21 February 2025
In January 2025, the MNB conducted its quarterly Bank Sentiment Survey. Based on the responses, the banking system perceived a slight deterioration in the economic environment in 2024 H2. According to the banks, the tightening of the regulatory environment, the increase in operating expenses, the decrease in the level of profitability in the case of some institutions, the deterioration in corporate creditworthiness, and the uncertainty about the international and domestic economic environment contributed negatively to their perception of the operating environment. By contrast, the increase in competition and in household credit demand had a positive effect. Looking ahead to 2025 H1, the banks expect the economic situation to remain unchanged.
Factors determining developments in economic sentiment:
- The economic environment had a negative impact on banks’ economic sentiment, similar to the previous wave of the survey. In 2024 H2, a net 22 per cent and 35 per cent of the responding institutions perceived a deterioration in the international and domestic macroeconomic environment, respectively. However, a quarter of the banks expect an improvement in the economic environment again in 2025 H1.
- Market competition has intensified, thereby continuing to have a positive impact on economic sentiment. A third of the banks perceived increased competition against non-bank market participants and in the field of payment services, to which the increase in the financial transaction levy may also have contributed. Looking ahead, competition may intensify in all sub-segments, most notably in the retail sector, where a net 57 per cent of the banks expect an increase. The expected increase in competition may reflect the use of voluntary pension fund savings for housing, the rural home renovation programme, the Demján Sándor Programme, the launch of the worker loan scheme, and the relaxation of the age requirement for the prenatal baby support loan.
- Access to funds has improved slightly over the past six months, according to banks. In parallel with the decline in interest rates, the availability of short and long-term funds, as well as interbank liquidity, has also improved over the past year. Looking ahead, one-fifth of the banks expect interbank liquidity to worsen in 2025 H1.
- Credit risks have not materialised due to a stable labour market, debt cap rules, and high corporate liquidity, and as a result portfolio quality has contributed neutrally to bank sentiment. The creditworthiness of retail customers has not changed significantly, but in the corporate segment, a net 32 per cent of the banks perceived a deterioration in creditworthiness in 2024 H2, and a fifth of them expect a deterioration going forward. Nevertheless, portfolio quality may remain broadly unchanged in 2025 H1.
- Half of the banks saw a pick-up in retail credit demand in 2024 H2, and they expect this to continue going forward. A net 5 per cent of the banks saw an increase in demand for corporate loans, but 43 per cent expect an upturn in the next six months. This confirms the results of the Lending Survey regarding the expected pick-up in forint lending, although there is still no sign of a turnaround in investment loans.
- Half of the banks reported a tightening of the regulatory environment, and 35 per cent expect this to continue in the next six months. Looking back, this can be explained by the countercyclical capital buffer (CCyB) activated in mid-2024, the tightened windfall tax, and the mortgage interest rate cap and, looking ahead, by the amended Capital Requirements Regulation (CRR3).
- Nearly one-third of the banks reported a deterioration in profitability before impairment, and 55 per cent reported an increase in operating expenses. Looking ahead, 32 per cent of the banks expect a decline in the level of profitability, and 62 per cent expect an increase in operating expenses.
On the whole, based on the Bank Sentiment Index[1] calculated as the difference between the number of banks perceiving an improvement and banks reporting a deterioration in economic activity, the respondents perceived some deterioration in the operating environment in 2024 H2. Looking ahead to 2025 H1, economic sentiment is expected to remain unchanged.
Changes in the Bank Sentiment Index by bank size
Note: The Bank Sentiment Index is the arithmetic average of seven components (economic environment, market competition, availability of funds, customer risk, demand, regulation, profitability). The last data point is an estimation. Source: MNB Bank Sentiment Survey
During the Banking Business Survey, the net ratio is obtained by dividing the difference between the number of banks reporting an improvement and the number reporting a deterioration in response to the given question by the number of responding institutions. The answers are not weighted by the market share of individual institutions.
Detailed results and the figures of the Bank Sentiment Survey are available on the MNB’s website at the following link:
https://www.mnb.hu/en/financial-stability/publications/bank-sentiment-survey
[1] The Bank Sentiment Index is made up of seven components: economic environment, market competition, availability of funds, customer risk, demand, regulation and profitability. The Bank Sentiment Index is given as the arithmetic average of the ratio of the difference in responses to each component (improvement and deterioration) in relation to the entire scope of observation.