Hungary: Outlook

HVB Bank Hungary has total assets of € 3.8 bn and a market share of 5.5%. Our Hungarian subsidiary has a strong market position in corporate banking and is continually expanding its position in retail business. During 2004 six new branches were opened bringing the total up to 41. The number of customers increased in 2004 by almost 30% to 120,000 served by a staff of 1,200.

HVB Bank Hungary’s net income before taxes was € 86.1 m, 74% or € 36.7 m higher than in 2003. Behind Poland, Hungary thus achieved the second best result of all our CEE subsidiaries. This positive trend is a result of increases (in euro terms) in deposits and loans, which rose by 22% and 33%, respectively. The return on equity was up to 24.3% while the cost/income ratio was successfully lowered to 48.0%. Jelzálogbank, HVB Bank Hungary’s mortgage banking subsidiary, was consolidated in 2004 for the first time; its dynamic business development is reflected in a contribution of over 8% to operating profit.

Numerous awards reflect the bank’s success: for the second year in succession HVB Bank Hungary was named “Best Client Service in an Emerging Market” by GSCS Benchmarks, a British custody periodical. In payment business, HVB Bank Hungary is a market leader, demonstrated by various awards from major international banks, such as “Straight Through Processing Excellence Award” from Deutsche Bank, “Quality Recognition Award” from JPMorgan Chase, or “Certificate of Excellent Quality” from American Express Bank.

As part of an Austrian consortium consisting of HVB Bank Hungary, Vienna Stock Exchange, Raiffeisen Zentralbank, Oesterreichische Kontrollbank and Erste Bank, HVB Bank Hungary increased its equity interest in the Budapest Stock Exchange to 25.2% and is now the largest shareholder.

Business structure and development
In corporate customer business, especially in the multinational corporate segment, HVB Bank Hungary enjoys an excellent market position, which we want to strengthen further. Growth was recorded in real estate business. HVB Bank Hungary’s custody team carries out relationship management for about 130 institutional customers with a portfolio of about € 11 bn. The bank’s strong performance is supported through close cooperation with Head Office in Vienna.

As part of the strategy for small and medium-sized companies (SMEs) HVB Bank Hungary’s range of products now also includes factoring. A subsidiary established in Hungary in cooperation with the Austrian FactorBank offers the entire range of factoring products, from the purchase of receivables to portfolio management of receivables for clients. In autumn 2004 the bank launched an advertising campaign for new loan products targeted at small and medium-sized companies.

The positive trend in retail banking business was also backed up by the introduction of new products including a new type of mortgage loan linked to alternative savings schemes such as insurance policies or building society savings schemes. In 2004 Jelzálogbank, our mortgage bank subsidiary, launched a mortgage bond programme. In this context a large number of investors were addressed in an effort to sell appropriate forms of investment. The increased use of call centres and Internet banking led to the growth of alternative sales channels. As a result of these activities the number of customers grew to over 100,000 in 2004.