OTP Bank, a medium-sized player on the market, has stopped granting unsecured consumer loans in 14 branches, because, overall, the number of problems with loans was alarming, according to Laszlo Diosi, the bank's chief executive.
"We just provide home equity loans in those locations. As soon as we see that conditions have improved - in terms of personnel and process - we will resume consumer loans, most likely in March or April," Diosi told ZF.
He believes the increase in exposure to clients, overlapped with the still explosive growth of the real estate market, as well as tensions on the international markets that made loans more expensive, are a recipe for disaster in the banking system.
Unsecured consumer loans are the most vulnerable products in the banks' portfolios, with many players upping the reserves set aside for such loans in order to protect themselves from potential losses caused by bad payers.
The rapid exchange rate increase, along with the increase in interests and/or in fees have made it very difficult to repay loans especially for those clients that are close to their indebtedness cap.
Valentin Lazea, NBR's chief economist, says that the private lending growth rate is "infernal" and "unsustainable."
The local branch of Hungary's biggest bank ended last year with more than 11 million euros in losses, the same as in 2006.
At the same time, the quality of the loan portfolio worsened, after non-performing loans increased their volume and accounted for 10%, according to the data provided by OTP to the Budapest Stock Exchange.
"The increase in the share of non-performing loans is also fuelled by a statistical effect, given that we outsource some of the loans to Budapest, and they must be clean," Diosi explained.
He says that the quality of the loan portfolio has not actually worsened, as the loans i
