Hungary Banks Post Profit in 2013 on Fees and Commissions

Hungarian commercial banks turned profitable for the first time in three years in 2013, helped by a jump in fees and commissions after lenders passed on a financial transaction tax to clients.

Banks posted a combined net income of 67.6 billion ($ million) forint last year, compared with a loss of 173.5 billion forint in 2012 and a loss of 288.7 billion forint a year earlier, according to data published by the central bank on its website today. The ratio of non-performing household loans rose to 18.7 percent by the end of 2013 from 18.4 percent at the end of September, the data showed.

Prime Minister Viktor Orban, preparing for elections on April 6, levied Europe’s highest bank tax and introduced a financial transaction tax as he sought to keep the country’s budget deficit below a European Union threshold of 3 percent of economic output. Banks were forced to swallow $1.7 billion in losses on the early repayment of some foreign-currency mortgages at below-market exchange rates in 2011.

Of the total, 131 financial institutions reported a profit in 2013 while 40 were unprofitable, according to the central bank. The industry’s return on equity, a closely watched gauge of profitability, rose to 4.6 percent in 2013 from minus 3.2 percent a year earlier.

Fees and commissions soared an annual 54.2 percent last year, mainly boosted by banks’ practice of passing on the financial transaction tax to customers, the central bank said.

OTP Bank Nyrt., the country’s largest lender, competes with mostly foreign-owned banks including Erste Group Bank AG, UniCredit SpA, KBC Groep NV, Intesa SanPaolo SpA and Raiffeisen Bank International AG.

Loan Invalidation

Orban, pledged last year to phase out foreign-currency mortgages and urged courts to “take the side of the people” and help borrowers struggling to repay mostly Swiss franc-based loans following a drop in the forint.

The supreme court in December rejected a blanket invalidation of the loans while the constitutional court, at the government’s request, is examining the constitutionality of foreign-currency loans and whether lawmakers can retroactively amend loan terms.

The court, which debates the issue at a session today, may issue a verdict “soon,” Secretary General Botond Bitskey told daily Magyar Nemzet.

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