Customers seeking loans from FHB are in a less appealing position. While the interest rate on secured loans is attractive, credit decisions are much stricter than at certain larger banks. An assessor will value a property 20 per cent lower if he uses FHB's criteria than if he uses the criteria imposed by the high street banks. Furthermore, FHB will only loan 60 per cent of the value of the security, compared to 80 to 90 per cent at the other banks. A further stricture is that the bank often requires the creditor to have an income above the minimum wage, unlike certain other banks, which do not even require proof of an income.
FHB is aware of its poor showing in the marketplace, but blames the law on mortgages and financial services, which regulates the bank.
But strict regulation did not prevent FHB from entering into commercial activities when it was able to add a substantial state subsidy to mortgages that it refinanced. Its credit acitivities peaked in 2003, when it loaned HUF210bn, 76 per cent of it going towards refinancing mortgages offered by high street banks. Now that the government has tightened up on the mortgage support programme, and as forint rates have risen, FHB's 'wholesale' role has also declined.
Refinancing fell to 65 per cent of loans issued in 2004, and to 47 per cent last year, even as the total size of the bank's loans declined.
Nowadays, the banks are enticing mortgage customers with foreign-currency mortgages. But the FHB, via its 11 branches, but primarily with the help of its own salesmen, is trying to gain a footing in the market. Dániel Gyuris, the bank's chief executive, claimed some success: it provided 11 per cent of mortgages sold in Hungary last year. But enthusiasm will not be enough to keep the bank in the running. Bank staff accept they will need to take greater risks, to grow their lending activities and to simplify administration. Offering a mortgage decision in 2 months is no longer special when competitors can do the same in 3 weeks. And FHB is not just competing for customers: analysts say it has to convince its shareholders too. Analysts believe the boom years up to 2003 will not tide the bank over for as long as its managers believe.
In response, FHB is working on launching a commercial bank, according to Ferenc Karvalits, the bank's chairman. It will launch with starting capital of HUF6bn, and would provide current accounts, deposit accounts and card accounts alongside a broad range of mortgage services.
