Moody’s revises outlook for Hungary banking system to stable

Budapest, July 17 (MTI) – Moody’s Investors Service on Friday revised its outlook for Hungary’s banking system to stable from negative.

Moody’s sees the bank sector operating environment stabilising in the coming 12-18 months.

“We expect that the operating conditions for Hungarian banks will improve in 2015-16, amid relatively strong economic growth and a shift in the government’s policy stance towards banks,” said Armen Dallakyan, a senior analyst at Moody’s.

Moody’s said the improvements in banks’ operating environment would help them return to profitability and stabilise their credit fundamentals, “albeit at weak levels”.

Asset quality should show an improving trend this year and next, Moody’s said, noting the positive impact of the recent government-mandated conversion of FX-denominated mortgages into forints, eliminating risk related to a possible devaluation of the local currency. Another government measure requiring lenders to compensate borrowers for making unilateral changes to contracts and using exchange rate margins when calculating repayments on FX loans is likely to shave 2-3 percentage points off the retail non-performing loan ratio, which stood at 22.4 percent at the end of last year, Moody’s said.

Moody’s forecasts real GDP growth in Hungary of 2.8 percent in 2015 and 2.2 percent in 2016 on the back of increased government spending as well as stronger exports and private consumption.

Source: http://mtva.hu/hu/hungary-matters