A local website, index.hu, has speculated that changes in Hungary's tax rules for banks could raise up to HUF20bn - HUF30bn in revenue, whilst citing that the Finance Ministry has estimated a HUF10bn impact. There has still been no official comment from the Finance Ministry on the topic.
Our view:
It isn't surprising to see speculation surface on the potential impact of a possible new bank tax - the jump from HUF10bn to HUF20bn-HUF30bn illustrates mainly the lack of reliable information on the subject.
We understand that conceptually, the new tax would make provisions a non-tax-deductible expense (vis-a-vis actual write-offs, a timing difference). Though deferred tax accounting could shield reported earnings, there would of course still be a cash impact, which we believe would come in at the lower end of the above-mentioned range.
Of course, the current status of the new tax is vague and its basis may be different than we expect. To quantify the above impact on (9 231 HUF, -1,24%) Bank, we estimate its share of a HUF10bn tax on the sector would be HUF3bn-HUF5bn (ie. 1.5%-2.5% of earnings)and a HUF30bn tax at HUF9bn-HUF15bn (ie. 4.5%-7.5% of earnings).
Banks are very likely to oppose any new measure and our current view is that it is unlikely to be imposed, particularly the more extreme version. Nonetheless, continued speculation on the subject is expected to weigh on investor sentiment.