Hungary's banks face slowdown, risks -association

BUDAPEST, May 25 (Reuters) - Hungary's banking system has to prepare for years of much slower growth, lower profitability, a more constrained lending environment and higher risk, the chairman of the Hungarian Banking Association said on Monday.

"The double-digit growth rates that the majority of the sector have produced in the last 10 years will most likely be unsustainable," Peter Felcsuti, who is also the chief executive of Raiffeisen's (RIBH.VI: Quote, Profile, Research) domestic unit, told a conference.

He said the bank sector's growth will be much less credit-driven and profits will remain lower, as will capital efficiency.

"We need to calculate with a more conservative balance sheet structure, not least to keep the overseas owners calm," he said. "We can rely on external financing less than before."

"Once the crisis is over, is there a return to our previous business models, to quick growth, physical expansion, high risk and profitability? Most probably not," he added.

At another conference in early May Felcsuti had said he expected the bank sector as a whole may not be able to stay out of the red this year. [ID:nL7665452]

Banks are but one segment of the market which needs to adjust -- Hungary as a whole needs to adjust as well, focusing on investments and savings instead of consumption and credit that fuelled the growth of recent years, Felcsuti also said on Monday.

"Without a turnaround of economic and social policy, the Hungarian economy may leave behind the economic crisis, but not the crisis of its own (sluggish) growth," Felcsuti said.

The new Hungarian government, which took office last month after the previous cabinet collapsed, implemented a package of spending cuts and tax changes for this year and next in an attempt to keep the budget deficit in check and help the economy, which is seen contracting by 6.7 percent this year.

(Reporting by Marton Dunai; editing by Stephen Nisbet)