War impact on Hungary: Sberbank, OTP, energy prices, car manufacturing, an 'unfriendly country' & the refugee situation

HUNGARY - In Brief 02 Mar 2022 by Istvan Racz

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On the 7th day of the war, there are lots of news reports to react to. Here follows a brief collection of the more important ones.1. The MNB revoked the licence of Sberbank in Hungary, and it will be liquidated, after the latter's parent had been brought under a similar procedure in Austria. The local subsidiary of the bank was facing a liquidity and capital problem, as a big deposit got stuck at the parent bank. The MNB said that apart from the impact of anti-Russia sanctions, the local Sberbank was considered healthy, and so there is good hope that its operations and financial assets can be sold, just as it is reportedly happening in Croatia and Slovenia. Sberbank is small in Hungary, with about 1% of the balance sheet of the local banking system. Depositors will be compensated by the local deposit insurance scheme (up to EUR100k, the EU standard). The cost of this is hoped to be recovered from the bank's assets.2. In a matter of three weeks, OTP, the biggest Hungarian bank has lost 45% of its capitalisation on the stock exchange, because of its presence in Russia and Ukraine. These two operations represent 13.7% of the group's capital base, 8.2% of the total loan stock and 6.3% of the group's balance sheet total. As we are by no means any authority on equity research, we can only reiterate the rather uniform views of the MNB, independent analysts and the bank itself: should OTP lose both its Russian and Ukrainian subsidiaries, its regulatory capital ratios would still remain high, and the bank would remain profitable, despite the unquestionable significant hit. (Deja vu: we have vivid memories of the 2008-2009 crisis, when essentially no foreign players, including t...