The after-tax profit of Erste Bank Hungary climbed 25% y/y to HUF113bn (€280mn) in Q1-Q3 despite weak demand in corporate lending, the Austrian-owned lender announced on November 4.

Erste Bank was the fifth-largest lender in terms of assets at the end of 2023, with HUF4.8 trillion in assets, and was in the top three in the number of clients, branches and ATMs.

Hungarian banks posted a record HUF972bn profit in H1, boosted by dividend payments and one-offs, which translates into an impressive 25% ROE ratio. Lenders have seen their financial burdens eased, after the government allowed banks to reduce their windfall tax base by boosting their share of local government bonds.

The changing regulatory environment remains a major challenge for bank leaders. The government is pushing banks to offer mortgage loans below funding costs at 5%.  According to people familiar with the draft proposal, this will be a targeted measure available for first-time home buyers.

Erste saw its operating revenue rise to HUF183bn from HUF150bn, while revenue from commissions and fees climbed 22%.

ROE climbed to 26.4% in the first nine months, up from 24.6% a year earlier and 5.7% in Q1-Q3 2022.

The stock of client loans, including corporate bonds, edged up 2.2% in the 12 months to the end of September, chairman-CEO Radovan Jelasity told reporters at a press conference.

Outlays in Q1-Q3 rose 25% from the base period.  Retail lending stock increased 11%, while outlays were up 60%. New mortgage volume more than doubled and outlays of personal loans increased 40%. Outlays to SMEs slipped 4%.

The NPL ratio fell to 2.3% from 2.8%.

The loan-to-deposit ratio edged up to 76.3%, a 4.2pp increase from the base period.

The stock of retail deposits and managed investments reached HUF6.2 trillion at the end of September, up 20% from 12 months earlier.

Corporate lending stock, including bond subscriptions, fell 7% to HUF1.1 trillion in the 12 months to end-September.

Assets managed and invested have grown above market average, up 24% y/y to HUF5 trillion. The private banking unit managed HUF1.2 trillion in assets as of the end of September.

Following a decade-long hiatus, Erste resumed residential real estate financing after signing a HUF12bn loan for a new Budapest project earlier this year.