Erste Bank Closed a Successful H1 with Expectations Subdued

Erste Bank closed a successful first half of the year in Hungary with an operating profit of more than HUF 120 billion, up from HUF 93 billion in the previous year, and a nearly 60% increase in profit after tax to HUF 74.4 billion, Erste CEO Jelasity Radovan said at a press conference in Budapest on Thursday.

Erste's operating income in the first quarter of 2024 increased by 24%, according to the statement prepared in accordance with International Financial Reporting Standards (IFRS).

He stressed that Erste expects lower profits in the second half of the year. Positive business trends, a higher than expected interest rate environment and better than expected loan book development played a major role in the performance in the first half of this year. By contrast, profits in the second half of the year are expected to be more subdued due to slower than expected economic growth, a lower interest rate environment, the restructuring of the extra profit tax and the increase in the transaction tax, he said.

Radovan Yelasity stated that business investment and borrowing is on hold. The public is spending cautiously and consumption growth is subdued, all of which are affecting growth expectations for this year.

He highlighted that retail lending has picked up, with the bank disbursing more home loans in the first half of this year than it did in the full year to 2023. Invested and managed assets grew 31% year-on-year by the end of June to more than HUF 4,700 billion.

László Harmati, the financial institution's deputy chief executive in charge of retail, said the stock of customer loans and bonds at the end of June 2024 was 3.5% higher than a year earlier. Disbursements of new personal loans increased 42% to HUF 45 billion in the first half of the year compared to the same period last year, while baby loans increased 14% to HUF 19 billion. The non-performing loan ratio fell to 2.4% from 2.8% a year earlier. He called the 171% increase in new mortgage loan originations to HUF 67 billion a significant achievement. Both the increase in the number of loan contracts and the more than 30% rise in the average loan amount played a role in this, he explained.

More than 635,000 residential and 55,000 micro customers are now digitally active, he said. More than three quarters of retail customers use only mobile banking.

Róbert Cselovszki, Chairman and CEO of Erste Investment Plc, reported that the retail customer assets - investments and deposits - managed by the Erste Group in Hungary had increased to HUF 6,233 billion by the end of June, a 26% increase in one year. The share of investments in savings rose to 72% from 68% at the end of June 2023. Private banking assets under management reached HUF 1,100 billion at the end of June.

The asset value of investment funds managed by Erste exceeds HUF 2,500 billion. One third of this amount is in sustainable (ESG) investment funds. Over the past year, demand for ETFs (exchange traded funds) has grown strongly. The portfolio managed by Erste has almost doubled compared to June last year. Erste has more than 800 ETFs available, 250 of which are registered in Hungary, he said.

In the corporate sector, bond and loan holdings together fell 2% year-on-year to HUF 1,120 billion at the end of June. He pointed out that the volume of new corporate bonds and loans in the first half of this year was 19% higher than a year earlier, largely due to the fact that Erste Bank Hungary, together with Erste Group Bank AG, signed a EUR 90 million (about HUF 35 billion) loan agreement with CTP Group in March to finance four logistics and industrial parks in Hungary.