Q3 2022 Financial Performance Review

MKB BANK International economic outlook - uncertainties about economic growth External factors affecting the Bank's operations - Outlook Geopolitical impacts 14 =14 The Russian-Ukrainian conflict, which erupted at the end of February, continued in the third quarter, with no ceasefire agreement between the two sides. There is a growing possibility of a prolonged war. Uncertainties about the war, fears of a possible further escalation, and problems with gas supplies are weighing heavily on growth prospects. As the heating season approaches, fears about the supply of natural gas have been heightened. In the spring and summer, intensive stockpiling has started and in addition, Russian gas deliveries have been limited. As a result, natural gas futures prices rose to unprecedented levels by the end of August. Some actors expect a complete halt to Russian gas supplies. This would lead to a serious supply problem in Europe, with a significant growth penalty due to production curtailment. The Purchasing Managers' Indices (PMI) of advanced economies show a shrinking economy and a recession. In both the euro area and the US, the PMI indicators were below the 50-point threshold for growth during the third quarter. Rising overheads, falling consumer demand or rising financing costs are causing difficulties for many companies. Inflationary pressures and central bank policies Inflationary pressures continued to intensify in the third quarter, both in Hungary and in international markets. In the euro area, annual inflation stood at 10.7% at the end of October, while the average price increase in October was already 21.1% in Hungary. In the US, the annual CPI index is already falling, but core persistent inflation continues to rise. Central banks have begun to tighten substantially to counter the extreme inflationary environment. The Fed continued the cycle of interest rate hikes that began in March, with policy rates rising by a total of 150 basis points in two steps in the third quarter, and balance sheet tightening also continued overseas. The dollar further strengthened against the euro during the quarter owing to international risk aversion and more assertive policy action by the Fed. In July, the ECB launched a cycle of interest rate hikes in the euro area, with policy rates rising by 125 basis points during the quarter. In addition to inflation, the monetary tightening is also aimed at addressing the weakening euro. The outlook is increasingly clouded by high inflation, falling energy and commodity prices, and geopolitical tensions. In the US, the economy expanded by 2.6% in Q3 (annualised quarterly index) after two quarters of contraction. In contrast, the eurozone grew by 0.2% (Q/Q) after a strong first half year.

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