Unprecedented Profits at Hungarian Banks

Despite the extra profit tax, interest rate freeze and credit market slowdown, the Hungarian banking sector made unprecedented profits in the first half of this year. The domestic profit of HUF 676 billion means that for the first time in a long time, the sector's profit on equity rose above 20%.

On a non-consolidated basis, credit institutions posted a total net profit of HUF 676 billion in the first half of 2023, more than three times higher than in the first half of last year. Interest income was 46.9% higher than a year earlier, while fee and commission income rose by 13.8%.

In the changed interest rate environment, interest income increased by more than 2.5 times compared to the first half of last year, while interest expenses increased by almost four times, reflecting the impact of interest rate restrictions on certain loans. Compared to the same period of the previous year, operating revenues at the end of Q2 2023 were 31.3% up while operating costs, which were lower, increased by 12.9%, due to a significant increase in special taxes affecting the sector. Net impairment and provisioning in the first half of 2023 was far below the first half of the previous year (86.3% lower), accounting for just 3.9% of the balance of operating income and expenses in the first half of the year, compared with 47.4% in the same period of the previous year.

By the end of Q2 2023, the consolidated net profit of the banking sector amounted to HUF 978 billion, more than four times the first half of the previous year. Net interest income and net fee and commission income continued the upward trend observed in previous years (up 51% and 24.5% respectively compared to the same period last year), driven by the annual increase in total assets, the rising interest rate environment and the exchange rate effect.

Compared to the first half of the previous year, operating income increased at a significantly higher rate than operating expenses (40.5% vs. 24%). Net impairment and provisioning amounted to HUF 284 billion in the first two quarters of 2022, compared to just over a quarter of this amount (HUF 73 billion) at the end of Q2 2023. Net impairment and provisioning thus accounted for just under 7.3% of operating income in the first half of the year, compared to 48.3% in the same period of the previous year.

The net tax charge (excluding special taxes) amounted to HUF 125 billion at the end of Q2 2023, almost three times higher than in the first half of the previous year.