchmark BUX stock index, in which OTP has a 29 percent weighting, lost as much as 3.6 percent and last traded 0.7 percent lower.
Hungary won’t meet its pledge to banks to halve the special tax on lenders next year and will increase a separate levy on financial transactions and introduce a duty on utility infrastructure to keep the budget deficit within 3 percent of gross domestic product, Economy Minister Gyorgy Matolcsy told reporters today.
“The package puts the bulk of the burden on the banks and the corporate sector,” Zsolt Kondrat, a Budapest-based economist at Bayerische Landesbank’s MKB unit, wrote in e-mailed comments. The move “erodes the growth potential of the economy further and so risks remain high,” Kondrat said.
Hungary’s Bank Association said it was “shocked” that the government reneged on its pledge to halve the bank tax, according to an e-mailed statement. The measures endanger banks’ lending capacity, the “predictable financing” of the economy, and a recovery from recession, said the association, whose members include OTP and the Hungarian units of Erste Group Bank AG and UniCredit SpA.
FHB Jelzalogbank Nyrt., a Hungarian mortgage lender, fell 0.8 percent to 476 forint.
“The new measures consist of tax hikes burdening primarily banks and foreign retail and utility companies and exclude any structural expenditure cuts,” Eszter Gargyan, a Budapest-based economist at Citigroup Inc., wrote in an e-mailed report. “Banks will take the biggest hit.”
To contact the reporter on this story: Andras Gergely in Budapest at firstname.lastname@example.org
To contact the editor responsible for this story: Gavin Serkin at email@example.com