SMEs have been keen to invest in the last two years
Most companies carried out capacity expansions
Almost every second company has made an investment in the last two years, according to the research of Hungarian Bankholding focusing on small and medium-sized enterprises. The surveyed companies chose to invest mainly for capacity expansion and technological development, which were mostly financed with equity, but they also used state-subsidized and market-rate loans in significant proportions.
The latest market research of Hungarian Bankholding and NMS Hungary* concerning small and medium-sized enterprises examined the development of investments made by companies with an annual turnover of at least HUF 300 million. Based on a survey conducted in the fall of 2021 with nearly five hundred companies, it is clear that businesses have made significant investments over the past two years. 47 per cent of the respondents implemented a larger investment worth at least HUF 10 million, and 60 per cent kept the value of the development below the HUF 100 million limit; 14 per cent had several investments.
Development as an investment goal
Companies with higher turnover saw more opportunities in the investments: two-thirds of the enterprises with a turnover of over HUF 3 billion were able to carry out at least one development, while a quarter of them were able to carry out several developments. In terms of industries, companies in the construction sector were the most active, with 52 per cent investing in at least one and 17 per cent in more investments. The industrial sector was in second place: 39 per cent of them have made at least one investment worth HUF 10 million in the last two years, while more than a quarter of the companies in this sector have made several expansions.
The changed economic situation affected the trade and services sectors the most, with the lowest levels of investment appearing in these fields – 61 per cent of service providers and 67 per cent of traders did not make significant improvements. The total value of investments did not exceed HUF 100 million in the case of 61 per cent of the surveyed enterprises.
The main business goals of the companies were capacity expansion, replacement of old machines and equipment, and technological development. At the same time, in the fifth of the investments, the expansion of the activity and product portfolio was also included as a business goal, and 14 per cent of the respondents specifically aimed at introducing a new product or service. Improving energy efficiency was mentioned in several responses, this goal was mentioned in almost one in five investments (19%).
Sources of financing
The vast majority of companies with an annual turnover of at least HUF 300 million (82%) also used equity to finance their investments, one-fifth were covered by state-subsidized loans or state tenders, while only 8 per cent of investments required a market-rate loan. Enterprises with a turnover of more than HUF 3 billion and the companies operating in industry used public tenders in more cases (37% and 35%, respectively).
Strong position in the SME sector
The member banks of Hungarian Bankholding are currently the second largest market participants in Hungary in terms of balance sheet total, and the combined SME loan portfolio of Budapest Bank, MKB Bank and Takarékbank is close to HUF 700 billion, which covers more than one-sixth of the market. The banking group aims to be a market leader in a number of areas, including lending to the small and medium-sized enterprise sector as a key aspect of the national economy, and the leasing market.
Through its member banks, the banking group currently provides own products and public schemes available on favorable terms, such as the Széchenyi Card Program or the EXIM Compensation Program, to more than 25,000 SME clients. The financial institutions belonging to the Hungarian Bankholding provided nearly 900 HUF billion through more than 26,000 transactions through the FGS GO! Program, which was concluded at the end of September; HUF 355 billion was provided to enterprises through nearly 14,000 loan transactions within the framework of the Széchenyi Card GO! program available since 1 July; while in the EXIM Compensation Program, which promotes export, more than HUF 90 billion was also allocated to the companies.
„We deem it very important that the Hungarian SME sector does not lose its investment spirit during the more uncertain economic situation, as increasing competitiveness is not possible without these,”
– said Levente Szabó, Deputy Chief Business Officer of Non-standard Services of Hungarian Bankholding. He added:
„We are pleased to see that modernization of production and services, as well as technological development has been the goal of most, but it is clear that business leaders are placing increasing emphasis on energy efficiency investments that reduce not only costs, but they are also important for the environmental purposes. Many tenders are helping to modernize energy, and we are committed to supporting green goals: we will make all financing solutions available that help increase the competitiveness of domestic companies.”
*About Hungarian Bankholding and NMS Hungary SME investment research
The aim of the quantitative research is to determine how the companies involved in the survey think about their investments from the last 1-2 years, and what investments they plan to make in the near future. The data used for the analysis were collected by NMS Hungary Kft. between 23 September and 6 October 2021 through a computer-assisted telephone questionnaire survey. The sample was based on 500 domestic enterprises with an annual turnover of at least HUF 300 million.
Hungarian Bankholding Ltd.
Hungarian Bankholding Ltd. is a domestically owned financial holding company, which aims to implement the merger of Budapest Bank Zrt., MKB Bank Nyrt. and Takarék Group. The company commenced its effective operation on 15 December 2020, after MNB (acting as the central bank of Hungary) approved the merger of three credit institutions, and the shares of the key owners were transferred to the joint holding company. By transferring the in-kind contributions, the second largest banking group in Hungary has been established.
In March 2021, the Board of Directors and the Supervisory Board of the Hungarian Bankholding approved their five-year strategy for the merger of the member banks, based on which the fusion of the three credit institutions is planned to be concluded in 2023. The aim of the emerging large bank is to be the most modern bank in Hungary, which will introduce flexible, internationally leading digital solutions. The new large bank will serve the full market spectrum and all customer segments in the future, with a significant emphasis on the provision of new, modern range of products and services to retail, micro, small and medium-sized enterprise and agricultural customers.