National Bank of Hungary reports strong bank profitability and capital buffers as Home Start Programme lifts housing risks

The National Bank of Hungary published a Financial Stability Report finding that the banking system remained highly profitable, liquid and well capitalised in 2025, while non-performing loans fell to a historic low. The report also flags rising risks in household lending and the housing market as the Home Start Programme accelerated mortgage growth, lifted average loan-to-value ratios and coincided with higher market overvaluation. Bank return on equity reached 18.9 per cent at end-2025. Preliminary data put the capital adequacy ratio at 20.1 per cent, with free capital of HUF 2,025 billion, and stress tests indicated that only a small number of institutions would face a capital shortfall even under severe stress. Liquidity remained ample, with an average individual liquidity coverage ratio of 172 per cent in February 2026, although some banks may need stricter liquidity management under stress. Household loans grew 15 per cent in 2025 and corporate loans 7.3 per cent, but the corporate lending recovery was described as fragile. In housing finance, average loan-to-value ratios on new mortgages rose to 68 per cent from 59 per cent, house prices increased 23.5 per cent in nominal terms and estimated overvaluation reached 22.5 per cent. Average debt-service-to-income ratios did not rise and instalments are fixed for the full maturity, which mitigates default risk. The report also notes that interest-subsidised loans are increasing earnings volatility and sensitivity to yields, while the war in Iran has added market pressure in early 2026 through higher energy prices and lower risk appetite.