BUDAPEST: The Hungarian business of Erste Group Bank expects to return to the black this year and targets sustained profit over the medium-term, bolstered by growth in consumer and corporate lending, its chief executive told Reuters.
Last week, Hungary's government and the European Bank for Reconstruction and Development sealed an agreement to each acquire a 15 percent stake in Erste's local unit for a combined 77.78 billion forints ($271.8 million).
The bank, Hungary's sixth-largest lender by total assets and the second-biggest retail bank after its acquisition of Citibank's local retail portfolio, will now receive a capital injection to enable it to provide more loans in Hungary.
"We are confident that we are going to finally finish a profitable year already in 2016, but we are focusing much more on our mid-term results," Erste Bank Hungary Chief Executive Radovan Jelasity told Reuters in an interview. The bank last made a profit in 2010.
Jelasity said Erste aimed to boost its consumer unsecured loan book by 20-30 percent this year, and the bank also targeted a double-digit increase in its performing corporate loan portfolio, focusing on small and medium-sized businesses.
"We are going to be market leaders in certain segments, such as credit cards, we are going to substantially increase our share in consumer lending, in wealth management as well," Jelasity said.
He said total consumer lending in Hungary this year would probably be a little over 2 billion euros ($2.2 billion), far below both levels before the financial crisis and Hungary's peers in percentage terms.
"I am not saying those years will come back, the turbo years, but we are still running at 30-40 percent of what we saw before the (2008) crisis started," Jelasity said.
He also said he expected Moody's to follow Fitch in July or November in upgrading Hungary's sovereign debt into investment-grade status.
Jelasity said investors could now be more hopeful about Hungary's economy as local fundamentals have improved and the government has delivered on its promises, and cut a windfall
tax on banks in 2016 and 2017. He added, however, that persistently low rates squeezed margins and it would take some more time for confidence to fully return.
He said Erste was not interested in the privatisation of Budapest Bank, which could come up for sale later this year after the government bought it from GE Capital for $700 million last year.
Erste will probably also sell some of its distressed corporate loans to central bank vehicle MARK.
"We submitted a portfolio, we got the quotes and we are confident we will be able to come up with a concrete deal with them," Jelasity said.
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