Page 34 - Central & Southeast Outlook 2020
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Estonia’s banking sector made €73mn in pre-tax income in the third quarter, a drop of 8% y/y, Eesti Pank said in October. Higher administrative cost ate into the profit while there also was a reduction in revenue from service fees. “As the banking sector has seen rapid growth in assets at the same time, by €4bn to €29bn, the combined impact of lower income and increasing assets has reduced the return on assets of the sector,” Eesti Pank said.
The rapid growth in the assets of the banking sector was affected very much by Luminor Bank, which brought its Latvian and Lithuanian units under its Estonian headquarters as branches, the central bank also noted.
5.3 Finance - Hungary
The consolidated after-tax profit of the Hungarian banking sector rose 10.5% y/y to HUF560bn (€1.7bn) in the first nine months of 2019. At first glance, the bottom line of banks looks solid, but earnings were lifted by the release of risk provisions, Hungary’s central bank the Magyar Nemzeti Bank (MNB) has said, adding that in terms of efficiency and costs Hungarian banks are lagging behind regional peers.
The lending stock rose 190% to HUF30.2 trillion, while the stock of deposits increased by 14.2% to HUF38.2 trillion by the end of September.
The sharp increase may be explained by the internationally low aggregate debt of companies and the surge in new corporate investment seen in the past two years, which has seen the investment-to-GDP ratio grow jump to 30%.
The central bank sees no signs of excessive lending and is not worried about the dynamic lending activity as it comes from a low base.
Total assets of the sector stood at HUF48.2 trillion at the end of Q3, up 15.4% y/y.
Both negative real interest rates and the favourable economic outlook contributed to the buoyant credit demand, although lending dynamics may decelerate in the next few years as a result of base effects, the central bank said.
Corporate lending is also supported by the MNB's Funding for Growth Scheme launched in 2013 to help spread fixed-interest loans. Between
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