How severe will the impact of the bank tax be?

György Pálfi - Edina Persovits
Equity Portfolio Manager - junior equity analyst

Hungary was among the first (the second after Sweden, to be precise) to impose a bank tax, but still, it was not so much the speed of its introduction as the extent of the tax that brought it into the focus of attention. This year, banks operating in the Hungarian market will have to pay HUF 187 billion, which given the bank sector’s HUF 175 billion profit for the first half represents a considerable deduction, especially in view of the fact that the tax, which is levied on the balance sheet total, does not take into account the banks’ profitability. (The banks intend to raise almost HUF 20 billion towards the bank tax through additional injections of capital.) Since the announcement in early June, banks in Hungary have underperformed the market: the Polish banks have risen 15% and the Czech banks by 10%, while OTP remains roughly where it was at the end of May. Of the three large stock exchange-listed banks with a presence in Hungary, this impact was most readily apparent in the case of OTP, since the Hungarian assets of Erste and Raiffeisen only account for 7% and 25% of their total assets respectively.

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